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KPMG’s Week in Tax: 21 - 25 September 2020

KPMG’s Week in Tax: 21 - 25 September 2020

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

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United States

  • Announcement 2020-12 clarifies that lenders that make Paycheck Protection Program (PPP) loans that are later forgiven under the “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act) should not file information returns or furnish payee statements to report the amount of qualifying forgiveness.
  • The U.S. Treasury Department's Community Development Financial Institutions (CDFI) fund announced the “notice of allocation availability” for the calendar year 2020 allocation of the New Markets Tax Credit (NMTC) program. The NMTC allocation for the 2020 round is set at $5 billion in tax credit allocation authority.
  • Taxpayers in Alabama affected by Hurricane Sally will have until January 15, 2021, to file individual and business tax returns and to make certain tax payments.

Regulations

  • Final and proposed regulations were published in the Federal Register concerning the repeal of section 958(b)(4). A KPMG report provides an overview of the regulations.
  • A version of final and temporary regulations was posted on the IRS website as guidance concerning the amount of gain or loss treated as effectively connected with the conduct of a trade or business within the United States—“effectively connected gain” or “effectively connected loss”—under section 864(c)(8).
  • A version of final regulations posted on the IRS website concerns the additional first year depreciation deduction under section 168(k).
  • The IRS posted on its website a version of final regulations clarifying that certain deductions allowed to an estate or non-grantor trust are not miscellaneous itemized deductions. The final regulations also provide guidance on determining the character, amount, and allocation of deductions in excess of gross income succeeded to by a beneficiary on the termination of an estate or non-grantor trust.

OIRA review

  • OMB’s Office of Information and Regulatory Affairs (OIRA) received for review final regulations concerning consolidated net operating losses (NOLs).
  • OIRA completed its review of final and proposed regulations concerning the foreign tax credit provisions enacted by the 2017 U.S. tax law. Treasury and the IRS can now be expected to release these final and proposed regulations for publication in the Federal Register—the exact date of publication not being known.

State and local tax

  • In several states— Colorado, Illinois, Mississippi, and Tennessee—tax measures address the sales tax obligations for remote sales and transactions involving marketplace facilitators.
  • Tax authorities in California, Massachusetts, and Rhode Island released or updated guidance to provide tax relief in response to the COVID-19 pandemic.
  • Oregon’s tax court held that the motor vehicle use tax applied to purchases of vehicles by a rental car company. While Oregon does not impose a “traditional” sales and use tax, the motor vehicle use tax is imposed on the use in Oregon of motor vehicles purchased at retail.
  • The Pennsylvania Department of Revenue updated guidance concerning an economic nexus standard for corporate net income tax purposes. Interest and other intangible receipts have been added to the list of types of receipts that count towards the $500,000 economic nexus threshold. The revised guidance also addresses the application of the economic nexus standard to corporate partners.

Read TaxNewsFlash-United States

Cooperatives

  • Notice 2020-74 provides an extension of the replacement period for sales of livestock sold due to drought conditions (and thus allowing taxpayers to defer tax on any gains from forced sales pursuant to section 1033(e)).

Read TaxNewsFlash-Cooperatives

Exempt Organizations

  • A KPMG LLP report provides initial impressions of the final regulations under section 4968, which imposes an excise tax of 1.4% on the net investment income of certain private colleges and universities with at least 500 tuition-paying students and endowments valued at $500,000 or more per student.
  • The IRS Tax Exempt and Government Entity (TE/GE) division publicly released a memorandum providing guidance and implementing the TE/GE examination process used in all TE/GE examinations.

Read TaxNewsFlash-Exempt Organizations

Transfer Pricing

  • OECD: An Organisation for Economic Cooperation and Development (OECD) release reports on findings from the third phase of peer reviews of the country-by-country (CbC) reporting initiative pursuant to the base erosion and profit shifting (BEPS) Action 13.
  • Switzerland: A report from the KPMG member firm in Switzerland analyzes what elements to consider when analyzing a cash pool from a transfer pricing perspective, following the release of the OECD report “Transfer Pricing Guidance on Financial Transactions.”

Read TaxNewsFlash-Transfer Pricing

FATCA / IGA / CRS

  • Netherlands: An official with the Dutch Finance Ministry sent a letter to parliament to answer certain questions about issues and challenges under the FATCA regime encountered by Dutch citizens who have U.S. nationality.
  • UAE: Updated common reporting standard (CRS) guidance includes new sections concerning UAE tax residency definitions and the reasonableness test, and new sanctions that need to be imposed by each regulatory authority in the UAE.
  • United States: The IRS updated a set of “frequently asked questions” (FAQs) as guidance under the FATCA regime thereby providing guidance for applying the independence standard for an external reviewer performing a qualified intermediary (QI), withholding foreign partnership (WP), or withholding foreign trust (WT) periodic review.

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) released a final rule that amends the Cuban Assets Control Regulations.
  • The U.S. House of Representatives passed a bill that aims to prevent goods made with forced labor in the Xinjiang Uyghur Autonomous Region of the People’s Republic of China from entering the U.S. market.
  • A notice from the Office of the U.S. Trade Representative (USTR) makes one technical amendment to the exclusion extensions of imports from China previously granted under the $200 billion action pursuant to the “Section 301” investigation of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation.
  • The customs authority in Vietnam issued guidance for export and processing enterprises regarding an exemption from import duty and import VAT for factory construction.

Read TaxNewsFlash-Trade & Customs

Americas

  • Canada: An economic recovery plan in British Columbia includes a 15% refundable tax credit to employers that increase employment of low- to middle-income workers in British Columbia. In addition, a temporary provincial sales tax (PST) rebate would apply to PST paid on select machinery and equipment purchased by incorporated businesses between 17 September 2020 and 30 September 2021.
  • Canada: Guidance from the Canada Revenue Agency (CRA) addresses the residency of foreign affiliates and qualifying non-resident employees with regard to cross-border tax issues caused by travel restrictions during the COVID-19 pandemic.
  • Chile: A summary of tax developments prepared by the KPMG member firm in Chile addresses tax measures for economic reactivation, value added tax (VAT), and stamp tax on bond issuances, among others.

Read TaxNewsFlash-Americas

Asia Pacific

  • Australia: The 2020 federal budget is scheduled to be announced on 6 October 2020.
  • Australia: Federal and state governments announced various measures in response to the COVID-19 pandemic including items addressing the JobKeeper program, insolvency reforms for small businesses, support for commercial tenants and landlords in New South Wales, an extension of the payroll tax exemption for JobKeeper payments in Western Australia, and a JobKeeper extension factsheet.
  • Cambodia: The tax authority delayed implementation of the electronic filing (e-filing) system for monthly tax returns until 2021.
  • Oman: Enacted income tax measures include automatic exchange of information (AEOI) amendments and tax residency provisions, among others.
  • Philippines: A bill pending in the lower house would address the taxation of digital services and transactions by  imposing VAT at a rate of 12% on sales by digital service providers (both residents and non-residents) of goods that are digital or electronic in nature and on services electronically rendered in the Philippines.
  • Qatar: Registration with the new tax administration system—Dhareeba—is required for all taxpayers by 30 September 2020.
  • Vietnam: The KPMG member firm in Vietnam has prepared a report that briefly describes recent tax guidance and developments concerning corporate income tax, VAT, foreign contractor tax, individual (personal) income tax, and import duty.

Read TaxNewsFlash-Asia Pacific

Europe

  • Ireland: The Department of Finance published papers from the Tax Strategy Group describing possible tax measures that may be included in the 2021 budget scheduled to be announced on 13 October 2020.
  • Spain: The General Court of the European Union issued a judgment concluding that the Spanish tax system applicable to certain finance lease agreements entered into by shipyards constitutes a state aid scheme, and that this unlawful state aid must be recovered from the beneficiaries.
  • Switzerland: VAT returns must be filed electronically beginning 1 January 2021 via one of two tools.
  • Slovakia: Income tax returns will be due at the end of the calendar month following the end of the pandemic period (now determined as ending 30 September 2020). Thus, the deadline for filing income tax returns for the applicable tax periods having an original deadline during the pandemic period will be 2 November 2020 (given that 31 October 2020 is a Saturday).
  • Austria: Rules were introduced to allow a carryback (expected) of tax losses for 2020 as a response to address the economic implications of the COVID-19 pandemic.

Read TaxNewsFlash-Europe

Indirect Tax

  • Canada: An economic recovery plan in British Columbia includes a temporary provincial sales tax (PST) rebate that would apply to PST paid on select machinery and equipment purchased by incorporated businesses between 17 September 2020 and 30 September 2021.
  • Philippines: A bill pending in the lower house would address the taxation of digital services and transactions by  imposing VAT at a rate of 12% on sales by digital service providers of goods that are digital or electronic in nature and on services electronically rendered in the Philippines.
  • Vietnam: The KPMG member firm in Vietnam has prepared a report that briefly describes recent tax guidance and developments concerning VAT and a foreign contractor tax.
  • Switzerland: VAT returns must be filed electronically beginning 1 January 2021.
  • United States: Oregon’s tax court held that the motor vehicle use tax applied to purchases of vehicles by a rental car company.
  • United States: In several states— Colorado, Illinois, Mississippi, and Tennessee—tax measures address the sales tax obligations for remote sales and transactions involving marketplace facilitators.

Read TaxNewsFlash-Indirect Tax

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