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KPMG’s Week in Tax: 11 - 15 November 2019

KPMG’s Week in Tax: 11 - 15 November 2019

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

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Transfer Pricing

  • United States: The U.S. Court of Appeals for the Ninth Circuit denied a petition for rehearing en banc of the Ninth Circuit’s decision from June 2019 upholding Treasury regulations under section 482 that require participants in a qualified cost-sharing arrangement to share the cost of employee stock-based compensation and reversing a decision of the U.S. Tax Court.
  • OECD: KPMG reports provide follow-up to OECD proposals to address the tax challenges of digitalisation of the economy: (1) initial impressions about the proposals in the OECD’s public consultation document concerning the global anti-base erosion (GloBE) proposal (Pillar Two) to address the tax challenges of digitalisation of the economy; and (2) comments to the OECD with regard to the Pillar One approach for certain “large and highly profitable” multinational enterprises (MNEs)—including digital companies—to pay tax wherever they have significant consumer-facing activities and generate their profits.

Read TaxNewsFlash-Transfer Pricing

BEPS

  • OECD: Eight peer review reports assess compliance with the international standard on transparency and exchange of information on request (EOIR).

Read TaxNewsFlash-BEPS

Americas

  • Brazil: With the consolidation of social contributions (PIS and COFINS), there is a question concerning the effect of a state-level sales tax (ICMS) on the basis for calculating the contribution credit.
  • Canada: Taxpayers are reminded that they have until 31 December 2019 to file a “fairness relief” request related to 2009.
  • Canada: Individual taxpayer and small business tax measures were enacted in Nunavut.
  • Canada: The 2020 contribution limits for money purchase registered pension plans (RPP), registered retirement savings plans (RRSP) and deferred profit sharing plans (DPSP) were announced by the Canada Revenue Agency.
  • Canada: Individuals and owner-managers subject to tax in Canada need to consider reviewing their year-end tax planning for 2019.
  • Chile: A political agreement was reached concerning principles to govern tax measures for raising tax revenues. There are proposals to increase certain tax rates for individual taxpayers among other items. It is expected that details of these tax measures will be sent to the Chilean Congress soon and with legislative consideration and discussion to follow over a 15-day period.

Read TaxNewsFlash-Americas

Asia Pacific

  • Australia: The Australian Tax Office (ATO) issued guidance concerning how it interprets a tax treaty with eight key points that broadly put emphasis on the overarching objectives of income tax treaties—the avoidance of double taxation (on specified types of income) and addressing fiscal evasion.

Read TaxNewsFlash-Asia Pacific

Europe

  • Hungary: An amendment to the value added tax (VAT) law in Hungary allows for a retroactive reduction of the tax base for VAT purposes when it is shown that a purchaser will not pay the amount owed for the goods or services and that the resulting bad debt is deemed to be unrecoverable by the supplier.
  • Hungary: The Court of Justice of the European Union (CJEU) held that the tax authority cannot rely on national law to deny a taxpayer access to documents upon which an adverse determination against the taxpayer is based (in this case, concerning VAT issues).
  • Hungary: The EU harmonization package related to VAT—referred to as the “quick fixes”—will be applicable in Hungary beginning from 1 January 2020.
  • Italy: Tax provisions in a “law decree” were published in advance of the budget law for 2020 and include provisions relating to the assumption of tax liabilities by a third party; rules for offsetting credits declared in annual income tax and IRAP returns and aligning the measures with the existing rules for offsetting VAT credits; and new rules for a 24-hour time limit within which a consignee of products under a customs duty suspension must inform the customs authority, among other items.
  • Czech Republic: A provision provides that the statute of limitations for making a tax assessment does not run during the time that there is a pending international request for tax information. This pause on the limitations period for assessment does not apply if the tax at issue is VAT.
  • Czech Republic: The Supreme Administrative Court held that air-conditioning repair in a building with leased premises that were both subject to and not subject to VAT. At issue was a claim for a reduced VAT deduction, which the court denied.
  • Czech Republic: The VAT law was amended to eliminate the “double” rounding of cash payments when the first rounding concerns the calculated tax and the second one the total amount of the VAT payment.  
  • Germany: The CJEU issued a judgment in a case concerning the compatibility with EU law of the German withholding tax on dividends paid to a Canadian pension scheme. The CJEU held that the German legislation constituted an unjustified restriction to the free movement of capital.
  • Germany: A report from the KPMG member firm in Germany provides a summary of recent tax developments including disclosure requirements of cross-border arrangements, the tax exemption on gains by a corporation on the sale of shares in another corporation, and the German tax consolidation regulations.
  • UK: Beginning 10 December 2019, trustees will be required by law to evaluate their adviser to confirm that they are receiving a good level of service and value for their money.

Read TaxNewsFlash-Europe

FATCA / IGA / CRS

  • Germany: Guidance from the tax authority provides information to financial institutions concerning the common reporting standard (CRS) regime.

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • EU and Singapore: The EU Council approved the EU-Singapore free trade agreement that will enter into force on 21 November 2019.
  • United States: The Office of the U.S. Trade Representative (USTR) released a notice of products excluded from the additional duties on goods of China with an annual trade value of approximately $200 billion as part of the action in the Section 301 investigation of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation.

Read TaxNewsFlash-Trade & Customs

United States

  • Rev. Proc. 2019-46 provides rules for using optional standard mileage rates to compute the deductible costs of operating an automobile for business, charitable, medical or moving expense purposes for those taxpayers whose use of an automobile for business purposes is not affected by a suspension of the miscellaneous itemized deduction under the 2017 tax law.
  • Notice 2019-60 provides additional temporary nondiscrimination relief for “closed” defined benefit plans that generally meet the eligibility conditions for the relief provided in Notice 2014-5.
  • The IRS announced that it is focusing on increased enforcement actions for syndicated conservation easement transactions.
  • The IRS posted draft instructions with regard to certain partnership forms for the 2019 tax year, and implementing the partnership audit regime (enacted under the Bipartisan Budget Act of 2015) that applies to partnership tax years beginning on or after January 1, 2018.
  • OMB’s Office of Information and Regulatory Affairs (OIRA) completed review of proposed and final regulations concerning the base erosion and anti-abuse tax (BEAT) provisions enacted by the 2017 U.S. tax law.
  • KPMG reports address: (1) the rules for defined compensation arrangements under section 409A, and (2) the sale of partnership interests resulting in ordinary income.
  • North Carolina’s governor signed legislation that: (1) increases the standard deduction for individuals; (2) adopts market-based sourcing effective for tax years beginning on or after 1 January 2020; (3) requires marketplace facilitators to collect and remit sales and use tax effective 1 February 2020; and (4) expands the definition of a holding company for franchise tax purposes.
  • The Indiana Department of Revenue issued a revenue ruling concerning a taxpayer that retrieved medical records and delivered the records in paper format (as well as by electronic format). The Department concluded the paper version of the medical records were tangible personal property and as such were subject to sales tax (as were the associated photocopying fees and shipping and handling charges).
  • In Nebraska, a temporary waiver of penalties and interest provides relief for certain remote sellers and multi-vendor marketplace platforms that were unable to meet the Wayfair-related sales tax collection requirements (effective 1 April 2019).
  • A hearing officer in New Mexico rejected a taxpayer’s position that it was a package delivery company—and not a trucking company (and thus subject to the special industry apportionment rules for trucking companies)—because the transport of packages was the predominate source of the taxpayer’s income generation. Thus, the hearing officer concluded that the taxpayer was subject to the trucking company regulations, but that equitable relief was also available.
  • The Virginia Department of Taxation issued guidelines to the effect that Virginia has conformed to the business interest limitation rule under IRC section 163(j) for taxpayers filing Virginia consolidated or combined returns.
  • The Wisconsin Tax Appeals Commission determined that sales of on-demand seminars for continuing legal education (CLE) credit were not subject to sales and use tax. The seminar transactions were determined to allow purchasers to obtain an educational service, and the digital good was incidental to that service.

Read TaxNewsFlash-United States

Indirect Tax

  • Hungary: An amendment to the VAT law allows for refunds of VAT to suppliers with uncollectable amounts (bad debts).
  • Italy: VAT measures were included in a “law decree” published in advance of the budget law for 2020.
  • Czech Republic: A court decision addresses air-conditioning repair in a building with leased premises that were, depending on their location in the building, subject to VAT or not subject to VAT.
  • Czech Republic: The VAT law was amended to eliminate the “double” rounding of cash payments when the first rounding concerns the calculated tax and the second one the total amount of the VAT payment.
  • United States: North Carolina’s governor signed legislation that adopts market-based sourcing effective for tax years beginning on or after 1 January 2020, and requires marketplace facilitators to collect and remit sales and use tax effective 1 February 2020.
  • Hungary: A judgment from the CJEU concludes the tax authority cannot rely on national law to deny a taxpayer access to documents upon which an adverse determination against the taxpayer is based (in this case, concerning VAT issues).
  • Hungary: The EU harmonization package related to VAT—referred to as the “quick fixes”—will be applicable in Hungary beginning from 1 January 2020.
  • Chile: Among the measures in a tax modernization bill is a proposal to impose VAT on digital services.
  • United States: The Indiana Department of Revenue issued a revenue ruling concerning a taxpayer that retrieved medical records and delivered the records in paper format (as well as by electronic format), and concluding the paper version of the medical records was tangible personal property that was subject to sales tax (as were the associated photocopying fees and shipping and handling charges).
  • United States: In Nebraska, a temporary waiver of penalties and interest provides relief for certain remote sellers and multi-vendor marketplace platforms that were unable to meet the Wayfair-related sales tax collection requirements (effective 1 April 2019).
  • United States: The Wisconsin Tax Appeals Commission determined that sales of on-demand seminars for continuing legal education (CLE) credit were not subject to sales and use tax.

Read TaxNewsFlash-Indirect Tax

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