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KPMG’s Week in Tax: 26 - 30 August 2019

KPMG’s Week in Tax: 26 - 30 August 2019

Tax developments or tax-related items reported this week include the following.

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United States

  • Rev. Proc. 2019-36 provides the domestic asset / liability percentages and domestic investment yields needed by foreign life insurance companies and by foreign property and liability insurance companies to compute their minimum effectively connected net investment income under section 842(b) for tax years beginning after 31 December 2017. 
  • OMB’s Office of Information and Regulatory Affairs (OIRA) has received for review from the U.S. Treasury Department proposed regulations that would provide guidance on the elimination of interbank offered rates.
  • Rev. Rul. 2019-21 provides the rates of interest for tax overpayments and tax underpayments for the fourth quarter of 2019. The interest rates will remain the same as those for the third quarter 2019.
  • Rev. Proc. 2019-23 updates prior IRS guidance and adds a new country—Georgia—to the list of countries with which the United States has in force an information exchange agreement for purposes of reporting payments of deposit interest of $10 or more made by U.S. financial institutions to nonresident alien individuals. It also adds two jurisdictions, Curaçao and Cyprus, to the list of jurisdictions with which Treasury and the IRS have determined that it is appropriate to have an automatic exchange relationship with respect to bank deposit interest income information under regulatory provisions.
  • The U.S. Tax Court issued an opinion finding that the taxpayer had properly offset interest expenses in full against the real estate income reported on Schedule E and rejecting the IRS contention that the interest expenses should have been reported on Schedule A as itemized deductions (and thus subject to the limitations imposed by section 163(d) on investment interest).
  • U.S. President Trump and French President Macron reportedly agreed to resolve issues concerning the French digital services tax. There has not been an official announcement from the U.S. Treasury Department or the Office of the U.S. Trade Representative (USTR) about this agreement.
  • A report from KPMG explains why mineral royalties held for investment do not qualify for the 20% deduction under section 199A, and why mineral working interest income may be eligible for the deduction.
  • The Wisconsin Tax Appeals Commission ruled in favor of a taxpayer in a dispute addressing whether amounts received from a foreign limited partnership (that had elected to be treated as a corporation) were distributions eligible for a dividends-received deduction under Wisconsin law.
  • Newly enacted Missouri law extends the statute of limitations for sales and use tax refunds from three years to 10 years—effective 28 August 2019.
  • The California Franchise Tax Board concluded gain recognized from an IRC section 338(g) election (the election to treat the purchase of the target corporation’s stock as a purchase of the target’s assets) must be reported by the target entity on its final return and apportioned to California using its own apportionment factors.
  • The New Jersey Division of Taxation released a technical bulletin addressing the state’s treatment of global intangible low-taxed income (GILTI) and foreign-derived intangible income (FDII).
  • Utah’s highest court reviewed a constitutional challenge to Utah’s individual income tax structure, as it applies to foreign and interstate business income of S corporation shareholders.

Read TaxNewsFlash-United States
 

  • The U.S. Senate Finance Committee released another report from a bipartisan taskforce about temporary tax provisions that expired, or will expire, between 31 December 2017 and 31 December 2019. The new report addresses provisions designed to increase participation in the workforce and to expand economic opportunity in low-income communities.
  • A KPMG report examines a bill introduced by Senator Ron Wyden (D-OR) that represents a dramatic departure from the previously proposed approaches for the taxation of carried interest.

Read TaxNewsFlash-Legislative Updates


Trade & Customs

  • The USTR released for publication in the Federal Register a notice of modification of the Section 301 action concerning China and reflecting the increase in tariffs by 5% on approximately $550 billion worth of Chinese imports.
  • U.S. Customs and Border Protection, along with the U.S. Treasury Department, released a notice of proposed rulemaking for the disclosure of information otherwise protected by the Trade Secrets Act to a trademark owner when merchandise bearing suspected counterfeit trademarks has been voluntarily abandoned. 

Read TaxNewsFlash-Trade & Customs


Africa

  • Nigeria: Courts issued judgments in cases concerning the taxation of drilling rigs and vessels used with respect to oil and gas production activities. The cases addressed whether these vessels are subject to a 2% surcharge (tax levy) on payments under the drilling contracts, and whether a “drill ship” was a vessel used solely for marine navigation, carriage of workers and operational equipment, and the storage and transportation of oil and gas products.
  • Nigeria: The Court of Appeal held that a failure to register an agreement with the National Office for Technology Acquisition and Promotion does not render it null and void. Previous guidance provided registration was required before companies could recognize certain expenses in their financial statements.

Read TaxNewsFlash-Africa


Americas

  • Canada: The Department of Finance announced Canada this week deposited its instrument of ratification with respect to the base erosion and profit shifting (BEPS) multilateral instrument (MLI).
  • Mexico: Under a new rule (effective 1 August 2019), taxpayers must obtain directly from a contractor involved in a labor subcontracting agreement certain information about social contributions, tax returns, and tax withholding with respect to the workers; and payments of worker-employer fees or value added tax (VAT) returns.
  • Canada: Beginning 1 September 2019, certain aluminum products face additional monitoring. There are also new reporting and recordkeeping requirements for steel importers.
  • Canada: Revenue Quebec has proposed to extend the deadline for disclosures of nominee agreements (previously established to be 16 September 2019). 

Read TaxNewsFlash-Americas


Asia Pacific

  • Myanmar: Guidance has been provided for taxpayers to follow in determining their tax liabilities for the short financial year for the period beginning 1 April 2019 and ending 30 September 2019.
  • Australia: The Full Federal Court issued its decision in a case exploring certain aspects of interpretation of the fuel tax credit provisions in addition to rules for entitlement to fuel tax credits for tax periods older than four years.

Read TaxNewsFlash-Asia Pacific


Europe

  • Switzerland: Corporate tax reform will provide significant changes to the Swiss corporate tax system. With the effective date of 1 January 2020 rapidly approaching, companies may not have much time to react.
  • France: A draft decree proposes new tax-related recordkeeping and reporting requirements for online platforms.
  • Belgium: The tax authorities issued guidance with respect to the rules that apply for VAT purposes.

Read TaxNewsFlash-Europe


Transfer Pricing

  • A KPMG report highlights certain aspects to be considered when approaching technology in the area of transfer pricing and tax in general.

Read TaxNewsFlash-Transfer Pricing


Indirect Tax

  • France: A draft decree proposes enhanced reporting requirements, based in part on VAT rules, for online platforms.
  • Myanmar: Guidance sets forth procedures for taxpayers to follow in determining how certain taxes—the specific goods taxes, commercial tax, and income tax—are to be calculated for a short financial year beginning 1 April 2019 and ending 30 September 2019.
  • Australia: The Full Federal Court issued its decision in a case concerning the fuel tax credit provisions.
  • Belgium: Guidance concerns the application of the VAT rules and addresses the VAT rules for intra-Community deliveries of goods or supplies of services.
  • United States: New law in Missouri extends the statute of limitations for sales and use tax refunds from three years to 10 years—effective 28 August 2019.
  • United States and France: The U.S. and French presidents reportedly agreed to resolve issues concerning the French digital services tax.
  • Nigeria: Courts have issued judgments in cases concerning the taxation of drilling rigs and vessels used with respect to oil and gas production activities.

Read TaxNewsFlash-Indirect Tax

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