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KPMG’s Week in Tax: 28 October - 1 November 2019

KPMG’s Week in Tax: 28 October - 1 November 2019

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

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Europe

  • Italy: The final version of a law decree does not include digital tax provisions. A proposal for the digital services tax had been included in a draft version of the law decree (15 October 2019), but not in the final version.
  • Italy: New value added tax (VAT) measures are provided in a new law decree.
  • Slovakia: Amendments to the income tax law, generally effective beginning in 2020, include new exemptions from tax regarding employment income and simplified employer obligations.
  • Sweden: The Swedish high court requested a preliminary ruling from the Court of Justice of the European Union (CJEU) regarding the VAT treatment of supplies from an overseas head office to its branch in Sweden, in a situation when the overseas head office is a member of a VAT group but the Swedish branch is not a member of the VAT group.
  • Austria: Legislation passed by the parliament introduces a tax on digital services, and thus will impose a tax on digital advertising effective 1 January 2020.
  • Austria: Tax developments for October 2019 are included in a report prepared by the KPMG member firm in Austria.
  • EU: Although EU Member States have until the end of 2019 to implement the directive on administrative cooperation in the field of taxation (DAC6) into domestic legislation, several jurisdictions (including Bulgaria, Croatia, France, Germany, Hungary, and Lithuania) have introduced or are discussing draft legislation on mandatory disclosure rules..
  • Netherlands: To provide VAT relief for small businesses, a new small businesses scheme will apply as of 1 January 2020.
  • Luxembourg: The KPMG member firm in Luxembourg has prepared three discussions that consider the possible implications of Brexit on direct tax, on VAT, and on the taxation of global employees.
  • UK: There are potential Brexit implications for the taxation of luxury assets, including private aircraft.

Read TaxNewsFlash-Europe

Africa

  • South Africa: A bill proposes to extend “dividend stripping” provisions to situations when extraordinary dividends are declared on or after 20 February 2019 and are followed by a dilution of a corporate shareholding.
  • South Africa: A bill proposes not to allow tax-neutral transfers of interest-bearing instruments and exchange items between group companies.
  • South Africa: A proposal would require taxpayers to pay more withholding tax if they fail to renew their declarations and undertakings every five years.

Read TaxNewsFlash-Africa

Americas

  • Uruguay: Legislation provides a new form of corporation—the simplified stock company—and offers tax relief for sole proprietorships that convert their business in to a simplified stock company.
  • Canada: There are no proposed changes to the corporate or individual (personal) tax rates in Alberta’s 2019 budget. However, the budget would repeal several tax credits, including the scientific research and experimental development (SR&ED) tax credit, and would “pause” the annual indexation of personal non-refundable tax credits and tax bracket thresholds.

Read TaxNewsFlash-Americas

Asia Pacific

  • Australia: Offshore sellers of Australian commercial accommodation need to add goods and services tax (GST) when selling certain Australian-based accommodation in a 12-month period.
  • Malaysia: The 2020 budget includes tax incentives for energy, tourism, and real estate investment trusts (REITs); and certain income tax exemptions and tax allowances.
  • Taiwan: Beginning 1 January 2020, foreign e-commerce suppliers that fail to issue “cloud government uniform invoices” will be considered to be in violation of the invoice rules, and penalties can be imposed for non-compliance. 

Read TaxNewsFlash-Asia Pacific

Transfer Pricing

  • United States: The U.S. Tax Court issued an opinion finding that the taxpayer was not liable for 40% penalties under section 6662(h) in a dispute stemming from the cancellation of two advance pricing agreements (APAs) by the IRS.
  • KPMG reports concern transfer pricing issues:
    • Tax implications of “next gen” banking technology; transfer pricing issues with change in operating models
    • Tax, transfer pricing, and transformation; what asset managers may be forgetting

Read TaxNewsFlash-Transfer Pricing

United States

  • Final regulations (T.D. 9879) implement the rules for reportable policy sales under section 101 and the associated information reporting obligations under section 6050Y.
  • OMB’s Office of Information and Regulatory Affairs (OIRA) has:
    • Completed its review of final regulations and proposed regulations concerning the foreign tax credit provisions enacted by the 2017 U.S. tax law (Pub. L. No. 115-97)
    • Received for review proposed regulations concerning the tax treatment of payments made to charitable entities in return for consideration
       
  • The U.S. Tax Court this week:
    • Issued an opinion finding that the taxpayer was not liable for 40% penalties under section 6662(h) in a dispute stemming from the cancellation of two advance pricing agreements (APAs) by the IRS
    • Found the IRS had properly disallowed the full amount of a charitable contribution deduction of $155.5 million related to a conservation easement granted by the taxpayer to a qualified organization
    • In a “reviewed opinion” found that a notice of deficiency was invalid because it did not reflect that the IRS made a deficiency determination as to the taxpayer (petitioner) in this case because two taxpayers were identified in the notice of deficiency
       
  • State tax authorities and courts continue to address remote sales-related issues arising after the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc.:
    • The Arizona Department of Revenue rescinded prior guidance in light of Arizona’s new marketplace facilitator law.
    • The Hawaii Department of Taxation released guidance on the general excise tax responsibilities of marketplace facilitators.
    • The Louisiana Supreme Court heard a case in which a taxpayer argued that it was not a “dealer” required to collect local Jefferson Parish sales tax on third-party sales made through its marketplace for pre-Wayfair tax periods.
    • The Michigan House passed bills concerning economic nexus thresholds.
    • The North Carolina Senate passed a bill that would require marketplace facilitators that have either gross sales in excess of $100,000 or engage in 200 or more separate transactions into the state annually to begin collecting and remitting sales taxes as of 1 February 2020.
    • An electronic marketplace filed a notice of appeal with the South Carolina appeals court in response to a ruling of an administrative law judge that the entity was in the “business of selling” tangible personal property at retail because: (1) a customer’s interaction was almost entirely with the marketplace; and (2) the marketplace accepted money in exchange for products.
       
  • The Massachusetts Department of Revenue revised a regulation addressing the circumstances when corporations will be subject to Massachusetts corporate excise tax.
  • The Ohio Board of Tax Appeals held that an assessment of municipal income tax by a regional income tax agency was time-barred (not within the standard three-year limitations period).
  • Wyoming’s highest court held that a taxpayer’s purchase of certain assets of a business was subject to sales and use tax and that the taxpayer did not qualify for an asset-purchase exemption.

Read TaxNewsFlash-United States

Trade & Customs

  • A presidential decree announced actions with regard to the duty-free treatment of certain imports into the United States pursuant to the Generalized System of Preferences (GSP).
  • The U.S. Trade Representative (USTR) beginning 1 November 2019 will launch a process for considering extending for up to 12 months certain exclusions from additional tariffs on Chinese imports that were granted in December 2018 and are set to expire on 28 December 2019. The period for submitting comments will run from 1 November 2019 to 30 November 2019.

Read TaxNewsFlash-Trade & Customs

Indirect Tax

  • Australia: Offshore sellers of Australian commercial accommodation need to add GST when selling Australian-based accommodation, when these sales exceed AUD$75,000 in a 12-month period.
  • Italy: The final version of a law decree does not include digital tax provisions. The proposal for the digital services tax had been included in the 15 October 2019 draft law decree.
  • Italy: Law Decree no. 124 has been published in the official gazette and reflects new VAT measures.
  • Sweden: The Swedish high court requested a preliminary ruling from the CJEU regarding the VAT treatment of supplies from an overseas head office to its branch in Sweden, in a situation when the overseas head office is a member of a VAT group but the Swedish branch is not a member of the VAT group.
  • Austria: Legislation passed by parliament introduces a tax on digital services, and will impose a tax on digital advertising effective 1 January 2020.
  • Malaysia: Tax incentives and indirect tax measures are included in the 2020 budge.
  • Netherlands: In order to provide relief to small businesses with respect to their VAT obligations, a new small businesses scheme will apply as of 1 January 2020.
  • Taiwan: Beginning 1 January 2020, foreign e-commerce suppliers that fail to issue “cloud government uniform invoices” will be considered to be in violation of the invoice rules, and penalties can be imposed for non-compliance.
  • Luxembourg: The KPMG member firm in Luxembourg prepared a discussion that considers the possible implications of Brexit on VAT.
  • UK: There are potential Brexit implications for the taxation of luxury assets, including private aircraft.
  • United States: State tax authorities and courts continue to address remote sales-related issues arising after the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc.

Read TaxNewsFlash-Indirect Tax

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