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KPMG’s Week in Tax: 2 - 6 March 2020

KPMG’s Week in Tax: 2 - 6 March 2020

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

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Transfer Pricing

  • China - Hong Kong: An arrangement for the automatic exchange of country-by-country (CbC) reports between China and Hong Kong may reduce the reporting burden for certain taxpayers.
  • South Africa: A release from the tax authority focuses on transfer pricing, and indicates that transfer pricing risk profiling will be one of the measures to identify and address non-compliance with South African transfer pricing laws.
  • Argentina: The tax authorities again delayed the deadlines regarding compliance with the transfer pricing rules for the tax period beginning on or after 31 December 2018 and ending with reference to 31 July 2019. In general, the compliance deadlines for this period will fall between 20 and 24 April 2020 (inclusive).

Read TaxNewsFlash-Transfer Pricing

Europe

  • Spain: Financial transactions tax legislation is pending before the Spanish Parliament.
  • Netherlands: The Court of Appeals ‘s-Hertogenbosch held that a fund manager of a German entity had not acquired an interest in three Dutch real estate entities even though it had acquired legal ownership of shares. Thus, it was not liable for the Dutch real estate transfer tax.
  • Sweden: Details are provided concerning a new tax on plastic bags.
  • Germany: Tax legislation in Germany is intended to respond to the need for rules in various areas of German tax and financial market laws with regard to “Brexit” and during the transition period that ends 31 December 2020 (unless the transition period is extended until 31 December 2022).
  • Hungary: The Court of Justice of the European Union (CJEU) concluded that the “special taxes” imposed in Hungary on the turnover of telecommunications operators and undertakings in the retail trade sector are compatible with EU law.
  • Hungary: The CJEU issued a judgment concluding that: (1) EU law did not preclude foreign suppliers of advertising services from being subject to an obligation to submit a tax declaration in relation to that tax; but (2) the system of penalties relating to the Hungarian tax on advertising was not compatible with EU law.
  • Iceland: A report from KPMG provides information about the tax system in Iceland for 2020.
  • Czech Republic: The CJEU issued a judgment holding that the freedom of establishment does not preclude an EU Member State from restricting the use of tax losses in its jurisdiction when those losses were incurred in another EU Member State before the transfer of the taxpayer company’s place of effective management.
  • Italy: Concerning the rules on “letters of intent” for value added tax (VAT) relief afforded certain exporters, guidance outlines new procedures to be applied so that “habitual exporters” can conduct transactions and make purchases without the application of VAT
  • Norway: A public consultation paper proposes to introduce a withholding tax regime on interest and royalty payments made to related parties. The Ministry of Finance also is considering whether to introduce a withholding tax on certain lease payments.

Read TaxNewsFlash-Europe

Asia Pacific

  • Australia: The government of New South Wales announced relief from the stamp tax (duty) for those individual taxpayers who lost their homes during the bushfires and who choose to purchase a replacement home elsewhere, rather than rebuild.
  • India: A tribunal decided that contracts for the supply of equipment and contracts for services were in the nature of a “composite contract” for income tax purposes. The supply of equipment was connected with the taxpayer’s permanent establishment (PE) in India, and 35% of the profits accruing from the off-shore supplies to the PE were deemed to be taxable in India.
  • Myanmar: There is new criteria to be satisfied before foreign loans into Myanmar can be approved by the Central Bank.
  • Cambodia: An online portal is intended to facilitate the clearance of imports of construction materials, production machinery and equipment, spare parts, and raw materials imported into Cambodia for use in a “qualified investment project.”
  • Cambodia: Tax relief (including a “tax holiday”) for the garment and tourism sectors is being provided in light of the effects of the coronavirus outbreak.
  • Cambodia: Guidance provides VAT imposed on certain basic food items are to be treated as a “state charge” for a two-year period, from 1 January 2020 through 31 December 2021.
  • China: Guidance for Chinese domestic enterprises explains how to avoid imposing additional counter-tariffs against the U.S. tariff for a certain period of time on goods imported from the United States. 
  • China: Relief from Chinese social security contributions for a period of time was provided in response to the coronavirus (COVID-19).
  • Japan: The tax authority, in response to the coronavirus outbreak, announced extensions of time for individual taxpayers to file returns and make tax payments related to the 2019 tax year.
  • Malaysia: The authorities issued three “service tax policies” as guidance to address the potential cascading effect of the service tax on imported services.
  • Malaysia: An economic stimulus package for 2020 includes tax relief measures.
  • Malaysia:  Effective 1 January 2020, digital services provided by registered foreign service providers are subject to the 6% service tax imposed on imported taxable services. Guidance addresses the potential cascading effect of the services tax and price hike issues.

Read TaxNewsFlash-Asia Pacific

Africa

  • Zambia: When a resident or non-resident company becomes related to a Zambian company, details of the transaction must be disclosed to the Zambia Revenue Authority within a month of the change.
  • Nigeria: A KPMG report examines the current state of base erosion and profit shifting (BEPS) implementation in Nigeria with a focus on the eight BEPS actions that have been implemented.

Read TaxNewsFlash-Africa

Americas

  • Dominican Republic: A special tax regime allows taxpayers to voluntarily report the value of their assets to the Dominican tax authority (DGII) and to settle any resulting tax obligations. Under the special tax regime, tax at a rate of 2% would be imposed on the total amount of registered assets (or a fraction of the revalued amount of assets).
  • Costa Rica: The rate of interest on tax underpayments and on customs liabilities will be 12.2%, effective 1 April 2020.

Read TaxNewsFlash-Americas

FATCA / IGA / CRS

  • Luxembourg: The tax authorities proposed a draft bill that would amend the law relating to the FATCA and common reporting standard (CRS) regimes.
  • Taiwan: Financial institutions must report all financial account information through the CRS financial institution portal between 1 June 2020 and 30 June 2020.

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • China: The Tariff Commission of China’s State Council issued guidance on applications of Chinese domestic enterprises to avoid imposing additional counter-tariffs against the U.S. tariff actions. 

Read TaxNewsFlash-Trade & Customs

United States

  • Rev. Proc. 2020-17 provides an exemption from the information reporting requirements for certain U.S. citizens and resident individuals with respect to certain tax-favored foreign trusts (that is, tax-favored retirement trusts and tax-favored foreign nonretirement savings trusts that are established and operated exclusively or almost exclusively to provide pension or retirement benefits, or to provide medical, disability, or educational benefits).
  • The U.S. Securities and Exchange Commission (SEC) has provided regulatory relief from certain filing obligations of companies that have operations in or that are located in regions affected by the coronavirus.
  • The Florida Department of Revenue issued guidance concluding that fees that a technology company charged for access to its online platform are to be sourced to the customer’s billing address.
  • The Louisiana Board of Commerce and Industry passed a resolution to allow appeals under the industrial tax exemption program (ITEP) (a program under which, property tax abatements are granted to certain manufacturers).
  • The New Jersey Division of Taxation issued guidance explaining the eligibility requirements for the net deferred tax liability deduction, and stating taxpayers must complete new Form DT-1 on or before 1 July 2020
  • The Washington State Department of Revenue denied sales tax refunds requested by two taxpayers that sold tickets to “4-D rides” because the taxpayers’ shared website indicated that sales tax was included in the sales price of a ticket. Even though purchases of the ride tickets were not taxable retail sales, the taxpayers had remitted retail sales tax.

Read TaxNewsFlash-United States

Exempt Organizations

  • OMB’s Office of Information and Regulatory Affairs (OIRA) completed its review of proposed regulations concerning how unrelated business taxable income (UBTI) within the meaning of section 512 is to be calculated under section 512(a)(6) in the case of an entity described in section 511(a)(2) or (b)(2) with more than one unrelated trade or business.

Read TaxNewsFlash-Exempt Organizations

Indirect Tax

  • Spain: A draft of financial transactions tax legislation is being considered by the Spanish Parliament.
  • Australia: The government of New South Wales will provide relief from the stamp tax (duty) for individual taxpayers who lost their homes during the bushfires and who choose to purchase a replacement home elsewhere rather than rebuild.
  • Netherlands: An appeals court held that a fund manager of a German entity had not acquired an interest in three Dutch real estate private limited liability companies for which it had acquired legal ownership of shares and thus was not liable for the Dutch real estate transfer tax.
  • Sweden: The effective date of a new tax on plastic bags is 1 March 2020.
  • Cambodia: Tax relief for the garment and tourism sectors is being provided in light of the effects of the coronavirus outbreak. There is an exemption from stamp duty with regard to certain transfers of immovable residential property having a value of U.S. $70,000 or less.
  • Cambodia: Guidance regarding the VAT imposed on certain basic food items is to be treated as a “state charge” for a two-year period, from 2020 through 2021.
  • Germany: German tax legislation intended to respond to the need for rules in various areas of German tax and financial market laws with regard to “Brexit” and during the transition period that ends 31 December 2020 will also apply for VAT purposes.
  • Hungary: The CJEU issued a judgment concluding that the “special taxes” imposed in Hungary on the turnover of telecommunications operators and undertakings in the retail trade sector are compatible with EU law.
  • Hungary: The CJEU issued a judgment concluding that: (1) EU law does not preclude foreign suppliers of advertising services from being subject to an obligation to submit a tax declaration in relation to that tax; but (2) the system of penalties relating to the Hungarian tax on advertising is not compatible with EU law.
  • Italy: Concerning “letters of intent,” VAT relief is available for “habitual exporters” thereby allowing them to conduct transactions and make purchases without the application of VAT
  •  Malaysia:  Digital services provided by foreign service providers are subject to the 6% service tax imposed on imported taxable services. 
  • United States: The Florida Department of Revenue issued guidance concluding that fees that a technology company charged for access to its online platform are to be sourced to the customer’s billing address.
  • United States: The Louisiana Board of Commerce and Industry passed a resolution to allow appeals under the industrial tax exemption program (ITEP) (a program under which, property tax abatements are granted to certain manufacturers).
  • United States: The Washington State Department of Revenue denied sales tax refunds requested by two taxpayers that sold tickets to “4-D rides” because the taxpayers’ shared website indicated that sales tax was included in the sales price of a ticket. 

Read TaxNewsFlash-Indirect Tax

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