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KPMG’s Week in Tax: 18 - 22 November 2019

KPMG’s Week in Tax: 18 - 22 November 2019

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

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Transfer Pricing

  • United States: The taxpayer decided not to seek a stay of the mandate with regard to a decision of the U.S. Court of Appeals for the Ninth Circuit. Thus, the Ninth Circuit’s decision from June 2019—a decision upholding Treasury regulations under section 482 requiring participants in a qualified cost-sharing arrangement to share the cost of employee stock-based compensation—is final. Whether the taxpayer will seek certiorari from the U.S. Supreme Court is unknown.
  • Thailand: The tax authority released a transfer pricing disclosure form to be filed by corporate taxpayers with revenue of at least THB 200 million (approximately U.S. $6.6 million) or more per accounting year.
  • Australia: The Australian Taxation Office (ATO) provided more time for taxpayers required to file country-by-country (CbC) reports. The ATO announced that significant global entities that have a 31 December 2018 obligation for CbC reporting have until 15 January 2020 to submit their CbC reports, Master files, and Local files. The original deadline was 31 December 2019.
  • Portugal: Transfer pricing documentation in 2020 must be submitted to the Portuguese tax authority by all “major taxpayers” by a deadline of no later than the 15th day of the seventh month following the end of the corresponding tax year. This transfer pricing documentation submission requirement was effective 1 October 2019, and applies for taxpayers with fiscal years beginning 1 January 2019 and later. 
  • Portugal: An administrative court issued a decision regarding a transfer pricing issue—specifically concerning an underpriced controlled transaction that was tested through the application of the transactional net margin method (TNMM).

Read TaxNewsFlash-Transfer Pricing

BEPS

  • Cayman Islands: An industry update provided by Cayman Islands governmental agencies concerns changes to the CbC reporting and base erosion profit shifting (BEPS) rules, among other items.

Read TaxNewsFlash-BEPS

FATCA / IGA / CRS

  • Russia: The tax authority updated a list of organizations that may be classified as “financial market organizations” for common reporting standard (CRS) purposes and to include “electronic money operators.”
  • Cayman Islands: An industry update provided by Cayman Islands governmental agencies includes updates about the rules for FATCA / CRS reporting.

Read TaxNewsFlash-FATCA / IGA / CRS

Europe

  • Belgium: The Court of Justice of the European Union (CJEU) issued a judgment in a case concerning prior-law value added tax (VAT) rules in Belgium. Under the previous VAT rules (revised in 2016) , a VAT exemption was available for “independent groups of persons” and the CJEU found that this exemption was contrary to EU law when it denied the application of the exemption to a group that provided services also to non-members.
  • Czech Republic: The government approved the introduction of a digital services tax that will now be considered by parliament. The tax would be imposed at a rate of 7% on certain digital services provided in the territory of the Czech Republic.
  • Germany: The German Parliament passed legislation that includes VAT changes—including the EU “Quick Fixes” in German domestic law, effective 1 January 2020 and providing a reduced VAT rate for e-publications and e-books.
  • EU: The European Council adopted a directive on cross-border conversions, mergers, and divisions. 

Read TaxNewsFlash-Europe

Africa

  • Namibia: A program intends for taxpayers to register with the Integrated Tax Administration System (ITAS) and to use the online service.
  • Nigeria: The senate passed Finance Bill, 2019 that includes measures that would revise provisions of the laws for corporate income tax, VAT, petroleum products tax, individual income tax, and the customs and excise tax and stamp duties rules.
  • Ghana: The 2020 budget does not propose any new taxes, but would extend the national fiscal stabilization levy (NFSL) at a rate of 5% and the special import levy (SIL) at a rate of 2% for five years through 2024, among other tax proposals.

Read TaxNewsFlash-Africa

Americas

  • Canada: Charitable gifts must be made by 31 December 2019 for taxpayers to claim the donation tax credit on the 2019 tax return.
  • Canada: Legislation in Quebec contains measures concerning capital cost allowance, tax credits, and harmonization of Quebec tax provisions with other federal bills.
  • Mexico: The Supreme Court of Justice issued a decision in three “amparo” actions and concluded that a legislative rule limiting tax offsets to the same type of tax was constitutional in these three actions.

Read TaxNewsFlash-Americas

Asia Pacific

  • Singapore: The rules for cash reimbursements made under certain benefit plans by employers to employees have been revised.
  • Hong Kong: An appellate court taxpayer-favorable decision concludes that a payment made in lieu of bonus and share option gain arising from an employment separation agreement was not subject to salaries tax.
  • Korea: The tax tribunal issued a decision holding that if a company purchased land with a known restriction for business use, capital gain realized on the sale of the land would also be subject to additional corporate income tax and would not qualify for an exemption.

Read TaxNewsFlash-Asia Pacific

Trade & Customs

  • The Office of Foreign Assets Control (OFAC) of the U.S. Treasury Department released a final rule that amends the Venezuela sanctions regulations.
  • The U.S. International Trade Commission (ITC) determined that U.S. industries were materially injured by reason of imports of mattresses and imports of aluminum wire and cable from China.
  • The Office of the United States Trade Representative (USTR) released a notice announcing the results of the annual generalized system of preferences (GSP) review.
  • The Dutch customs authorities have postponed a change to the definition of “exporter” until 1 April 2020 (from 1 December 2019)—until then, a person not established in the European Union can be indirectly represented on the export declaration and indicated in box 2 of the export declaration.

Read TaxNewsFlash-Trade & Customs

United States

  • Final regulations concern the attribution of ownership of stock or other interests for purposes of determining whether a person is a related person with respect to a controlled foreign corporation (CFC) under section 954(d)(3). The final regulations also include certain revisions to the rules that determine whether a CFC derives rents in the active conduct of a trade or business for purposes of applying the active rent exception to foreign personal holding company income (FPHCI).
  • The Arkansas Department of Revenue issued a legal opinion addressing the “transactions” threshold in the state’s sales tax economic nexus law. The Department determined that a “transaction” occurred when the customer made a purchase or downloaded digital content for consideration; thus, each digital download constituted a transaction that counted toward the 200-transactions threshold.
  • The California Office of Tax Appeals (OTA) dismissed an assessment of tax on income earned by an individual who was a Texas resident and performed design services in Texas for a Canadian customer of the California LLC. The OTA concluded the location where the benefit was received was Canada, the place where the LLC’s customer was located and where it received the benefit of the design services that helped it promote and sell products.
  • The Indiana Department of Revenue partially denied a taxpayer’s claim for refund of sales tax paid on various purchases of computer software maintained on servers outside the state. [As of 1 July 2018, Indiana no longer taxes remotely accessed software.]
  • The Tennessee Department of Revenue issued a letter ruling addressing the tax treatment of a motor vehicle subscription service (customers paid a one-time activation fee and a monthly subscription fee for the use of a motor vehicle, and the monthly fee included insurance coverage, maintenance and repairs, and the ability to switch out motor vehicles). The Department concluded the subscription service was a lease of a motor vehicle, and as such, was subject to sales and use tax.

Read TaxNewsFlash-United States
 

  • The U.S. House Ways and Means Subcommittee on Select Revenue Measures released a discussion draft of an energy bill—the Growing Renewable Energy and Efficiency Now (GREEN) Act—that includes proposals for tax benefits and energy-related incentives.

Read TaxNewsFlash-Legislative Updates

Indirect Tax

  • Czech Republic: The government approved the introduction of a 7% digital services tax that will now be considered by parliament.
  • Germany: The German Parliament passed legislation that includes VAT changes—including the EU “Quick Fixes” and measures providing a reduced rate of VAT for e-publications.
  • Mexico: The Supreme Court of Justice issued a decision in three “amparo” actions and concluded that a legislative rule limiting tax offsets to the same type of tax (including VAT) was constitutional in these three actions.
  • Ghana: The 2020 budget includes a proposal to repeal VAT on management fees relating to private equity, venture capital, and mutual funds.
  • Korea: VAT-related issues were considered by the tax authority, the Supreme Court of South Korea, and the Ministry of Economy and Finance.
  • United States: The Arkansas Department of Revenue issued a legal opinion finding that a “transaction” occurred when the customer made a purchase or downloaded digital content for consideration; thus, each digital download constituted a transaction that counted toward the 200-transactions threshold.
  • United States: The Indiana Department of Revenue partially denied a taxpayer’s claim for refund of sales tax paid on various purchases of computer software maintained on servers outside the state.
  • United States: The Tennessee Department of Revenue issued a letter ruling addressing the tax treatment of a motor vehicle subscription service.

Read TaxNewsFlash-Indirect Tax

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