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KPMG’s Week in Tax: 7 - 11 October 2019

KPMG’s Week in Tax: 7 - 11 October 2019

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

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Transfer Pricing

  • OECD: The Organisaton for Economic Cooperation and Development (OECD) released a proposal for multinational enterprises (MNEs)—including digital companies—to pay tax wherever they have significant consumer-facing activities and generate their profits. The consultation document describes the “unified approach” to Pillar One and seeks comments on a number of policy issues and technical aspects.
  • Australia: The Australian Tax Office is currently actively focused on the pharmaceuticals and life sciences industry—an industry dominated by multinational organisations and cross-border value chains, so that international tax issues and transfer pricing are at the heart of the ATO’s focus.
  • Argentina: A draft resolution concerning transfer pricing compliance procedures reflects the postponed transfer pricing filing deadlines for taxpayers with fiscal years ending on or after December 2018.

Read TaxNewsFlash-Transfer Pricing

FATCA / IGA / CRS

  • United States: Any qualified intermediary (QI) (including qualified derivatives dealer (QDD)), withholding foreign partnership (WP), and withholding foreign trust (WT) must submit its applications for the 2019 year by 15 November 2019.
  • India: The tax authority released an updated version of user guides for the reporting portal and “quick reference” guides pursuant to the FATCA and common reporting standard (CRS) regimes. A set of “frequently asked questions” (FAQs) and the first version of the information request utility and its user guide were also released.

Read TaxNewsFlash-FATCA / IGA / CRS

Europe

  • Norway: Proposed changes to taxation of hydropower producers were presented by an appointed expert committee.
  • Italy: A question has been referred to Italy’s Constitutional Court concerning the constitutionality of a provision of Italy’s registration tax law. At issue is the treatment of a share deal versus an asset deal and the applicable treatment of deeds under article 20 of Italy’s registration tax law.
  • Sweden: Employers and employees need to consider possible social security implications and other matters in the event of a “no deal” Brexit.
  • EU: The United Arab Emirates (UAE) and the Marshall Islands were removed from the EU “blacklist” of non-cooperative jurisdictions for tax purposes. Albania, Costa Rica, Mauritius, Serbia, and Switzerland were also found to be compliant with all of their commitments on tax cooperation and were removed from the “grey list.”
  • Hungary: The European Commission announced its decision to refer Hungary to the Court of Justice of the European Union (CJEU) for failing to apply the minimum EU threshold for excise duty on cigarettes.
  • France: The draft Finance Law for 2020 includes a provision that would revise the rules for management of funds exempt from value added tax (VAT).
  • France: The finance bill for 2020 includes measures that may affect corporations—including a delay of a scheduled reduction of the corporate income tax “standard” rate for 2020 and 2021; rules to address the use of hybrid instruments and entities in a cross-border context; new rules under which the tax residency of the persons heading or leading large companies would be deemed to be French residents; and freezing the withholding tax on certain French-source income paid to a non-resident loss-making company.
  • Ireland: Tax measures in the budget 2020 include income tax, business taxation, property taxation, indirect tax, and capital acquisitions tax proposals.
  • Germany: The CJEU held that a VAT exemption for transactions involving payments and transfers related to the operation of automated teller machines (ATMs) do not qualify for the VAT exemption available for certain transactions concerning payments and transfers.

Read TaxNewsFlash-Europe

Africa

  • Nigeria: The federal government’s budget proposals for 2020 would finance expenditures in part by additional revenue that would be derived from a proposed increase in the value added tax (VAT) rate from 5% to 7.5%.
  • Nigeria: The Federal High Court issued a judgment holding that the tax authority cannot appoint a specific bank as its collecting agent to recover alleged companies income tax from a taxpayer company.

Read TaxNewsFlash-Africa

Americas

  • Canada: The three political parties (Conservative, Liberal, and New Democratic) have released tax policies ahead of Canada’s general election on 21 October 2019.
  • Costa Rica: Tax developments in Costa Rica concern: (1) updated individual income tax brackets for 2020; (2) factoring contract legislation that was effective 30 September 2019; and (3) ultimate beneficial owner register rules of the central bank.

Read TaxNewsFlash-Americas

Asia Pacific

  • Australia: The Australian Taxation Office (ATO) released a decision impact statement following court judgments in a case concerning the operation of the Fuel Tax Act 2006 that allows a taxpayer a fuel tax credit for taxable fuel that the taxpayer acquires for use in carrying on the enterprise.
  • New Zealand: Earlier this year, representatives of the governments of New Zealand and China signed a new income tax treaty. New Zealand has completed its domestic procedures to ratify the treaty, and the treaty will enter into force once China has also completed its domestic procedures.
  • New Zealand: A consultation document considers the tax treatment of “holding costs” (such as interest, rates, insurance, and repairs and maintenance) associated with owning land that is taxable on sale, and considers the tax deductibility of these costs for a range of “use” scenarios.

Read TaxNewsFlash-Asia Pacific

United States

  • An IRS Chief Counsel Attorney Memorandum (CCAM) that has implications for the insurance sector concludes that the election out of the “same country exception” under section 952(c) is obsolete.
  • OMB’s Office of Information and Regulatory Affairs (OIRA) received for review from the U.S. Treasury Department regulations concerning the tax treatment of certain interest in corporations as stock or indebtedness. Tax professionals suspect that these regulations could concern section 385.
  • The IRS 2019-2020 priority guidance plan was released, listing guidance priorities for the 12-month period from 1 July 2019 through 30 June 2020.
  • Proposed regulations concern state-established and maintained tax-advantaged savings programs under which contributions may be made to an “achieving a better life experience” (ABLE) account for the purpose of paying for the qualified disability expenses of the designated beneficiary of the account.
  • Rev. Rul. 2019-24 concerns the tax treatment of certain virtual currency transactions—or “cryptocurrency.” The IRS also provided an updated set of FAQs to address virtual currency transactions for taxpayers who hold virtual currency as a capital asset.
  • A quarterly list of countries that require (or may require) participation in, or cooperation with, an international boycott (within the meaning of Internal Revenue Code section 999(b)(3)) was unchanged—no new countries were added, and no countries were removed from the prior quarterly list.
  • Proposed regulations concern the tax consequences of the transition to the use of reference rates other than “interbank offered rates” (IBORs) in debt instruments and non-debt contracts.
  • Treasury announced that a public hearing will be held on 22 November 2019 concerning proposed regulations under section 245A and the limitation on the dividends received deduction available for certain dividends received from current or former controlled foreign corporations.
  • The Puerto Rico Treasury Department issued guidance on the electronic filing requirements applicable to 2019 Form 499R-2 / W-2PR filings (employment tax returns).
  • The IRS provided relief for certain taxpayers affected by Tropical Storm Imelda, allowing them until 31 January 2020 to file individual and business tax returns and to make certain tax payments.
  • Maryland and Wisconsin issued guidance on marketplace nexus rules, following the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc.
  • Delaware companies in receipt of new unclaimed property voluntary disclosure agreement (VDA) invitations that do not enroll within 60 days of receipt of the letters will be immediately eligible for selection for an unclaimed property audit by Delaware state officials.
  • The Kansas Attorney General issued an opinion concluding that a Department of Revenue notice and new sales tax enforcement policy are not a valid exercise of administrative authority.
  • The Maryland tax court invalidated a regulation limiting the use of pre-merger net operating losses (NOLs).
  • The Massachusetts Department of Revenue issued a working draft technical information release addressing the computation of the IRC section 163(j) interest limitation for Massachusetts corporate excise tax purposes.
  • The Pennsylvania Department of Revenue issued a corporation tax bulletin to require corporations to begin filing returns if they meet an economic nexus standard for tax years beginning on or after 1 January 2020.

Read TaxNewsFlash-United States

Trade & Customs

  • The Office of the U.S. Trade Representative (USTR) released a notice that sets out the tariff classifications subject to additional customs duties being imposed on certain imports from Europe, following last week’s action by the World Trade Organization (WTO) in the EU large civil aircraft dispute.
  • A notice reports that USTR has modified the Harmonized Tariff Schedule of the United States (HTSUS) concerning bifacial solar panels.

Read TaxNewsFlash-Trade & Customs

Exempt Organizations

  • The IRS 2019-2020 priority guidance plan includes projects concerning exempt organizations, charitable giving, and tax-exempt bonds.

Read TaxNewsFlash-Exempt Organizations

Indirect Tax

  • Australia: The Australian Taxation Office (ATO) released a decision impact statement addressing the ATO position after a case concerning the operation of the Fuel Tax Act 2006 that allows a taxpayer a fuel tax credit for taxable fuel that the taxpayer acquires for use in carrying on the enterprise.
  • Hungary: The European Commission announced its decision to refer Hungary to the Court of Justice of the European Union (CJEU) for failing to apply the minimum EU threshold for excise tax (duty) on cigarettes.
  • France: The draft Finance Law for 2020 includes a provision that would revise the rules for management of funds that are exempt from VAT. Other indirect tax measures in the finance bill for 2020 include harmonization and simplification of certain rules in the VAT system for the taxation of trade between EU Member States; VAT obligations for supplies of services and distance sales of goods (e-commerce); and collection and use of data made public by individuals on their social networks or on any digital interface.
  • Ireland: Indirect tax measures in the budget 2020 include measures concerning property taxation, stamp duty on commercial property, and carbon tax.
  • Nigeria: The federal government budget proposals for 2020 would finance expenditures in part by additional revenue that would be derived from a proposed increase in the VAT rate from 5% to 7.5%.
  • Germany: The CJEU held that a VAT exemption for transactions involving payments and transfers related to the operation of automated teller machines (ATMs) do not qualify for the VAT exemption available for certain transactions concerning payments and transfers.

Read TaxNewsFlash-Indirect Tax

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