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KPMG’s Week in Tax: 9 - 13 December 2019

KPMG’s Week in Tax: 9 - 13 December 2019

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

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Americas

  • Canada and Chile: The withholding tax rate under the Canada-Chile income tax treaty has been reduced retroactively, with the rate now being 10% (reduced from 15%) for certain interest paid or credited between 1 January 2017, and 31 December 2018. There may be refund opportunities for certain taxpayers.
  • Canada: The Department of Finance intends to recommend allowing broader access to the principal residence exemption for certain trusts.
  • Canada: Revenue Quebec published the Quebec pension plan (QPP) contribution limits for the upcoming year.
  • Canada: In Alberta, the federal fuel charge—part of a federal program for industrial facilities that emit greenhouse gases above a threshold—will be effective beginning 1 January 2020.
  • Canada: Following the approval of Alberta’s technology innovation and emissions reduction (TIER) system, businesses in Alberta need to consider their action steps concerning their fuel charge obligations.
  • Canada: The Department of Finance stated that it will recommend amending the income tax law and regulations to allow a current year deduction for certain previously excluded provincial or territorial mining taxes.
  • Canada: A “middle class tax cut” proposal would gradually increase the basic personal income tax deduction to $15,000* beginning in 2020. ($ = Canadian dollar)
  • Ecuador: A new form allows payment and reporting of multiple tax payments.  
  • Brazil: A provisional measure implements the requirements and conditions for Brazil’s federal government to settle tax disputes with taxpayers and to resolve unpaid tax debts.
  • Costa Rica: The tax administration released for comments a document containing proposals for a charging mechanism that would apply for value added tax (VAT) purposes with regard to cross-border or intangible digital services made using debit cards or credit cards.
  • Argentina: A decree provides updated references to the income tax law and includes new tax regulations concerning: (1) certain transfers of stock or assets; (2) permanent establishments; (3) non-cooperative jurisdictions; (4) exemption on capital gains of sales of foreign stock; (5) restatement for inflation and the equalization tax; and (6) thin capitalization with regard to foreign exchange differences.
  • Mexico: A chamber of the Supreme Court issued a judgment clarifying the term “certain date” for purposes of documents presented by taxpayers in satisfying certain tax obligations.

Read TaxNewsFlash-Americas

Asia Pacific

  • New Zealand: Inland Revenue released an official issues paper on purchase price allocations. As proposed, the position of vendors and purchasers regarding the value of assets sold would be aligned.
  • Turkey: The digital services tax provisions were enacted in December 2019, and will be effective in March 2020.
  • India: The Supreme Court affirmed the imposition of sales tax on a time-charter agreement, concluding that the site of the sale (here, a transfer of a right to use a tugboat) is the place where the contract was entered into.

Read TaxNewsFlash-Asia Pacific

Europe

  • Bulgaria: Changes to the income tax law, including hybrid mismatch rules, will be effective 1 January 2020.
  • Czech Republic: A bill pending before the Chamber of Deputies would introduce a digital services tax to be imposed at a rate of 7%. 
  • Czech Republic: An amendment to the VAT law to implement the EU VAT “quick fixes” measures will not be effective in the Czech Republic beginning 1 January 2020.
  • EU: A proposal from the German Finance Minister concerns the introduction of a financial transaction tax.
  • EU: One of the measures under the EU’s VAT “quick fixes” concerns a simplified treatment for call-off stock.
  • Belgium: Changes to the Belgian car taxation regime, effective in 2020, may present administrative challenges for companies that have fleets of automobiles.
  • Belgium: A year-end review examines changes in 2019 in the field of (international) social security and opportunities and challenges that may continue in 2020.

Read TaxNewsFlash-Europe

Africa

  • Nigeria: The Tax Appeal Tribunal (sitting in Lagos) issued a judgment holding that interest on an additional state tax assessment is to be computed by imposing interest only on the principal amount of the tax liability (not inclusive of any amount of penalty assessed with regard to that principal tax liability).

Read TaxNewsFlash-Africa

Transfer Pricing

  • India: A tribunal held that a deduction under section 10A (a tax incentive) cannot be denied with respect to additional income that was reported by the taxpayer on its amended return. The additional income flowed from the terms of an advance pricing agreement (APA) that in turn increased the operating margin reported by the taxpayer.
  • Canada: Before the year-end, taxpayers need to evaluate their transfer pricing policy and customs policy.
  • Costa Rica: The tax administration released draft guidelines regarding the procedures for processing APAs.

Read TaxNewsFlash-Transfer Pricing

FATCA / IGA / CRS

  • Oman: Officials signed the multilateral convention on mutual administrative assistance in tax matters under the common reporting standard (CRS) regime.

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • Canada: Year-end adjustments to related-party transactions may require further analysis in order to determine whether additional customs duties are payable.
  • United States: The Office of the U.S. Trade Representative (USTR) released a notice that announces the United States will not proceed with action against the European Union with regard to a dispute concerning meat and meat products.
  • United States: The USTR issued a statement announcing an apparent congressional agreement with regard to the trade agreement that would replace NAFTA—the United States-Mexico-Canada Agreement (USMCA).
  • United States: The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced that two U.S. insurance companies agreed to settle alleged violations of the Cuban sanction regulations.

Read TaxNewsFlash-Trade & Customs

United States

  • Rev. Proc 2020-9 provides a clarification regarding pre-approved pension plan amendments and specifically concerning hardship distributions of elective deferrals, and extends the deadline—applicable to pre-approved plans—for adopting an interim amendment relating to the regulations to 31 December 2021.
  • A KPMG report (39 pages) provides initial analysis and observations about final regulations and additional proposed regulations under section 59A (the “base erosion and anti-abuse tax” or “BEAT” provisions).
  • A KPMG report discusses highlights and provides observations about certain key provisions in the BEAT regulations that apply specifically or may be relevant to insurance companies.
  • The IRS formalized a process with the Alcohol and Tobacco Tax and Trade Bureau (TTB) concerning whistleblower awards under the excise tax laws that are administered and enforced by TTB.
  • Notice 2019-67 specifies updated mortality improvement rates and static mortality tables to be used for defined benefit pension plans under section 430(h)(3)(A).
  • Notice 2019-66 provides relief from the requirement to report all partners’ shares of partnership capital on the tax basis method for 2019.
  • OMB’s Office of Information and Regulatory Affairs (OIRA) acknowledged receipt for review of final regulations concerning the tax treatment of opportunity zones.
  • The California Franchise Tax Board announced that for tax years beginning on or after 1 January, 2019, taxpayers in “good standing” that file corporate franchise and income returns on Forms 100 and 100W will be granted an automatic seven-month extension for filing returns.
  • The Chicago city budget for 2020 includes increases in certain tax rates: (1) personal property lease transaction tax (PPLTT) rate increased from 5.25% to 7.25% as applied to nonpossessory leases of computer property; and (2) the tax on food and beverage sold at retail increased from 0.25% to 0.50%.
  • Iowa conforms to federal tax law for tax years beginning on or after 1 January 2019. Iowa did not conform to the TCJA changes for tax year 2018.
  • The South Carolina Department of Revenue ruled that certain delivery charges associated with sales of tangible personal property are subject to sales tax.
  • The Washington State Department of Revenue explained that beginning on or after 1 January 2020, businesses engaged in advanced computing activities classified under the “service and other activities” classification of the business and occupation (B&O) tax will be subject to a surtax.

Read TaxNewsFlash-United States

Exempt Organizations

  • Final regulations provide guidance on how certain organizations that provide employee benefits—including voluntary employee beneficiary associations (VEBAs), supplemental unemployment benefit trusts (SUBs), social and recreational clubs, and title holding corporations that have income payable to the listed organizations—are to calculate their unrelated business taxable income (UBTI).

Read TaxNewsFlash-Exempt Organizations

Cooperatives

  • The U.S. Tax Court concluded the taxpayer (an agricultural cooperative) was not required for its 2009 and 2010 tax years to compute separate section 199 domestic production activities deduction (DPAD) amounts for its patronage and nonpatronage activities.

Read TaxNewsFlash-Cooperatives

Indirect Tax

  • Ecuador: The tax authority issued reminders of the requirement for taxpayers to issue goods and services invoices or vouchers electronically and of the approaching 31 December 2019 deadline.
  • Canada: The Department of Finance will recommend allowing a current year deduction for certain previously excluded provincial or territorial mining taxes.
  • Costa Rica: Proposals for a charging mechanism would apply for VAT purposes with regard to cross-border or intangible digital services made using debit cards or credit cards.
  • Czech Republic: A bill would introduce a digital services tax to be imposed at a rate of 7%. 
  • Czech Republic: The EU VAT “quick fixes” will not be effective in the Czech Republic beginning 1 January 2020.
  • EU: A proposal would introduce a financial transaction tax.
  • EU: Part of the EU VAT “quick fixes” is the simplified treatment for call-off stock.
  • Turkey: Digital services tax provisions were enacted, and will be effective in March 2020.
  • Belgium: Changes to the Belgian car taxation regime may present administrative challenges for companies that have fleets of automobiles.
  • India: The Supreme Court affirmed the imposition of sales tax on a time-charter agreement.
  • Canada: In Alberta, the federal fuel charge will be effective beginning 1 January 2020.
  • United States: The IRS and TTB formalized a process for whistleblower awards related to federal excise taxes.
  • United States: The California Franchise Tax Board announced an automatic seven-month extension for filing returns for taxpayers in “good standing” that file corporate franchise and income returns on Forms 100 and 100W.
  • United States: The Chicago city budget includes increased rates of personal property lease transaction tax and the tax on food and beverage sold at retail.
  • United States: Guidance from the South Carolina Department of Revenue concludes certain delivery charges associated with sales of tangible personal property will be subject to sales tax.
  • United States: The Washington State Department of Revenue noted a surcharge that applies to select businesses engaged in advanced computing activities classified under the “service and other activities” classification of the business and occupation (B&O) tax.

Read TaxNewsFlash-Indirect Tax

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