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KPMG’s Week in Tax: 20 - 24 January 2020

KPMG’s Week in Tax: 20 - 24 January 2020

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

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Europe

  • Sweden: Proposed legislation relating to research and development (R&D) would provide enhanced relief relating to social security contributions for salary and wages paid to eligible employees involved in R&D projects.
  • France: According to reports, France will delay collection of the digital services tax. Information indicates that the tax will still be imposed for 2020, but that collection of the tax will be deferred (in particular, both installment payments due in April and October 2020 would be suspended).
  • France: Tax rules set forth several tax compliance obligations for online platforms. In particular, e-commerce platforms that connect users to each other must file, before 31 January 2020, a report of transactions involving users of their platforms and made during 2019.
  • Italy: The Budget Law for 2020 introduces a digital services tax that imposes tax on revenues generated over the course of the year by digital services rendered to users located in Italy and identified as such by their IP addresses. The rate of the digital services tax is 3%
  • Italy: Tax measures were enacted at the end of December 2019 as part of the Budget Law for 2020, and generally are effective 1 January 2020. The measures concern tax credits, income taxes, indirect taxes, and the FATCA regime.
  • Italy: A “law decree” that separately accompanied the Budget Law for 2020 concerns income tax-related measures, tax collection, and property tax regarding offshore platforms.
  • Netherlands:  As of 1 January 2020, businesses filing their own tax returns must make use of eRecognition in order to log on to the Dutch tax authorities' tax return portal.
  • Czech Republic: Tax legislative items that were effective beginning January 2020 include the taxation of insurance companies, the taxation of one-crown bonds, the rates of excise taxes on spirits and tobacco products, and the tax exemption of winnings from gambling.
  • Czech Republic: A new income tax treaty between the Czech Republic and South Korea entered into force at the end of 2019, and includes changes to the rules for tax withheld at source.
  • Czech Republic: Clarifications concerning VAT legislative amendments (effective 1 April 2019) include the correction of tax base for unrecoverable debts and the VAT on heating and cooling.

Read TaxNewsFlash-Europe

Africa

  • Mauritius: An income tax treaty and Protocol signed by Mauritius and Kenya was ratified in Mauritius in late 2019. Kenya must complete its ratification procedures for the treaty agreements to enter into force.
  • Nigeria: The KPMG member firm in Nigeria produced a report providing a summary of developments concerning tax and regulations in Nigeria in 2019 and expectations for 2020.

Read TaxNewsFlash-Africa

Asia Pacific

  • Thailand: Proposed amendments to value added tax (VAT) regulations would affect foreign e-commerce operators and electronic platforms involved in the Thai market.
  • Singapore: The budget for 2020 is expected to be delivered on 18 February 2020.
  • Australia: There are potential fringe benefits tax (FBT) implications when businesses are involved in bushfire-relief contributions made on behalf of employees.
  • Australia: The period for applying a transitional compliance approach to the standard for determining where a company’s central management and control is located has been extended.
  • India: The Delhi Bench of the Income-tax Appellate Tribunal held that a taxpayer must withhold tax at source on year-end provisions because the payees were identifiable and the provisions were for ascertainable liabilities.
  • India: The Agra Bench of the Income-tax Appellate Tribunal held that findings (an intimation) issued by the Centralised Processing Centre are an appealable order.
  • India: The High Court of Kerala quashed an order of the Authority for Advance Ruling (AAR) that had found that placement of a medical instrument and supplies of reagents, calibrators, disposables, etc., was a “composite supply” for purposes of the goods and services tax (GST). Medical devices are subject to a higher rate of GST than are reagents. The court disagreed, and remanded the case back to the AAR.
  • Korea: A new income tax treaty between the Czech Republic and South Korea entered into force at the end of 2019.

Read TaxNewsFlash-Asia Pacific

Transfer Pricing

  • Canada: The Canada Revenue Agency released a report of mutual agreement procedure (MAP) statistics for 2018.
  • Puerto Rico: An amendment to Puerto Rico’s tax law allows a full deduction of related-party charges if taxpayers file a transfer pricing study (documentation) with their income tax returns.
  • Australia: The Australian Taxation Office (ATO) released a “taxpayer alert” that addresses international arrangements that mischaracterise Australian activities connected with intangible assets.
  • Taiwan: To assist companies that have imported goods from related parties and would like to apply the one-time transfer pricing adjustment, Taiwan Customs released guidelines on assessing the one-time transfer pricing adjustment to determine the dutiable value.

Read TaxNewsFlash-Transfer Pricing

FATCA / IGA / CRS

  • Italy: The Budget Law for 2020 includes a procedure to be followed by Italian reporting financial institutions to avoid penalties in instances of failures to report U.S. taxpayer identification numbers (TINs).

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • Taiwan: Customs released guidelines on assessing the one-time transfer pricing adjustment to determine the dutiable value.
  • Australia: The Australia-Hong Kong free trade agreement has entered into force, and other free trade agreements with Peru and Indonesia are expected to be effective soon. Effective 1 January 2020, Australian importers may benefit from a new range of tariff reductions under the China-Australia free trade agreement.

Read TaxNewsFlash-Trade & Customs

United States

  • The IRS posted its internal “training materials” about how the IRS has been implementing the 2017 tax law (the “Tax Cuts and Jobs Act” or TCJA). The IRS training materials are broken out by small businesses, large businesses and international, and tax-exempt entities.
  • The IRS released a “practice unit” that is titled: FDAP Payments - Statistical Sampling and Projection Procedures. The purpose of the practice unit is to describe the use of statistical sampling in the audit of a U.S. withholding agent and associate projection procedures.
  • The IRS issued a release concerning which form is to be used in claiming refundable tax credit payments by certain bond issuers—specifically Form 8038-CP, Return for Credit Payments to Issuers of Qualified Bonds, and the related Instructions for Form 8038 (Rev. January 2020).
  • The U.S. Tax Court held that the trust fund recovery penalty under section 6672 is a “penalty” within the meaning of section 6751(b)(1) and thus requires written supervisory approval be obtained for the “initial determination of such assessment.”
  • A KPMG report provides, in table format, summaries of the taxation of income and gains from listed securities in 114 markets around the world as of 31 December 2019.
  • KPMG provided its 2020 personal tax planning guide for individuals. Among the topics are discussions concerning individual income tax planning, planning for business, the qualified opportunity zone program, investment-related tax issues, and information for higher-income taxpayers about retirement planning, charitable giving, and estate and gift planning.
  • The IRS announced that taxpayers who have been affected by the earthquakes that began on 28 December 2019 in Puerto Rico may qualify for tax relief.
  • The Washington State Supreme Court reversed a state appellate court decision to hold that a home improvement retailer was entitled to a sales tax and Business & Occupation (B&O) tax bad debt deduction.
  • State and local governments in D.C., Georgia, Iowa, Kansas, Maryland, and Nebraska responded to  the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. and in particular with respect to sales tax obligations for remote sales and transactions involving marketplace facilitators.
  • Proposed legislation in California, if enacted, would increase the corporate income tax rates for corporations and financial institutions with net income over $10 million based on the company’s “compensation ratio” (salaries and wages).
  • New legislation in New Jersey provides for an elective pass-through entity alternative income tax and allow non-corporate owners of the pass-through entities to claim a corresponding refundable gross income tax credit and permit a corporate owner to receive a corporation business tax credit. The new law is effective for tax years beginning on or after 1 January 2020.
  • Proposed legislation in Virginia would affect combined reporting and market-based sourcing for tax years beginning on or after 1 January 2021. The combined reporting bills would mandate worldwide filing, but would allow water’s-edge elections. There are also other recently introduced bills that would move Virginia from a fixed-date conformity state to a rolling conformity state. 
  • A Washington State appellate court upheld a $3.1 million assessment of retailing B&O tax and retail sales tax on an information technology firm. At issue was whether the taxpayer was selling digital automated services or professional services.

Read TaxNewsFlash-United States

Exempt Organizations

  • The IRS posted instructions for filing an amended Form 990-T to claim a refund or credit of the unrelated business income tax (UBIT) reported and paid on Form 990-T for 2017 or 2018 as a result of section 512(a)(7) (now repealed).
  • The IRS posted volumes of its internal “training materials” for tax-exempt entities to help provide tax professionals with a better understanding of how the IRS is implementing the 2017 tax law.

Read TaxNewsFlash-Exempt Organizations

Indirect Tax

  • France: Reports indicate that France will delay collection of the digital services tax payments due in April and October 2020.
  • France: Tax rules set forth several tax compliance obligations for online platforms.
  • Italy: The Budget Law for 2020 introduces a digital services tax to tax revenues generated by digital services rendered to users located in Italy and identified as such by their IP addresses. The rate of the digital services tax is 3%
  • Czech Republic: Tax legislative items that were effective beginning January 2020 include changes to the rates of excise taxes on spirits and tobacco products.
  • Czech Republic: Clarifications concerning VAT legislative amendments (effective 1 April 2019) include the correction of tax base for unrecoverable debts and the VAT on heating and cooling.
  • United States: The Washington State Supreme Court reversed a state appellate court decision to hold that a home improvement retailer was entitled to a sales tax and B&O tax bad debt deduction.
  • United States: A Washington State appellate court upheld a $3.1 million assessment of retailing B&O tax and retail sales tax on an information technology firm. At issue was whether the taxpayer was selling digital automated services or professional services.
  • United States:  State and local governments in D.C., Georgia, Iowa, Kansas, Maryland, and Nebraska have taken action respect to sales tax obligations for remote sales and transactions involving marketplace facilitators.

Read TaxNewsFlash-Indirect Tax

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