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KPMG’s Week in Tax: 4 - 8 November 2019

KPMG’s Week in Tax: 4 - 8 November 2019

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

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Transfer Pricing

  • Portugal: Changes to the transfer pricing rules—effective 1 January 2020—include: (1) a requirement to submit transfer pricing documentation by taxpayers that are subject to the jurisdiction of the “large taxpayer unit”; and (2) an extension of advance pricing agreements (APAs) from the current three-year period to four years.
  • OECD: The OECD released additional interpretative guidance for implementation and operation of country-by-country (CbC) reporting pursuant to BEPS Action 13, that reflects a summary of common errors made by multinational enterprise (MNE) groups in preparing CbC reports.

Read TaxNewsFlash-Transfer Pricing

BEPS

  • Norway: The multilateral instrument (MLI) negotiated under Action 15 of the OECD/G20 BEPS project and signed by Norway entered into force 1 November 2019. The MLI will affect 28 tax treaties within the Norwegian income tax treaty network.

Read TaxNewsFlash-BEPS

FATCA / IGA / CRS

  • Austria: An amendment to the rules for implementing the common reporting standard (CRS) regime concerns the competent tax office for large enterprises. The amendment will be effective from 1 July 2020.

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • United States: A Florida company agreed to pay approximately $210,000 to settle its potential civil liability for 12 apparent violations of the Sudanese sanctions regulations for jet engine leases (the Florida company leased jet engines to a company in the UAE, that in turn subleased them to a Ukrainian airline that then installed the engines on an aircraft that were subject to a leasing arrangement with an airline in Sudan).
  • EU: The European Commission published the most recent version of the Combined Nomenclature (CN) applicable as from 1 January 2020.
  • United States: The U.S. Department of Commerce announced an affirmative preliminary determination in the countervailing duty (CVD) investigation of imports of certain collated steel staples from China. 

Read TaxNewsFlash-Trade & Customs

Africa

  • Nigeria: Finance Bill, 2019 passed its second reading in the Senate. The bill includes measures that would revise provisions of the laws for corporate income tax, value added tax (VAT), petroleum products tax, individual income tax, and the customs and excise tax and stamp duties rules.
  • South Africa: For income tax purposes, a determination must be made as to whether a distribution by a collective investment scheme in securities (CISS) is a return of capital or a dividend. The distinction is critical in applying the rule that a CISS must distribute any income that it receives to unit holders within 12 months in order to avoid being taxed on the income.
  • South Africa: A circular about exchange controls concerns rules that generally have prohibited individuals from engaging in transactions with a foreign investment that in turn invests the funds back into the South African common monetary area.
  • South Africa: A new accounting standard (IFRS 16) introduces a single lessee accounting model, effective from annual reporting periods beginning on or after 1 January 2019.
  • Nigeria: There is an update on pending legislation concerning production sharing contracts for offshore and inland basin crude oil and gas extraction.

Read TaxNewsFlash-Africa

Americas

  • Canada: For the first quarter of 2020, the interest rate for pertinent loan or indebtedness (PLOI) is expected to decrease slightly to 5.64% (down from 5.65%), but the rate of interest will not change for tax overpayments or underpayments for the first quarter of 2020.  
  • Canada: The Canada pension plan (CPP) contribution limits for 2020 will increase to $58,700* (up from $57,400). The employee and employer contribution rates for 2020 will increase to 5.25% (up from 5.1%). The self-employed contribution rate will increase to 10.5% (from 10.2%).

      * $ = Canadian dollar

  • Canada: Rules in British Columbia that largely mirror the federal corporate “significant control” reporting requirements will be effective 1 May 2020. Thus, certain private corporations in British Columbia will be required to maintain up-to-date records reporting details about “significant individuals” (that is, individuals who meet the legislated corporate ownership thresholds).
  • Mexico: A tax legislative package for 2020 has been approved by Congress. Among the tax provisions in the legislation are measures concerning: the concept of permanent establishment; rules concerning credits for tax paid to other countries; hybrid mismatch rules; measures concerning private equity managers; measures denying deductions for certain payments made to related parties located in “low tax” jurisdictions, regarding certain payments made through structure agreements, or payments made with respect to intangibles; the treatment of amounts or revenue from fiscally transparent entities; rules relating to deductions for payments for labor subcontracting agreements; new limits for interest deductions; and VAT imposed on certain services provided via digital platforms.

Read TaxNewsFlash-Americas

Asia Pacific

  • Kazakhstan: The tax administration has implemented two “pilot projects” concerning VAT.
  • Turkey: Draft legislation proposes to introduce a digital service tax, to be imposed at a rate of 7.5% on entities that satisfy certain revenue thresholds.
  • Australia: The Australian Taxation Office (ATO) issued a draft tax determination that may affect taxpayers purchasing a business or assets and assuming deductible liabilities related to these assets.

Read TaxNewsFlash-Asia Pacific

Europe

  • Lithuania: VAT rules concern application of the reverse-charge mechanism with regard to sales of computers and mobile phones.
  • Portugal: Tax legislation concerning the VAT rules reflects changes to the deadlines for VAT remittances and new invoice rules that are effective 1 January 2020.

Read TaxNewsFlash-Europe

United States

  • The U.S. Court of Appeals for the Second Circuit issued a decision in a case concerning claims made by the State of New York that a manufacturer of cigarettes, owned by an Indian nation, had violated the state laws on cigarette sales by not paying tax on the cigarettes.
  • Proposed regulations update the life expectancy and distribution period tables that are used to calculate required minimum distributions from qualified retirement plans, individual retirement accounts (IRAs) and annuities, and certain other tax-favored employer-provided retirement arrangements.
  • Notice 2019-59 provides the dollar limitations for qualified retirement plans for tax year 2020.
  • Rev. Proc. 2019-44 provides the annual inflation adjustments for more than 60 tax provisions to be used by individual taxpayers on their 2020 returns (that is, the returns that are generally filed in 2021).
  • The IRS Large Business and International (LB&I) division released guidance for tax examiners on a “practice unit” webpage concerning taxpayers that have elected a partial disposition of a building or its structural components.
  • Proposed regulations concerning “eligible terminated S corporations” (ETSCs) provide guidance that generally reflects an intention to ease the transition from S corporation status to C corporation status for corporations that revoke their S corporation status within two years of the enactment of the 2017 tax law.
  • The Alcohol and Tobacco Tax and Trade Bureau (TTB) of the U.S. Treasury Department issued a release explaining that businesses (such as wineries) affected by the recent wildfires in California may obtain a waiver of excise tax-related penalties for not timely filing or paying excise taxes. There is no waiver allowed for the excise tax itself or interest.
  • The Florida Department of Revenue issued a bulletin reminding taxpayers that effective 1 January 2020, the sales tax rate imposed on renting, leasing, letting or granting a license to use real property is decreased to 5.5% (from 5.7%).
  • The Illinois Department of Revenue in a pair of letter rulings concluded that receipts from investment advisory services are to be sourced to the location of the customer’s billing address.
  • Maryland’s tax court denied a taxpayer’s claim for refund of various state and county recordation and transfer taxes that were paid with respect to the taxpayer’s purchase of real estate in Maryland. Because the taxpayer (a Los Angeles County employee retirement fund) was not a political subdivision of Maryland, the court determined that the taxpayer did not qualify for any exemptions from these taxes under Maryland law.
  • The Massachusetts appellate tax board found that receipts derived from federal patent infringement litigation are sourced to Massachusetts under the general rule that gross receipts from the enforcement of legal rights by Massachusetts-domiciled taxpayers are presumed to be attributable to Massachusetts unless the legal dispute related directly and exclusively to real or tangible personal property located outside of Massachusetts.
  • The Wisconsin appellate court affirmed a decision of a lower court that receipts from the licensing of the right to install and replicate proprietary software were not attributed to Wisconsin when the equipment manufacturers were located outside the state.

Read TaxNewsFlash-United States

Indirect Tax

  • Lithuania: VAT rules concern application of the reverse-charge mechanism with regard to sales of computers and mobile phones.
  • Mexico: Congress approved a tax legislative package for 2020 that includes amendments related to VAT. Included are measures to increase the efficiency of VAT collection, and clarify that revenue from certain digital or e-commerce services provided to Mexican residents from abroad, by entities not having an establishment in Mexico, will be subject to VAT in Mexico.
  • Kazakhstan: The tax administration implemented two “pilot projects” concerning VAT
  • Turkey: Draft legislation proposes to introduce a digital service tax, to be imposed at a rate of 7.5% on the revenue of certain entities.
  • Portugal: Tax legislation in Portugal includes changes to the VAT rules.
  • United States: The Florida Department of Revenue reminded taxpayers that effective 1 January 2020, the sales tax rate imposed on renting, leasing, letting or granting a license to use real property is decreased to 5.5% (from 5.7%).
  • United States: Maryland’s tax court denied a taxpayer’s claim for refund of various state and county recordation and transfer taxes that were paid with respect to the taxpayer’s purchase of real estate in Maryland. 

Read TaxNewsFlash-Indirect Tax

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