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KPMG’s Week in Tax: 16 - 20 December 2019

KPMG’s Week in Tax: 16 - 20 December 2019

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

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Asia Pacific

  • Myanmar: A law amending the stamp tax (duty) in Myanmar revises the amount of penalty that may apply with regard to unpaid or underpaid stamp taxes.
  • Australia: Performance bonuses paid to foreign employees may be subject to Australian payroll tax, even if the employee has spent limited time in Australia. The tax authorities have issued guidance that specifically addresses these situations and provides an example.
  • India: Amendments to the Income-tax Act 1961 and the Finance (No. 2) Act 2019 have been enacted. Some of the amendments concern the treatment of tax concession for domestic companies, tax concession for new domestic manufacturing companies, reduced minimum alternative tax rate, surcharge for advance tax, and buy-back of shares.
  • India: The Central Board of Indirect Taxes and Customs issued notices that require certain registered persons to provide electronic invoices with regard to business-to-business supplies if a turnover threshold (INR 100 crore) is satisfied.
  • Indonesia: There are reports that a draft of a tax omnibus bill is being finalized to: (1) decrease the corporate income tax rate in phases; and (2) replace the current worldwide tax system for foreign individual tax residents to a territorial tax system.
  • Taiwan: A tax ruling concludes a reduced rate applies with regard to the business tax imposed on revenue derived by banks from transactions of negotiable certificates of deposit, issued by Taiwan’s central bank. According to the tax ruling, this revenue is subject to business tax of 2% (instead of the business tax rate of 5%).
  • Hong Kong: The Financial Secretary announced certain tax relief measures, including provisions for making tax payments in instalments and subsidies for small- and medium-sized enterprises (SMEs) intended to provide support for enterprises and with regard to employment.
  • Hong Kong and Macau: A new income tax treaty has been signed, and will enter into force once the formal ratification procedures are completed by both parties.
  • New Zealand: The government is proposing a legislative change for early 2020 to allow lessees to align the tax treatment with a new lease accounting standard (NZ IFRS 16).

Read TaxNewsFlash-Asia Pacific


Europe

  • Italy: Changes made to the digital services tax provision contained in the budget bill for 2020 by the upper chamber are pending approval by the lower chamber.
  • EU: One of the measures under the EU’s VAT “quick fixes” concerns uniform rules to simplify chain transactions.
  • Netherlands: The Dutch upper house adopted tax measures that include the “2020 Tax Plan” in addition to bills to implement the second EU anti-tax-avoidance directive (ATAD2) and the EU directive on cross-border arrangements (DAC6).
  • Netherlands: Dutch Customs announced that in the coming months, more audits and checks will be conducted with regard to the customs value and classification of goods (the commodity code). Special attention will also be paid to the additional customs duties levied on certain products originating from the United States. 
  • Ireland: Guidance from Irish Revenue requires employers reflects a revised position with regard to determining the number of work days employees spend in Ireland in a single year of assessment. The change concerning “short-term business visitors” is effective in 2020.
  • Sweden: A decision of the Swedish high court affirms the conclusion announced in earlier decisions that director's fees are to be taxed as income from employment.
  • Poland: There are new standard audit file rules for value added tax (VAT) purposes beginning July 2020.
  • Poland: The effective date of application of withholding tax rules has been delayed to 30 June 2020 for corporate income taxpayers and individual taxpayer.
  • Bulgaria: Changes to the VAT law generally are effective 1 January 2020.
  • EU: The European Commission announced approval under EU state aid rules of five programs to support maritime transport in Cyprus, Denmark, Estonia, Poland, and Sweden.

Read TaxNewsFlash-Europe


Transfer Pricing

  • Nigeria: The deadline for the statutory filing of country-by-country (CbC) reporting notification and the CbC report for companies with a 31 December accounting year-end date is 31 December 2019.
  • Costa Rica: The tax authority issued guidance to clarify when transfer pricing reports are required of a taxpayer group.
  • Argentina: A general resolution concerning the effective date of certain transfer pricing compliance rules delays the deadline.

Read TaxNewsFlash-Transfer Pricing


Africa

  • Nigeria: A tax enforcement exercise aims to identify tax defaulters and to recover outstanding tax liabilities. The program began 18 December 2019.
  • Nigeria: The enactment of the 2020 appropriation bill returns Nigeria to a January-to-December budget cycle.
  • Nigeria: There is a new royalty regime, enacted as part of legislation concerning deep offshore and inland basis production-sharing contracts.

Read TaxNewsFlash-Africa


Americas

  • Mexico: The legislative process for the tax reform package for 2020, completed in December 2019, includes international taxation, digital taxation, and other tax items.
  • Canada: The government issued “mandate letters” to the Finance Department and the Canada Revenue Agency of the possible tax agenda for 2020.
  • Canada: Guidance addresses the notion of tax paid-up capital and eligibility for the dividend tax credit in Quebec. 
  • Canada: The 2019 budget in Alberta repeals certain tax credits (effective 1 January 2020) but enacts a movie and television production-related tax credit.
  • Canada: Ontario’s budget legislation includes tax rate reductions for small business and concerning certain purchases of aviation fuel.
  • Canada: Distributed investment plans are reminded that they must collect investor information by 31 December 2019 in order to comply with upcoming goods and services tax / harmonized sales tax (GST/HST) and Quebec sales tax (QST) obligations.
  • Canada: Following the agreement to final revisions of the United States-Mexico-Canada Agreement (USMCA), companies need to consider how to plan for the new trade agreement.

Read TaxNewsFlash-Americas


FATCA / IGA / CRS

  • Liechtenstein: The tax authority of Liechtenstein announced agreements for the automatic exchange of information (AEOI) for financial accounts with authorities in Ecuador, Kazakhstan, and Oman.
  • United States: Final regulations concerning certain financial products provide rules regarding dividend equivalents from sources within the United States paid to nonresident alien individuals and foreign corporations.
  • United States: Notice 2020-2 announces additional time for taxpayers to comply with the final and temporary regulations under sections 871(m), 1441, 1461, and 1473.

Read TaxNewsFlash-FATCA / IGA / CRS


Trade & Customs

  • Netherlands: Dutch Customs announced that in the coming months, more audits and checks will be conducted with regard to the customs value and classification of goods (the commodity code). Special attention will also be paid to the additional customs duties levied on certain products originating from the United States. 
  • EU: The European Commission announced the issuance of the European customs data model. Version 5.1.
  • United States: U.S. Customs and Border Protection (CBP) announced the issuance of a “blanket authorization” for immediate delivery procedures for merchandise to be released on or after 17 December 2019 through 31 December 2019.
  • United States: The Office of the U.S. Trade Representative (USTR) released three notices concerning product exclusions and amendments to the additional customs duties imposed under 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

  • Final regulations concerning opportunity zones and a list of "frequently asked questions" (FAQs) were released.
  • Proposed regulations were released as guidance procedures for identification and recovery of a misdirected direct-deposit refund.
  • Proposed regulations concern provisions under section 162(m) that limit the deduction for certain employee remuneration in excess of $1 million for federal income tax purposes. A KPMG report provides initial impressions about these proposed regulations.
  • Final regulations provide guidance regarding the distribution by a distributing corporation of stock or securities of a controlled corporation without the recognition of income, gain or loss.
  • Final and proposed regulations relating to the determination of foreign tax credits were eventually published in the Federal Register. The IRS and Treasury previously released a version of these final and proposed regulations on 2 December 2019.
  • Final regulations concerning certain financial products were issued to provide guidance with regard to dividend equivalents from sources within the United States paid to nonresident alien individuals and foreign corporations.
  • OMB’s Office of Information and Regulatory Affairs (OIRA) completed review of final regulations concerning qualified opportunity funds. OIRA also announced it received for review (1) final regulations concerning the limitation on the deduction of business interest under section 163(j); (2) final regulations concerning hybrid dividends and payments; and (3) proposed regulations providing guidance under section 1502 and certain other Code sections.
  • Notice 2020-3 provides interim guidance for the 2020 calendar year on tax withholding from periodic payments for pensions, annuities, and certain other deferred income.
  • Notice 2020-2 announces additional time for taxpayers to comply with the final and temporary regulations under sections 871(m), 1441, 1461, and 1473.
  • Rev. Proc. 2020-10 provides that the third six-year remedial amendment cycle for pre-approved defined benefit plans begins on 1 May 2020 and ends on 31 January 2025.
  •  A KPMG report focuses on how section 409A—enacted 15 years ago—applies to equity compensation.
  • A KPMG report provides a summary highlighting the 2019 guidance received in the qualified plan area.
  • A KPMG report provides a summary of state and local tax developments for 2019.
  • The Nebraska Department of Revenue issued guidance addressing the state tax treatment of two regimes (“global intangible low-taxed income” (GILTI) and “foreign-derived intangible income” (FDII)) that were enacted by the 2017 federal tax law.
  • The Pennsylvania Department of Revenue issued guidance addressing the vendor sales tax absorption statute and the use of direct payment permits.
  • A Texas appellate court held that the taxpayer was not entitled to a sales tax refund related to purchases of coin-operated gaming equipment used by patrons of its pizza restaurants. The court concluded that these machine purchases were not exempt as “sales for resale.”
  • A Washington State appellate court held that two manufacturers owed sales tax on leases of wooden pallets that were used to hold the taxpayers’ products during shipment.

Read TaxNewsFlash-United States
 

  • The U.S. Congress passed appropriations bills, one of which (H.R. 1865) includes tax provisions.
  • The U.S. House of Representatives passed a bill to modify the state and local tax (SALT) deduction.  

Read TaxNewsFlash-Legislative Updates


Cooperatives

  • Legislation approved by the U.S. Congress would modify the rules for determining tax-exempt status of certain mutual or cooperative telephone or electric companies.

Read TaxNewsFlash-Cooperatives


Exempt Organizations

  • Legislation passed by the U.S. Congress includes a provision to repeal what is commonly referred to as the “parking tax”—that is, section 512(a)(7), which requires tax-exempt organizations to include in unrelated business taxable income the amounts they pay or incur on qualified transportation fringe benefits.

Read TaxNewsFlash-Exempt Organizations


Indirect Tax

  • Italy: The digital services tax is pending consideration by the lower chamber, having been approved and modified by the upper chamber.
  • EU: One of the measures under the EU’s VAT “quick fixes” concerns uniform rules to simplify chain transactions.
  • Myanmar: A law amending the stamp tax (duty) revises the amount of penalty that may apply with regard to unpaid or underpaid stamp taxes.
  • Poland: There are new standard audit file rules for VAT purposes.
  • Bulgaria: Legislative changes to the VAT law generally are effective 1 January 2020.
  • EU: The European Commission announced approval under EU state aid rules of five programs to support maritime transport in Cyprus, Denmark, Estonia, Poland, and Sweden.
  • India: Notices require certain registered persons to provide electronic invoices with regard to business-to-business supplies if a turnover threshold (INR 100 crore) is satisfied.
  • United States: In Pennsylvania, guidance bulletins address the vendor sales tax absorption statute and the use of direct payment permits.
  • United States: A Texas appellate court held that the taxpayer was not entitled to a sales tax refund related to purchases of coin-operated gaming equipment used by patrons of its pizza restaurants because the purchases were not exempt as “sales for resale.”
  • United States: A Washington State appellate court held that two manufacturers owed sales tax on leases of wooden pallets that were used to hold the taxpayers’ products during shipment.

Read TaxNewsFlash-Indirect Tax

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