KPMG’s Week in Tax: 14 - 18 September 2020

KPMG’s Week in Tax: 14 - 18 September 2020

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

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United States

  • Final regulations concerning the rehabilitation credit, and including rules to coordinate the new five-year period over which the credit may be claimed with other special rules for investment credit property, finalize regulations that were proposed in May 2020 “without modification.”
  • Final regulations providing guidance on the definition of an eligible terminated S corporation and rules relating to distributions of money by such a corporation after the post-termination transition period finalize regulations that were proposed in November 2019, but with certain modifications.
  • OMB’s Office of Information and Regulatory Affairs (OIRA) completed its review of final regulations concerning section 168(k), relating to the 100% additional first-year depreciation deduction that allows businesses to write off most depreciable business assets in the year they are placed in service by the business. Now that OIRA review has been completed, Treasury and the IRS can be expected to release these regulations for publication in the Federal Register.
  • Notice 2020-73 announces that the IRS and Treasury Department intend to amend regulations under section 987 (regarding income, currency gain or loss of “qualified business unit”) to defer the applicability date of final regulations by one additional year. 
  • The IRS provided tax relief for taxpayers in Oregon affected by wildfires and straight-line winds that began 7 September 2020. These affected taxpayers now have until 15 January 2021 to file individual and business tax returns and to make certain payments of tax.
  • The IRS issued a release reminding taxpayers of the availability of expedited requests for letter rulings due to the COVID-19 pandemic. The IRS ordinarily processes requests for letter rulings in the order that they are received, but a taxpayer with a compelling need to have a request processed more quickly may request expedited handling.
  • The IRS Large Business & International (LB&I) division added four new campaigns to its list of compliance campaigns—bringing the current total active campaigns to 57 compliance campaigns.
  • An LB&I directive concerning the research credit under section 41 allows IRS examiners to accept research and development (R&D) expenses as reported on taxpayer financial statements, but with certain restrictions and limitations.
  • The U.S. Treasury Department’s Community Development Financial Institutions (CDFI) Fund announced that it will consider requests for extensions of compliance and certification reports regarding the New Markets Tax Credit as COVID-19-related relief.
  • An IRS practice unit focuses on the dollar-value method of valuing last in-first out (LIFO) inventories.
  • The U.S. Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau (TTB) issued a reminder to semi-monthly excise tax return filers that there are three excise tax return periods and five due dates in September 2020.


KPMG reports

KPMG reports this week:

  • Provide initial impressions about the final regulations concerning the computation of life insurance reserves
  • Reflect additional details released by the Biden campaign with respect to the “made in America” tax proposals
  • Provide an overview of a new safe harbor for the acquisition of incidental personal property as part of a like-kind exchange of real property that could catch unsuspecting taxpayers by surprise
  • Examine favorable like-kind exchange treatment that is now limited to certain exchanges of real property


State and local tax updates

  • Tax authorities in California, District of Columbia, Michigan, and Utah released or updated guidance to provide tax relief in response to the COVID-19 pandemic.
  • Legislation in California (pending enactment) would require the Franchise Tax Board to compile certain tax information on “large taxpayers” and provide that information on an annual basis to two tax committees in the California legislature.
  • The Office of the D.C. Attorney General filed a consumer protection and sales tax enforcement action against an online grocery delivery platform that allows customers to purchase groceries from local stores through an app or website and have the groceries delivered by personal shoppers. The complaint alleges that the platform did not collect the sales tax owed on the platform’s delivery and service fees.
  • A New Jersey appeals court affirmed a decision of the New Jersey tax court that a foreign corporate limited partner (taxpayer) had New Jersey nexus by virtue of owning limited partnership interests in two partnerships operating in the state.

Read TaxNewsFlash-United States

Exempt Organizations

  • A draft version of the 2020 Form 990-T, Exempt Organization Business Income Tax Return, contains several revisions to how unrelated business taxable income (UBTI) will be reported.

Read TaxNewsFlash-Exempt Organizations

Transfer Pricing

  • Belgium: The corporate tax and transfer pricing compliance deadline for many Belgian taxpayers has been extended to 29 October 2020 for Assessment Year 2020. The deadline is typically toward the end of September but was extended in light of the current COVID-19 pandemic situation.

Read TaxNewsFlash-Transfer Pricing

FATCA / IGA / CRS

  • Cayman Islands: Legislation was enacted amending the Tax Information Authority Law (2017 Revision) regarding the FATCA and common reporting standard (CRS) regimes.
  • Germany:  A central tax office release provides information for financial institutions concerning the CRS regime.
  • Ireland: The Irish Revenue Commissioners published updated filing guidelines for DAC2 (an EU directive) and the CRS. There were no material changes to the filing guidelines.
  • Ireland: An updated list of “frequently asked questions” (FAQs) concerning the CRS regime confirms that CRS XML Schema Version 1.0 and CRS User Guide Version 2.0 are applicable for all exchanges until 31 December 2020.
  • Russia: A brochure on the automatic exchange of financial information (AEOI)—guidance that generally appears to be in line with the OECD standard for AEOI—outlines responsibilities that financial organizations must take on behalf of their clients.

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • United States: A New York company specializing in sales of advanced communications systems, software, and services agreed to pay approximately $894,000 to resolve its potential civil liability for four apparent violations of the U.S. Sudanese sanctions regulations.
  • United States: The Office of the U.S. Trade Representative (USTR) announced that the United States will resume duty-free treatment of non-alloyed, unwrought aluminum from Canada retroactive to 1 September 2020.
  • Saudi Arabia: A self-correction program, provided to allow importers voluntarily to declare and pay customs duties on non-compliance with the Saudi customs rules, is scheduled to end 30 September 2020.

Read TaxNewsFlash-Trade & Customs

Africa

  • Nigeria: The Tax Appeal Tribunal, Lagos, issued a judgment in a consolidated case finding that certain expenses were deductible for tax purposes but that an investment allowance was not available for computers because they were not plant and equipment.
  • Nigeria: The Tax Appeal Tribunal, Lagos, issued a judgment holding that rental income derived from the lease of real estate property, whether for residential or commercial purpose, is beyond the scope of the value added tax (VAT) law.
  • Mauritius: A new pension regime (Contribution Sociale Généralisée) has replaced the National Pension Fund and is effective 1 September 2020.

Read TaxNewsFlash-Africa

Americas

  • Canada: British Columbia announced it will delay to 1 April 2021 (1) registration requirements and repeal of the provincial sales tax (PST) exemption for certain carbonated beverages, and (2) carbon tax increases. Also, the time limit for certain taxpayers to claim a refund of carbon tax, motor fuel tax, PST, and tobacco tax was also extended until 90 days after the end of the provincial state of emergency (COVID-19).
  • Canada: British Columbia announced deadline extensions for certain corporate and individual (personal) provincial tax credit claims for a maximum of six months, until 31 December 2020. The extension applies to tax credit claims originally due on or after 13 March 2020. The province is also extending from 24 months to 36 months the B.C. mining flow-through share tax credit eligibility period.
  • Canada: The Canada Revenue Agency (CRA) increased to $23* (up from $17) the amount that an employer can use to determine whether an overtime meal or allowance—or the meal portion of a travel allowance—is taxable. The increases are effective retroactively to 1 January 2020. (*$ = Canadian dollar).
  • Costa Rica: Certain construction services—engineering, architecture, topography, and civil works construction services—are temporarily exempt from VAT, from 16 September 2020 through 31 August 2021.
  • Mexico: The tax authority published the second list in 2020 of foreign providers of digital services that are registered for tax purposes in Mexico. This list is relevant for recipients of digital services in Mexico because if a foreign provider of digital services is not registered in the taxpayer registry (RFC), the recipient of the digital services must consider that the services were imported and accordingly must directly remit the related amount of VAT. 

Read TaxNewsFlash-Americas

Asia Pacific

  • Bahrain: The National Bureau for Revenue released a guide explaining that if a business is transferred as a going-concern, then this is a supply that is outside the scope of VAT.
  • Bahrain: The tax authorities clarified that certain expenses incurred prior to obtaining a new building permit may be zero-rated for VAT purposes.
  • Cambodia: Anti-money laundering measures provide a framework to prevent money laundering and the financing of terrorism and set out several obligations for “reporting entities.”
  • Cambodia: The minimum wage for 2021 for workers in the textile, garment and footwear sectors is set at U.S. $192 per month, and applies beginning 1 January 2021.
  • Saudi Arabia: The General Authority for Zakat and Tax (GAZT) extended the waiver of penalties for all tax filings and payments until 30 September 2020 in an effort to mitigate the impact of the COVID-19 pandemic. The extension applies for the waiver of penalties for Zakat, income tax, withholding tax, VAT, and excise tax.

Read TaxNewsFlash-Asia Pacific

Europe

  • UK: HM Revenue & Customs (HMRC) is sending letters to large businesses for evidence of confirmation the validity of their claims under the job retention scheme. The letters are being sent beginning this week (14 September 2020), and businesses have 30 days to respond.
  • Czech Republic: COVID-19 tax and economic relief measures include: (1) an amendment to a decree on investment incentives that aims to provide more substantial support for investments involving selected “strategic products;” (2) an extension of two employment regimes under the antivirus programme until 31 October 2020; and (3) a draft amendment that would provide economic support during a period of partial unemployment.
  • EU: A COVID-19 recovery package includes new environment-related measures at the EU level, including a “plastic tax.” 

Read TaxNewsFlash-Europe

Indirect Tax

  • Canada: British Columbia will delay to 1 April 2021 expanded registration requirements and repeal of the provincial sales tax (PST) exemption for certain carbonated beverages and carbon tax increases.
  • Costa Rica: Certain construction services—engineering, architecture, topography, and civil works construction services—are temporarily exempt from VAT from 16 September 2020 through 31 August 2021.
  • Nigeria: The Tax Appeal Tribunal, Lagos, issued a judgment holding that rental income derived from the lease of real estate property, whether for residential or commercial purpose, is not subject to VAT.
  • EU: A COVID-19 recovery package includes a “plastic tax.” 
  • Bahrain: The National Bureau for Revenue released a guide explaining that if a business is transferred as a going-concern, this is outside the scope of VAT.
  • Mexico: The tax authority published the second list in 2020 of foreign providers of digital services that are registered for VAT purposes in Mexico.
  • United States: There are three federal excise tax return periods and five due dates in September 2020 for semi-monthly excise tax return filers under the TTB jurisdiction.
  • United States: In District of Columbia, a consumer protection and sales tax enforcement action was filed against an online grocery delivery platform that allows customers to purchase groceries from local stores through an app or website and have the groceries delivered by personal shoppers. The complaint alleges that the platform did not collect the sales tax owed on the platform’s delivery and service fees.

Read TaxNewsFlash-Indirect Tax

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