KPMG’s Week in Tax: 21 - 25 October 2019

KPMG’s Week in Tax: 21 - 25 October 2019

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

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Asia Pacific

  • Australia: A draft taxation determination may result in reduced foreign income tax offset. The draft determination expresses a position that capital gains on which no foreign income tax has been paid are not eligible to be included in calculating the foreign income tax offset (FITO) limit. 
  • Australia: Legislation in New South Wales (includes Sydney) proposes changes relating to duties and land tax in which anything “fixed to land” would be land for NSW landholder-duty (tax) purposes. Previously, only common law fixtures were included.
  • Australia: An updated estimate of the income “tax gap” of large corporate groups for each financial year from 2010-11 to 2016-17 shows a downward trend for the past four years.
  • China: The State Council issued an order to expand the availability of the financial industry to foreign insurance companies and foreign-funded banks. From a tax perspective, areas of complications and uncertainties continue, including (1) pricing of related-party transactions; (2) the applicability of value added tax (VAT) to certain financial products; and (3) VAT exemption on reinsurance.
  • China: The tax authorities issued administrative guidance concerning the application of provisions of China’s network of income tax treaties.

Read TaxNewsFlash-Asia Pacific

Europe

  • Luxembourg: A new Protocol to amend the method of avoiding double taxation between France and Luxembourg appears to apply the tax credit method to avoid double taxation. Based on the Protocol language, Luxembourg taxable income earned by a French tax resident would be taken into consideration to determine French tax liability.
  • Belgium: The Belgian Constitutional Court issued a decision annulling the annual tax on securities accounts. The decision implies that the tax can no longer be levied for future periods.
  • Germany: The European Commission announced its decision to send a formal notice to Germany in relation to German legislation with regard to the taxation of distance sales of goods sold through digital marketplaces. If Germany does not act within the next two months in response to the formal notice, the EC may send a reasoned opinion to the German authorities.
  • Portugal: The Court of Justice of the European Union (CJEU) issued a judgment in a case concerning the VAT treatment of the assignment of a debt that had been recognized in enforcement proceedings, holding that such an assignment was subject to VAT.
  • Poland: Taxpayers purchasing goods—including electronics, fuels, steel, recyclable materials, car parts, or construction services—need to be aware of a requirement to settle their payments using the split-payment mechanism for VAT purposes (effective 1 November 2019).
  • Serbia: Legislation amending the VAT law is generally effective 1 January 2020, with certain provisions effective in 2019.

Read TaxNewsFlash-Europe

Americas

  • Brazil: Guidance consolidates the rules for certain social contributions and concerns the rules with regard to the social integrity program (PIS) and social security financing (COFINS) as well as PIS-Import and COFINS-Import.
  • Canada: Following the results of the 2019 federal election, the Liberal Party of Canada is set to form a minority government. A KPMG report summarizes the Liberal's election tax platform and offers insight into potential tax changes that may be seen as early as the end of 2019.
  • Mexico: Taxpayers that have been involved in certain maquila transactions were to withhold VAT when the goods were imported using a “V5” customs declaration. If VAT was not withheld, under then-applicable rules, the taxpayers could offset the amount of the VAT liability by using other tax overpayments. However, given changes to the rules and following the results of tax audits, taxpayers may want to consider revising their tax situations.

Read TaxNewsFlash-Americas

BEPS

  • A KPMG report provides an overview of controlled foreign companies (CFCs) rules under the anti-tax avoidance directive (ATAD) and an overview of implementation in the EU.

Read TaxNewsFlash-BEPS

FATCA / IGA / CRS

  • Cayman Islands: The automatic exchange of information (AEOI) portal is currently open and is available for common reporting standard (CRS) and FATCA notification and reporting submissions until 29 November 2019, at which point the portal will be offline until early 2020 for maintenance.
  • Netherlands: The Dutch tax administration released a document that answers questions from Parliament about two reports regarding problems being faced by Dutch residents who are U.S. citizens.
  • UK: An update to the guidance on the AEOI references a “frequently asked question” (FAQ) published by the U.S. Internal Revenue Service (IRS) relating to reporting taxpayer identification numbers (TINs) for 2020 and future periods.
  • United States: The IRS Large Business and International (LB&I) division publicly released a “practice unit” that outlines eight steps that are intended to assist the IRS examiner in obtaining electronic data needed to determine the reliability of information provided in Forms W-8.

Read TaxNewsFlash-FATCA / IGA / CRS

United States

  • The U.S. Tax Court issued a “reviewed opinion” in a case in which the IRS applied section 280E to deny deductions claimed by the taxpayer, the operator of a medical-marijuana dispensary in California. The majority opinion, in denying the taxpayer’s motion for summary judgment, held that section 280E does not violate the “Excessive Fines Clause” of the Eighth Amendment.
  • The IRS Large Business and International (LB&I) division publicly released a “practice unit” that outlines eight steps that are intended to assist the IRS examiner in obtaining electronic data needed to determine the reliability of information provided in Forms W-8.
  • OMB’s Office of Information and Regulatory Affairs (OIRA) completed its review of U.S. Treasury Department regulations concerning (1) the tax treatment of certain interests in corporations as stock or indebtedness; and (2) the life expectancy tables that apply for purposes of computing minimum required distributions from qualified retirement plans under section 401(a)(9).
  • The City of Boulder, Colorado, released guidance for marketplace facilitators and marketplace sellers.
  • The New Jersey Division of Taxation issued guidance addressing the unitary business principle to help taxpayers determine which entities are to be included in the combined reports that will be filed for privilege periods ending on and after 31 July 2019.
  • The Ohio Board of Tax Appeals concluded that a taxpayer (an automobile company) was entitled to retroactive application of a consolidated Commercial Activity Tax (CAT) filing election, on a finding that denial of the CAT election was unreasonable.
  • A Texas administrative law judge upheld a franchise tax assessment against a Colorado-based service provider, finding that the taxpayer had nexus in Texas for franchise tax purposes as a result of having a single employee working in Texas.

Read TaxNewsFlash-United States
 

  • The House Ways and Means Committee approved four health-related tax bills, including one that would impose an excise tax on nicotine used in vaping, at the same rate as the excise tax on small cigarettes.
  • The House Ways and Means Committee approved a bill that includes an excise tax on selected drugs during periods in which the manufacturer is not in compliance with certain requirements of a proposed new drug price negotiation program.

Read TaxNewsFlash-Legislative Updates

Trade & Customs

  • The Office of the U.S. Trade Representative (USTR) released a notice announcing that on 31 October 2019 the USTR will open an electronic portal for U.S. stakeholders to submit requests for exclusion from the additional customs duties to be imposed on particular products classified within a tariff subheading subject to additional customs duties on imports from China under the “Section 301 action.”
  • The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the extension of the expiration date of a general license related to nine Belarus-related entities.

Read TaxNewsFlash-Trade & Customs

Indirect Tax

  • Australia: Legislation in New South Wales proposes changes relating to duties and land tax in which anything “fixed to land” would be land for NSW landholder-duty (tax) purposes.
  • China: The State Council issued an order to expand the availability of the financial industry to foreign insurance companies and foreign-funded banks. From a tax perspective, areas of complications and uncertainties concern the applicability of VAT to certain financial products and VAT exemption on reinsurance.
  • Brazil: Guidance consolidates the rules for certain social contributions and concerns the rules with regard to the social integrity program (PIS) and social security financing (COFINS) as well as PIS-Import and COFINS-Import.
  • Belgium: The Belgian Constitutional Court issued a decision annulling the annual tax on securities accounts, with effect as of 1 October 2019.
  • Germany: The European Commission announced that it had decided to send a formal notice to Germany about German legislation on the taxation of distance sales of goods sold through digital marketplaces. If Germany does not act within the next two months in response to the formal notice, the EC may send a reasoned opinion to the German authorities.
  • Mexico: Taxpayers that have been involved in certain maquila transactions were to withhold VAT when the goods were imported using a “V5” customs declaration. If VAT was not withheld, under then-applicable rules, the taxpayers could offset the amount of the VAT liability by using other tax overpayments. However, given changes to the rules and following the results of tax audits, taxpayers may want to consider revising their tax situations.
  • Portugal: The CJEU issued a judgment in a case concerning the VAT treatment of the assignment of a debt that had been recognized in enforcement proceedings, holding that such an assignment was subject to VAT.
  • Poland: Taxpayers purchasing goods—including electronics, fuels, steel, recyclable materials, car parts, or construction services—need to be aware of a requirement to settle their payments using the split-payment mechanism for VAT purposes (effective 1 November 2019).
  • Serbia: Legislation was passed by Serbia’s Parliament that amends the VAT law.
  • United States: The City of Boulder, Colorado released guidance for marketplace facilitators and marketplace sellers.
  • United States: A Texas administrative law judge upheld a franchise tax assessment against a Colorado-based service provider, finding that the taxpayer had nexus in Texas for franchise tax purposes as a result of having a single employee working in Texas.

Read TaxNewsFlash-Indirect Tax

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