KPMG’s Week in Tax: 15 - 19 June 2020
KPMG’s Week in Tax: 15 - 19 June 2020
Tax developments from around the globe continue to focus on tax and economic relief in response to the coronavirus (COVID-19) pandemic.
COVID-19-related tax developments generally are not listed in this report. KPMG has multiple resources to monitor COVID-19 tax developments. For more information, read: Coronavirus (COVID-19) tax developments
The following discussion generally focuses on other tax developments reported this week.
- France: The deadline for filing claims for refunds of value added tax (VAT) is being extended to 30 September 2020.
- France: A proposal would allow French companies, an accelerated refund of “carryback receivables” as well as a specific procedure for obtaining the immediate refund of any carryback receivable derived during the COVID-19 crisis.
- Cyprus: The rules on the reference rate for the notional interest deduction have been revised.
- Sweden: The Agency for Economic and Regional Growth (Tillväxtverket) addressed the treatment of group contributions for entities receiving short-time work allowance support, and clarified that group contributions for FY 2019 do not affect the possibility of receiving such support during 2020.
- Finland: The tax administration issued updated instructions for submitting FATCA and common reporting standard (CRS) / DAC2 information.
- Belgium: The finance service announced that an online portal—MyMinFinPro CRS portal—is open for submission of CRS reports for the 2019 reportable year.
- Italy: A decree implements the rules concerning the VAT treatment of business-to-consumer (B2C) short-term hires and leases of pleasure boats and yachts.
- Netherlands: Information from government agencies addresses self-employment rules.
- Germany: The Federal Tax Court (BFH) held that a grant, for consideration, of the right to buy goods at a reduced price (in the form of a “membership”) constitutes an independent supply for VAT purposes.
- Czech Republic: The Ministry of Finance published a third “liberation package” that allows relief from interest, and penalties for the late filing of individual (personal) and corporate income tax returns for 2019 and for late payments of tax provided both the return is filed and the tax is paid by 18 August 2020.
- Luxembourg: The tax authorities announced the release of synthesized texts of certain income tax treaties that have been amended by the multilateral instrument (MLI).
- Norway: Legislation makes “provisional” or temporary amendments to the petroleum tax law—changes that are intended to boost investments in the oil and gas sector and in particular to stimulate investments on the Norwegian continental shelf.
- UK: There is a risk of double taxation for many Irish-incorporated UK resident companies that, because of Irish domestic law changes beginning January 2021, will become dual-resident for tax.
- Costa Rica: Value added tax (VAT) will be imposed on digital services and intangibles acquired from abroad for consumption in Costa Rica effective 1 August 2020.
- Barbados: The revenue authority extended to 31 August 2020 the reporting deadlines for FATCA and the common reporting standard (CRS) returns for the 2019 reportable year.
- Mexico: Rules have been issued concerning how to address VAT with regard to customer refunds, discounts, and cancelations of services provided by digital platforms of foreign residents not having a permanent establishment in Mexico.
- Canada: The tax measures in Prince Edward Island’s 2020 budget include a proposal to reduce the province's small business tax rate to 2% (from 3%).
- Canada: Saskatchewan's Minister of Finance on 15 June 2020 delivered the province's 2020 budget. No changes are proposed to Saskatchewan's corporate or individual (personal) tax rates, but there are certain proposed changes to credits and other measures.
- Canada: The Canada Revenue Agency (CRA) confirmed that the emergency wage subsidy will maintain the “30% revenue-drop threshold” for the current June 2020 period (that is, for the period from 7 June 2020 to 4 July 2020). The subsidy is to be extended to 29 August 2020.
- Mexico: A tax legislative proposal, presented to the Mexican Congress, would temporarily reduce the VAT rate to 10%, from the current rate of 16%, for the remainder of fiscal year 2020.
- Oman: The tax authority extended the deadline to 31 July 2020 for filing common reporting standard (CRS) returns for the 2019 reportable year.
- Singapore: The Income Tax Board of Review upheld the findings of the Comptroller of Income Tax that the taxpayer (an individual) had unduly derived a tax benefit from forming a corporation of a dental practice and invoked the anti-avoidance provisions.
- Pakistan: Tax measures proposed in the Finance Bill 2020 would affect certain income tax, indirect tax, and customs provisions.
- India: The Central Board of Indirect Taxes and Customs announced extensions to 30 June 2020 of the periods for “e-way bills” issued during the period of lockdown and of the timeline for issuing refund orders.
- Nigeria: The Federal Inland Revenue Service and the Nigerian Communication Commission signed a “memorandum of understanding” (MOU) concerning value added tax (VAT) and other tax liabilities of telecommunications operators.
- East Africa: Three of the East African Community (EAC) member countries— Kenya, Uganda, and Tanzania—on 11 June 2020 presented their budgets for 2020-2021. The budgets generally reflect stimulus measures announced in response to the COVID-19 pandemic, but also reflect proposals for tax and customs measures including certain revenue raising and expenditure provisions.
“Major” tax regulations must be reviewed by OMB’s Office of Information and Regulatory Affairs (OIRA), so submission of regulations for that review is an indication regulations may be coming relatively soon. Completion of OIRA review usually means issuance of the regulations is imminent, but not always.
This week, OIRA completed its review of:
- Final regulations under section 250 concerning the deduction for “foreign-derived intangible income” (FDII) and “global intangible low-taxed income” (GILTI)
- Proposed regulations concerning consolidated net operating losses (NOLs)
OIRA this week received the following Treasury regulations for review:
- Final and proposed regulations concerning the limitation on the deduction of business interest under section 163(j)
- Final regulations as guidance regarding the global intangible low-taxed income high tax exclusion
- Proposed regulations as guidance under section 954(b)(4) (rules for high-taxed subpart F income) and section 964 (rules for determining the earnings and profits of a foreign corporation)
Other U.S. items
- Digital services tax: A letter from the U.S. Treasury Secretary reveals that the United States was asking to "pause" OECD talks about a solution for the taxation of digital services. The OECD Secretary-General issued a statement regarding on-going negotiations to address the tax challenges of digitalisation of the economy.
- PPP loans: The U.S. Small Business Administration released two Paycheck Protection Program (PPP) loan-forgiveness application forms—a revised PPP loan-forgiveness application form and an “EZ” application form.
- Ninth Circuit affirmed the U.S. Tax Court’s dismissal of taxpayer petitions for lack of jurisdiction, finding that the petitions were not timely received and that the mailbox rule did not apply because the delivery was not by a then-eligible private delivery service.
- Digital signatures: IRS Services and Enforcement employees are authorized until December 31, 2020, to continue to accept documents by email and digital signatures on certain documents, in response to the coronavirus (COVID-19) pandemic.
- California: Newly enacted legislation suspends the use of California net operating loss (NOL) deductions and certain tax credits for the 2020, 2021, and 2022 tax years.
- Maine: The Supreme Judicial Court held a taxpayer was not allowed to use the alternative apportionment formula to source gain from the sale of a frozen pizza business, finding that the pizza business was clearly part of the taxpayer’s overall unitary business and that applying alternative apportionment to a segment of a unitary business was inconsistent with one of the core principles justifying the use of a sales factor formula to apportion the income of a unitary business.
- Michigan: The Department of Treasury finalized a notice addressing the computation of the IRC section 163(j) limitation for purposes of the Michigan corporate income tax, and explaining how to compute the 163(j) limitation given the differences between the federal consolidated filing group and the Michigan unitary business group rules.
- Mississippi: The Supreme Court, in a case concerning whether the capital of single-member limited liability companies (LLCs) was included in their owner’s franchise tax base, held the taxpayer could not exclude the capital of the single-members LLCs from its franchise tax base. The taxpayer (a corporation that owned several single-member LLCs doing business in Mississippi) filed amended franchise tax returns in which it excluded the capital of its single-member LLCs from the franchise tax base, alleging that these LLCs were not corporations subject to the franchise tax. The tax authority and the high court rejected this claim.
- South Carolina: An administrative law court judge determined that a taxpayer’s protest of an assessment was untimely, and rejected the good faith arguments put forward by the taxpayer (a patient information management company) with consistent challenges on receiving mail delivered by the postal service and an overly restrictive spam filter.
- State and local COVID relief: A summary is provided of state and local jurisdictions that have announced or implemented tax measures with regard to COVID-19.
- FAQs on travel disruptions: The IRS updated a set of “frequently asked questions” (FAQs) as guidance regarding nonresident alien individuals and foreign businesses with employees or agents that have been affected by the emergency travel disruptions as a result of COVID-19.
- The Federal Reserve Board this week announced it will be seeking public feedback on a proposal to expand its “Main Street lending program” to provide access to credit for certain nonprofit organizations.
- The U.S. Governmental Accountability Office (GAO) released a report of its findings on reviewing the IRS’s use of Form 990 data.
- Australia: The Australian Taxation Office (ATO) updated the instructions for taxpayers regarding their country-by-country (CbC) reporting obligations for 2020.
- Italy: Value added tax (VAT) rules were issued concerning the use of pleasure boats outside the EU.
- OECD: A statement addresses ongoing negotiations on the taxation of the digital economy.
- Germany: A supermarket discount model “membership” was held to be subject to the standard VAT rate.
- Mexico: Rules on VAT and digital services when offered by foreign residents without a permanent establishment in Mexico explain what happens for customer refunds or cancelations.
- United States: There are reports that the United States is withdrawing from talks on a solution to the digitial services taxation.
- France: The VAT refund deadline has been extended to 30 September 2020.
- Hungary: Retail tax measures were enacted.
- Mexico: A proposal would reduce the VAT rate to 10% and would expand border regions or zones eligible for a more favorable rate of VAT.
- Nigeria: Guidance addresses the VAT payable by telecommunications operators.
- Costa Rica: VAT on cross-border digital services is the subject of new measures.
- India: Extensions of indirect-related tax periods were announced, generally to 30 June 2020.
- Pakistan: The Budget 2020 includes indirect tax proposals.
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