KPMG’s Week in Tax: 1 - 5 June 2020

KPMG’s Week in Tax: 1 - 5 June 2020

Tax developments from around the globe continue to focus on tax and economic relief in response to the coronavirus (COVID-19) pandemic.

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This week, there were COVID-19-related tax developments from:

Bulgaria Italy UAE
Cambodia Mauritius UK
Canada Nigeria United States
Channel Islands Poland  
France Spain  


KPMG has multiple resources—updated on a frequent basis—to monitor COVID-19 tax developments. Read Coronavirus (COVID-19) tax developments


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

Africa

  • Nigeria: A governmental order provides guidance regarding the determination of “significant economic presence” for purposes of the companies income tax, that may apply to foreign companies that derive income in Nigeria through digital means.

Read TaxNewsFlash-Africa

Americas

  • Canada: The prescribed interest rate for family income-splitting loans falls to 1% beginning 1 July 2020.
  • Canada: Many pension entities, master trusts, and certain others must file goods and services tax (GST) / harmonized sales tax (HST) and Quebec sales tax (QST) returns by 30 June 2020.

Read TaxNewsFlash-Americas

Asia Pacific

  • Saudi Arabia: Value added tax (VAT) refund applications for 2019 must be submitted before 30 June 2020. Non-resident businesses that conduct economic activities outside Saudi Arabia may be eligible for a refund of the VAT incurred in Saudi Arabia.

Read TaxNewsFlash-Asia Pacific

Europe

  • Belgium: The tax authorities announced a six-month deferral regarding reporting requirements under the EU directive on mandatory disclosure of cross-border arrangements (known as “DAC6”).
  • Italy: The Italian tax authority issued a ruling concerning the tax treatment of dividends distributed to pension funds participating in an “Authorized Contractual Scheme” (ACS). The ruling addresses the standard withholding tax rate of 26% and when a reduced rate, such as that under an income tax treaty, may apply.
  • Netherlands: Proposed measures would impose tax on dividend payments made to “low-tax jurisdictions,” effective 1 January 2024.
  • Denmark: A model framework for withholding tax relief at source implies that the Danish domestic dividend tax rate of 27% may be reduced to an applicable tax treaty rate for withholding at source.

Read TaxNewsFlash-Europe

FATCA / IGA / CRS

  • United States: The certification due date for qualified intermediaries (QIs), withholding foreign partnerships (WPs), and withholding foreign trusts (WTs) with a periodic due date of 1 July 2020 has been extended to 15 December 2020.
  • United States: The IRS updated the Foreign Account Tax Compliance Act (FATCA) registration system.
  • Brazil: The tax authority (RFB) issued updated guidance with respect to the FATCA and the common reporting standard (CRS) regimes.
  • Taiwan: The tax authority released CRS data preparation “tools” for financial institutions.
  • China: The automatic exchange of information (AEOI) portal will be available for the submission of CRS reports from 1 August 2020 to 30 September 2020. The annual CRS compliance status report submission deadline has been extended to 31 October 2020.
  • Germany: The database for the FATCA test system was deleted on 18 May 2020, meaning that data may have to be resubmitted if the new message does not have the same content as the previously provided.
  • Switzerland: A report describes the audit mechanism that will be followed to determine the compliant implementation of the AEOI with partner countries in 2020.

Read TaxNewsFlash-FATCA / IGA / CRS

United States

COVID-19-related developments in the United States include the following.

  • Rev. Proc. 2020-34 provides temporary relief under a safe harbor for arrangements treated as trusts holding rental real property that may be subject to a mortgage loan and is leased to tenants who are experiencing financial hardship as a result of the COVID-19 pandemic.
  • Notice 2020-39 provides relief for “qualified opportunity funds” (QOFs) and their investors in response to COVID-19.
  • Notice 2020-42 temporarily allows retirement plan elections that require the signature of an individual participant (including spousal consents) to be witnessed electronically.
  • The U.S. Senate completed congressional action when it approved the “Paycheck Protection Program Flexibility Act of 2020” (H.R. 7010)—a bill that would make several important changes to the PPP, such as extending the time for the expenditure of funds and easing the requirement that 75% of funds be used for wages. Read TaxNewsFlash-Legislative Updates

Other developments this week include the following.

  • The Office of the U.S. Trade Representative (USTR) announced the launch of investigations of digital services taxes imposed or considered by other governments.
  • The rates of interest with regard to tax overpayments and tax underpayments will decrease for the calendar quarter beginning 1 July 2020.
  • OMB’s Office of Information and Regulatory Affairs (OIRA) received for review proposed regulations with respect to section 1061—the measures that are often referred to as the “carried interest” rules.
  • A practice unit from the IRS Large Business and International (LB&I) division concerns the effects of flow-through entities on an individual’s foreign tax credit.
  • The U.S. Tax Court held that the transfers of parcels of real estate by a real estate developer to liquidating trusts (for the benefit of mortgage holders) did not have the effect of producing the losses claimed for the years because there were no bona fide dispositions or completed transactions regarding the property transfers to the liquidating trusts.
  • Announcement 2020-7—concerning the third six-year cycle for pre-approved defined contribution plans—covers (1) IRS plan to issue opinion letters, (2) application for an individual determination letter, and (3) adopting of a newly approved plan.
  • The U.S. Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau (TTB) released a final rule relating to the federal excise taxes imposed on distilled spirits, wines, and beer and that removed certain bond requirements.
  • Idaho’s Supreme Court held that gain from the sale of a majority-owned interest in a limited liability company (LLC) did not constitute business income.
  • Michigan’s Supreme Court, in addressing a City of Detroit-sourcing dispute, held that the sales factor sourcing rule for services under the uniform city income tax ordinance attributes service receipts to the location where services are performed—rather than where the services are received by customers. Therefore, legal services performed in Detroit for out-of-city clients were considered Detroit-sourced receipts.
  • Voters in the Portland, Oregon metro area approved a ballot measure that adopts a new tax to fund homeless services.
  • The South Carolina Department of Revenue concluded that a taxpayer’s cloud-based software was subject to sales tax.

Read TaxNewsFlash-United States

Trade & Customs

  • United States: The Office of Foreign Assets Control (OFAC) of the U.S. Treasury Department released a final rule to implement Syria-related sanctions regulations.
  • United States: Beginning 1 July 2020, U.S. Customs and Border Protection (CBP) will collect assessments on imported softwood lumber covered under the softwood lumber checkoff.
  • Saudi Arabia: Increased rates of customs duties for certain commodities and goods ranging from 0.5% to 15%, will apply beginning from 10 June 2020.
  • United States: The USTR has determined to extend certain product exclusions from the additional duties on goods of China with an annual trade value of approximately $34 billion as part of the action in the Section 301 investigation of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation.

Read TaxNewsFlash-Trade & Customs

Indirect Tax

  • United States: The USTR launched investigations of digital services taxes that have been adopted or are being considered by certain trading partner countries of the United States.
  • Saudi Arabia: VAT refund applications for 2019 must be submitted before 30 June 2020.
  • Saudi Arabia: Increased rates of customs duties (from 0.5% to 15%) apply for certain commodities and goods beginning 10 June 2020.
  • Canada: Certain pension entities and master trusts must file GST / HST and QST returns by 30 June 2020.
  • Poland: The required deadline to use a new form for electronic reporting of VAT will be postponed until 1 October 2020 (instead of 1 July 2020).
  • Nigeria: The determination of “significant economic presence” can apply to foreign companies that derive income in Nigeria through digital means.
  • United States: A final rule regarding the federal excise taxes imposed on distilled spirits, wines, and beer removes certain bond requirements.
  • United States: Michigan’s Supreme Court held that legal services performed in Detroit were sourced to the city because that was the location where the services are performed—rather than where the services were received by customers.
  • United States: The South Carolina Department of Revenue concluded that a taxpayer’s cloud-based software was subject to sales tax.

Read TaxNewsFlash-Indirect Tax

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