KPMG’s Week in Tax: 31 August - 4 September 2020

KPMG’s Week in Tax: 31 August - 4 September 2020

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

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United States

  • The IRS released a version of final regulations as guidance regarding the base erosion and anti-abuse tax (BEAT) imposed on certain large corporate taxpayers with respect to certain payments made to foreign related parties.
  • Notice 2020-69 announces the IRS and Treasury Department intend to issue regulations addressing the application of sections 951 and 951A to certain S corporations with accumulated earnings and profits. The notice also announces that future regulations will be issued to address the treatment of qualified improvement property (QIP) under the alternative depreciation system of section 168(g) for purposes of calculating qualified business asset investment (QBAI) with regard to the foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI) provisions.
  • Regulations pending review from OMB’s Office of Information and Regulatory Affairs (OIRA) concern (1) foreign tax credits and (2) revisions to the section 168(k) final regulations on the additional first-year depreciation. Knowing the status of OIRA review of Treasury regulations can help in predicting when regulations may be issued by Treasury and the IRS.
  • The U.S. Court of Appeals for the Eleventh Circuit, in a case of first impression, held that an amount that the individual taxpayers received in settling an action against their accounting firm was taxable income to the taxpayers and not a return of capital.
  • The IRS announced the launch of a “Bipartisan Budget Act” (BBA) centralized partnership audit regime webpage that is intended to be a “one-stop location for anything BBA-related.”
  • The U.S. Tax Court denied the taxpayers’ motion for summary judgment concerning whether an IRS penalty assessment complied with the penalty-approval process of section 6751(b)(1).
  • The IRS announced tax relief available to taxpayers affected by Hurricane Laura. Among the tax relief measures, the due dates for filing individual and business tax returns or for making certain tax payments generally are postponed to 31 December 2020.
  • Final regulations under section 468A relate to deductions for contributions to trusts maintained for decommissioning nuclear power plants and the use of amounts in those trusts to decommission nuclear plants.
  • KPMG reports:
    • Provide a description and insights of the key provisions of the 2020 final and proposed regulations under sections 245A, 951A and 954
    • Examine various tax considerations relating to telemedicine
    • Offer initial analysis of Notice 2020-65 providing guidance on employee payroll tax deferral as directed by a presidential memorandum

State and local tax

  • Tax authorities in Minnesota, New York State, and South Carolina released guidance providing tax relief in response to the COVID-19 pandemic.
  • An appeals court decision—concerning whether a Cincinnati, Ohio city income tax ordinance that sets forth the requirements for filing a consolidated income tax return was preempted by an Ohio statute on the same rules—concludes that the local ordinance that limited inclusion in the group to only affiliates that were conducting business in Cincinnati was preempted by state law that requires Cincinnati to accept a consolidated return that includes all group members filing a consolidated federal tax return. 
  • The District of Columbia enacted legislation that includes tax-related changes (1) delaying a deduction to offset the financial statement impact of the District moving to combined reporting and (2) limiting the tax benefits of investing in certain Opportunity Zones.
  • The North Carolina Department of Revenue issued a set of FAQs concerning its ongoing initiative to expedite the resolution of corporate inter-company pricing issues. By 15 September 2020, taxpayers must agree in writing to participate in the initiative by completing and emailing an “Election to Participate” form to the Department.  

Read TaxNewsFlash-United States

Transfer Pricing

  • Chile: Guidelines address the annual requirements for transfer pricing documentation (including Master and Local files) by taxpayers that are part of a multinational enterprise (MNE) group.
  • United States: A set of FAQs concerns an initiative in North Carolina to expedite the voluntary resolution of corporate intercompany pricing issues.
  • Belgium: A reminder to certain taxpayers that have an obligation that they must prepare and file the following forms if certain thresholds are met: Local file, Master file, country-by-country (CbC) report, and the CbC reporting notification.

Read TaxNewsFlash-Transfer Pricing

FATCA / IGA / CRS

  • Singapore: The Inland Revenue Authority of Singapore (1) promulgated FATCA regulations that will be effective from 1 January 2021 and (2) released updated FAQs related to the common reporting standard (CRS) regime.
  • Russia: The tax authority updated a list of organizations that may be classified as “financial market organizations” for CRS purposes.

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • A new permit requirement in Mexico includes rules for monitoring the transshipment of exports of steel from Mexico and ultimately into the United States.
  • A U.S. presidential proclamation announces that steel articles imported from Brazil no longer threaten to impair U.S. national security and, thus, that steel imported from Brazil is excluded from an additional 25% tariff.
  • The Office of the U.S. Trade Representative (USTR) has determined to extend through 31 December 2020 certain product exclusions from the additional 10% customs duties on goods of China.

Read TaxNewsFlash-Trade & Customs

Africa

  • Kenya: The ratification process for an income tax treaty between Kenya and Mauritius has been completed in Kenya. 

Read TaxNewsFlash-Africa

Americas

  • Canada: The Canada Revenue Agency (CRA) further extended the time for relief provided in response to cross-border tax issues arising from the imposition of travel restrictions that were imposed in response to the COVID-19 pandemic. The extended date is 30 September 2020.
  • Canada: The CRA announced that all Canadian employers must report certain employment-related payments made in response to the COVID-19 pandemic on the 2020 T4 slip, "Statement of Remuneration Paid" using new information codes that correlate to defined periods. The additional information is intended to validate payments under various COVID-19-related programs.

Read TaxNewsFlash-Americas

Asia Pacific

  • Cambodia: A capital gains tax will be effective 1 January 2021. The rate of the tax will be 20% of the amount of gain realized (subject to certain deductions), and the tax itself must be reported and paid within three months after the date of the transaction giving rise to the capital gains.
  • Malaysia: Updated service tax policies reflect changes made to the service tax law. In general, there are no significant changes.
  • India: A tribunal held that the taxpayer was allowed depreciation on goodwill on acquisition of the business operations from a company. The taxpayer (an entity engaged in the business of transporting time-sensitive packages and cargo) had acquired the freight-forwarding business of an Indian entity.

Read TaxNewsFlash-Asia Pacific

Europe

  • Netherlands: The government in a 28 August 2020 letter to the Lower House of parliament presented a relief and recovery package for businesses and workers in response to the coronavirus (COVID-19) pandemic.
  • Portugal: The VAT “quick fixes” regime was transposed into domestic law.
  • Belgium: A ruling provides that generally, individual directors do not need to apply for a VAT number when they receive consideration for the transfer of a copyright to the company.
  • Ireland: The deadline to file the 2019 Form ESS1 (regarding profit sharing schemes) has been extended to 31 October 2020, as the reporting transitions from a paper-based to an online system.
  • Ireland: Additional guidance was issued on the operation of the employment wage subsidy scheme.
  • Poland: Legislation was enacted imposing a tax (“fee”) on beverages containing sugar, caffeine or taurine as well as on certain alcoholic beverages when sold in bottles of a certain size.

Read TaxNewsFlash-Europe

Indirect Tax

  • Portugal: The VAT “quick fixes” regime was transposed into domestic law.
  • Belgium: A ruling provides that generally, individual directors do not need to apply for a VAT number when they receive consideration for the transfer of a copyright to the company.
  • Malaysia: Updated service tax policies reflect digital services tax measures.
  • Poland: Legislation was enacted imposing a tax on beverages containing sugar, caffeine or taurine and on certain alcoholic beverages when sold in bottles of a certain size.

Read TaxNewsFlash-Indirect Tax

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