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KPMG’s Week in Tax: 3 - 7 August 2020

KPMG’s Week in Tax: 3 - 7 August 2020

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

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United States

KPMG reports

  • KPMG reports provide initial analysis of the section 163(j) regulations and of related IRS guidance, and include specific reports considering implications for domestic corporations, passthrough entities, and foreign corporations (among others).
  • A KPMG report provides a set of “frequently asked questions” (FAQs) about Joe Biden’s federal tax agenda ahead of the November election.
  • A KPMG report examines COVID-19-related tax issues that are currently affecting banks and their customers, including the impact of the “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act).


Federal tax

  • Proposed regulations under section 1061, the "carried interest" provisions, were released to the Federal Register.
  • Notice 2020-62 provides modifications to two safe harbor explanations that plan administrators may use to satisfy the requirement under section 402(f) that certain information be provided to recipients of an eligible rollover distribution.
  • Notice 2020-61 provides guidance—in “question and answer” (Q&A) format—concerning the special rules relating to funding of single-employer defined benefit pension plans, and related benefit limitations, as enacted by the CARES Act.
  • Final regulations under section 59A—the “base erosion and anti-abuse tax” or “BEAT” provisions—were received for review by OMB’s Office of Information and Regulatory Affairs (OIRA).
  • Other regulations still pending OIRA review concern section 954 and coordinating rules under sections 245A and 951A.
  • Treasury released a set of FAQs addressing loan forgiveness issues under the Paycheck Protection Program (PPP).
  • The IRS posted FAQs concerning the tax treatment of leave-sharing plans—guidance issued in response to the COVID-19 pandemic.
  • The IRS updated a set of FAQs regarding the implementation of certain retirement plan relief measures enacted in response to the COVID-19 pandemic. A new FAQ addresses partial plan termination determinations.


State and local tax

  • A ballot measure in California would, if approved by the voters, revise the state’s property tax regime.
  • Tax authorities in Maryland, New Jersey, and Oregon released guidance to provide tax relief from the COVID-19 pandemic.
  • The Iowa Department of Revenue issued revised guidance reflecting an exclusion for “global intangible low-taxed income” (GILTI). Under the revised law, corporate taxpayers are allowed an exclusion for the amount included in income under IRC section 951A net of the IRC section 250 deduction. The exclusion applies retroactively to tax years beginning on or after 1 January 2019.
  • The North Carolina Department of Revenue announced a voluntary initiative to expedite the resolution of corporate intercompany pricing issues beginning 1 August 2020 and generally concluding by 1 December 2020.
  • A Pennsylvania appellate court upheld the Department of Revenue’s benefits-received, market-based interpretation of the cost of performance method for sourcing sales of services—a position that was in effect for the tax year at issue.

Read TaxNewsFlash-United States

Africa

  • South Africa: Proposals included in the 2020 Draft Taxation Laws Amendment Bill would:
    • Revise the rules for real estate investment trusts (REITS) that are excluded from application of the participation exemption rules
    • Add “sunset clauses” for certain tax incentives
    • Limit claims for mining tax incentives to the company owning the mining rights
    • Allow the tax authority to impose an “estimated assessment” when a taxpayer fails to submit relevant material as requested by the South African Revenue Service (SARS)
    • Address an inconsistency regarding the determination of the doubtful allowance that is available in respect of impaired trade receivables
  • South Africa: There is guidance concerning applications for value added tax (VAT) rulings provided by SARS.
  • South Africa: Individual taxpayers may need to consider the treatment of home office expenses as tax deductions for the 2021 tax year.
  • Nigeria: The tax authority of Delta State will waive interest and penalties on outstanding tax liabilities arising from tax audits of “affected taxpayers” (including education institutions, eateries, and hotels) for the period from 2011 to 2019—a relief measure provided in response to the COVID-19 pandemic.
  • Zimbabwe: Among the tax measures included in the 2020 mid-term budget are changes to the “immediate money transfer tax” (IMTT) thresholds and “pay as you earn” (PAYE) tax.

Read TaxNewsFlash-Africa

Americas

  • Costa Rica: The effective date for application of VAT to cross-border digital services transactions involving credit and debit card issuers has been delayed to 1 October 2020. However, digital services intermediaries and providers that voluntarily registered with the tax administration must apply the VAT mechanism as of 1 August 2020.

Read TaxNewsFlash-Americas

Asia Pacific

  • Turkey: Reduced VAT rates apply through 31 December 2020 for services provided by certain small companies and certain individuals affected by the COVID-19 pandemic.
  • Australia: Guidance from the Australian Taxation Office (ATO) clarifies its position regarding loans that have been “put on hold” during the COVID-19 pandemic and addresses the tax treatment of debt that is forgiven in response to COVID-19.
  • Malaysia: An economic recovery plan in response to the COVID-19 pandemic implements exemptions from stamp tax (duty) and real property gains tax for certain residential property transfers.
  • Myanmar: Guidance amends the rules for administration of the commercial tax and income tax for the 2019-2020 tax period.

Read TaxNewsFlash-Asia Pacific

Europe

  • Belgium: There are VAT considerations for services provided by Belgian companies to UK customers in light of Brexit.
  • Russia: A new law provides an exemption from VAT for the IT or digital sector and specifically for software and databases.
  • Serbia: The government granted tax relief benefits and direct aid to business entities affected by the COVID-19 pandemic.
  • Portugal: The EU mandatory disclosure rules (DAC6) reporting deadlines were postponed.
  • Romania: A “windfall profit tax” is imposed on certain taxpayers involved in providing electricity and natural gas, effective from 30 July 2020 until 30 June 2021.

Read TaxNewsFlash-Europe

Transfer Pricing

  • Ecuador: Guidance provided by two resolutions (1) sets forth the transfer pricing methodology for banana exports involving related parties in other countries, and (2) concerns the analysis of data from comparable independent third parties.
  • United States: The North Carolina Department of Revenue is implementing a voluntary initiative to expedite the resolution of corporate intercompany pricing issues.

Read TaxNewsFlash-Transfer Pricing

FATCA / IGA / CRS

  • Australia: The tax authority released aggregated information on Australian financial accounts held by foreign tax residents as of 31 December 2018, as collected under the common reporting standard (CRS) regime.
  • Luxembourg: The tax authority extended the deadline for filing FATCA and CRS returns for the 2019 reporting period from 30 June 2020 to 30 September 2020—relief granted in response to the coronavirus (COVID-19) pandemic.
  • Mexico: The tax authority extended the FATCA and CRS filing deadlines to 7 December 2020 (from 15 August 2020) for the 2019 reporting period, as relief in response to the COVID-19 pandemic.

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • A KPMG report discusses how tariffs may unexpectedly affect intellectual property payments for imported goods.
  • U.S. Customs and Border Protection (CBP) issued an administrative ruling that clarifies whether importations made by a nonresident importer in one day and sent to a U.S. fulfillment facility or warehouse may qualify for informal duty-free entry.

Read TaxNewsFlash-Trade & Customs

Indirect Tax

  • South Africa: Guidance concerning value added tax (VAT) rulings has been provided by the South African Revenue Service (SARS).
  • South Africa: A legislative proposal would allow mining tax incentives only with respect to the company owning the mining rights.
  • Turkey: Reduced VAT rates apply through 31 December 2020 for services provided by certain small companies and individuals.
  • Belgium: There are VAT considerations for services provided by Belgian companies to UK customers in light of Brexit.
  • Costa Rica: The effective date for application of VAT to certain cross-border digital services transactions involving credit and debit card issuers has been delayed to 1 October 2020.
  • Russia: A new law provides an exemption from VAT for software and databases.
  • Zimbabwe: A money transfer tax and other indirect tax measures were included in the 2020 mid-term budget.
  • Malaysia: An economic recovery plan in response to the COVID-19 pandemic implements exemptions from stamp tax (duty) and real property gains tax for certain residential property transfers.

Read TaxNewsFlash-Indirect Tax

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