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

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

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

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Transfer Pricing

  • Malaysia: A report of “frequently asked questions” (FAQs) provides information for Malaysian taxpayers that are engaged in related-party transactions or controlled transactions.
  • Country-by-country (CbC) reporting: A KPMG report provides an overview of the CbC reporting notification requirements for all countries that have (currently) implemented final CbC reporting legislation.
  • Australia: Updated practical compliance guidelines regarding transfer pricing recordkeeping options provide the maximum interest rate and the minimum interest rate for small related-party inbound and outbound loans, respectively, for the 2021 year. 
  • Peru: The tax administration published new information in advance of the 29 January 2021 deadline regarding the filing of CbC reports for 2017, 2018, and 2019.
  • OECD: The Organisation for Economic Cooperation and Development (OECD) received comments regarding “Blueprints” on Pillar One and Pillar Two solutions to the tax challenges arising from digitalisation of the economy. The comments, including those from KPMG tax professionals, have been released.
  • OECD: Transfer pricing country profiles provide information on implementation of the hard-to-value-intangibles approach, as agreed to by the OECD/G20 Inclusive Framework on base erosion and profit shifting (BEPS).
  • Russia: Pending tax legislation would amend the process for advance pricing agreements (APAs), as well as affecting tax control over prices and clarifying the definition of controlled transactions.
  • Bulgaria: A new deadline for mandatory transfer pricing documentation is 30 June (of the year following the year for which the documentation applies).
  • UK: HMRC confirmed that the UK will not be a party to the EU Arbitration Convention after 31 December 2020. Thus, mutual agreement procedure (MAP) requests under the EU Arbitration Convention will not be accepted after 2020.

Read TaxNewsFlash-Transfer Pricing

BEPS

  • OECD: A report provides data on the progress made by 124 jurisdictions in spontaneously exchanging information on tax rulings, in accordance with the BEPS Action 5 minimum standard.

Read TaxNewsFlash-BEPS

FATCA / IGA / CRS

  • Ireland: The Irish Revenue Commissioners published updated guidelines regarding the XML schema version 2.0 under the common reporting standard (CRS) regime.
  • Finland: The tax administration issued an updated version of FATCA technical guidance and an updated version of CRS technical guidance.
  • Switzerland: New requirements under the automatic exchange of information (AEOI) in tax matters will be effective beginning 1 January 2021.
  • Switzerland: The tax administration published a list of 13 Swiss financial institutions in response to an administrative assistance request from the IRS concerning certain U.S. accounts.  

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • China: Chinese authorities released the first “zero-tariff” product list for the Hainan free trade port.
  • EU: The EU Council adopted a package of 21 decisions to increase trade between the European Union (EU) and neighbouring countries in the pan-Euro-Mediterranean region. Free trade agreements will need modernise the rules of origin provisions.
  • United States: Proposed regulations concerning the “de minimis exemption” for section 301 customs duties are still pending review by OMB’s Office of Information and Regulatory Affairs (OIRA). It is believed that the proposed rule would eliminate the “de minimis exemption”—that is the standard that goods valued at $800 or less, imported by one individual on one day, may enter the United States without customs duty.
  • United States: The Office of the U.S. Trade Representative (USTR) requested comments regarding the “special 301” review for 2021 and concerning the adequacy and effectiveness of trading partners’ protection of intellectual property rights.

Read TaxNewsFlash-Trade & Customs

Europe

  • Italy: A draft decree provides rules for implementing the digital services tax and clarifies several definitions and concepts included in the legislation.
  • Poland: Amendments to the tax law, effective 1 January 2020, introduce changes to the Polish corporate income tax and individual income tax regimes, including amendments addressing the taxation of restructuring transactions.
  • Germany: The Ministry of Finance (BMF) issued an opinion that the transfer of leased property that results in the sale of a business “in its entirety” is not subject to VAT if the purchaser, by taking over a leasing company from the seller, enters into the existing rental agreements on acquiring the property. The opinion’s provisions must be applied in all pending cases.
  • Germany: The Court of Justice of the European Union (CJEU) issued a judgment concluding that the supply of heat by a group of residential property owners to its members is subject to value added tax (VAT).
  • Bulgaria: Amendments to the tax and social insurance and VAT laws generally have an effective date of 1 January 2021.
  • Spain: The process for filing claims for refunds of value added tax (VAT) paid in the United Kingdom by Spanish businesses will be affected when the Brexit transitional period ends 31 December 2020 (at which time the United Kingdom leaves the EU).
  •  Spain: A regulation has advanced regarding the taxation of digital services before the 16 January 2021 effective date of the digital services tax.
  • Spain: The Supreme Court held that a Spanish subsidiary could be deemed to be a permanent establishment of a non-resident company (a Swiss company) for VAT purposes.
  • UK: The deadline for filing coronavirus job retention scheme (CJRS) claims for December 2020 claims is 14 January 2020. 
  • UK: While the deadline for filing corporation tax returns has not been extended in response to COVID-19, HMRC is prepared to accept disruptions caused by COVID-19 as a “reasonable excuse” for late filing on a case-by-case basis.
  • UK: The UK government—as the Brexit transition period closes on 31 December 2020—introduced legislation that includes measures in respect of changes related to customs, VAT, and excise tax law in order to comply with the provisions of the Northern Ireland Protocol.
  • Netherlands: The Upper House of Parliament passed the 2021 “tax plan” package. The Lower House approved the legislation in November 2020.
  • Netherlands: An existing COVID-19-relief package for businesses and workers will be expanded, and the government decided not to phase out in the first quarter of 2021 a job-retention program or overhead compensation for small and medium size enterprises.
  • Austria: A KPMG summary describes recent tax developments covers tax legislation, court decisions, and COVID-19-related measures.

Read TaxNewsFlash-Europe

Americas

  • Panama: A new form of a legal commercial entity—Sociedades de Emprendimiento—makes available beneficial tax treatment.
  • Canada: Guidance addresses issues that may arise as a result of COVID-19 pandemic-related workplace or territorial restrictions for First Nations or indigenous taxpayers (that is, restrictions that may temporarily cause employees or employers to work or reside off-reserve). The administrative guidance applies from 16 March to 31 December 2020, and may be extended if necessary.
  • Canada: A reduction in the Alberta's general corporate income tax rate to 8% (from 10%) has been advanced and will be effective 1 July 2020. 
  • Canada: Saskatchewan’s small business income tax rate is temporary reduced to 0% (from 2%), but will gradually be phased back in 2% beginning 1 July 2023.
  • Canada: Eligible businesses that overpaid their Canada pension plan (CPP) contributions in 2016 or employer insurance (EI) premiums in 2017 must file a refund claim application by 31 December 2020.
  • Canada: New Form T1134 requires multinational corporations that are residents in Canada to provide additional information on their foreign affiliates for tax years beginning after 2020.
  • Canada: A year-end summary lists goods and services tax / harmonized sales tax (GST/HST), Quebec sales tax (QST), and other indirect tax changes and sets forth upcoming deadlines for  Canadian and non-resident businesses.
  • Canada: Updated administrative guidelines for Saskatchewan’s provincial sales tax (PST) require marketplace facilitators to register and collect Saskatchewan’s PST on all taxable sales made through their platforms since 1 January 2020.

Read TaxNewsFlash-Americas

Asia Pacific

  • Taiwan: Withholding tax applies on payments made to a foreign company for providing cross-border services to a Taiwan domestic company, but certain methods may allow for a reduced withholding tax.
  • Australia: Proposed legislation would extend the temporary full expensing of depreciating assets measure, and would introduce a new alternative test for businesses to qualify for immediate expensing of depreciating assets.
  • Hong Kong: Guidance (Departmental Interpretation and Practice Note 62) sets out rules for implementation of the ship leasing tax concessions.
  • Bangladesh: A KPMG report describes tax law measures as amended by the Finance Act 2020.
  • India: A tribunal found a permanent establishment so that a China-based company was taxable in India on income derived from the supply, installation, and commissioning of telecommunication network equipment.  .
  • India: The Madras High Court held that a “gift” of shares by a company to its step-down subsidiary was not subject to the capital gains tax-exemption and was not a valid gift.

Read TaxNewsFlash-Asia Pacific

United States

  • Final regulations on the deduction limitations under section 274 for expenses related to qualified transportation fringe benefits, such as parking, were published in the Federal Register.
  • OMB’s Office of Information and Regulatory Affairs (OIRA):
    • Received for review final regulations concerning the limitation on the deduction of business interest expense under section 163(j)
    • Received for review final regulations concerning the deductibility of certain fines, penalties, and other amounts under section 162(f)
    • Completed its review of final regulations regarding the revenue recognition rules and the timing of inclusion in gross income under section 451(b)
  • Notice 2020-88 concerns a new round of (re)allocations of section 48A credits under the qualifying advanced coal project program. The credits are available for reallocation due to forfeitures of previously allocated section 48A credits or unallocated credits.
  • The IRS granted taxpayers in Alabama affected by Hurricane Zeta (beginning date 28 October 2020) until 1 March 2021 to file individual and business tax returns and to make tax payments.
  • A KPMG report provides examples of comments about accounting for income taxes recently issued by the U.S. Securities and Exchange Commission (SEC) to registrants. The comments from regulators and standard setters may help issuers identify areas for improvements in existing income taxes disclosures to provide more robust and relevant information to investors.

State and local tax

  • In Arizona, the due date for renewing transaction privilege tax licenses for all taxpayers whose activities are subject to the tax is 1 January 2021.
  • A California appeals court held that a reassessment for property tax purposes was triggered by a transfer of real property between legal entities.
  • The Indiana Department of Revenue in a “memorandum of decision” ruled that certain purchases of software and payments for access to software were exempt from sales tax.
  • The New York State Department of Taxation and Finance determined that per-minute charges for access to secure, climate-controlled doghouses were subject to New York sales tax.

Read TaxNewsFlash-United States

Exempt Organizations

  • A memo for employees of the Tax Exempt and Government Entities (TE/GE) Division extends “information document request” (IDR) timelines in response to the COVID-19 pandemic until 30 June 2021.
  • The IRS updated a set of “frequently asked questions” (FAQs) to clarify that emergency financial aid grants paid to students in response to the COVID-19 pandemic do not need to be reported by higher education institutions on Form 1098-T, Tuition Statement.

Read TaxNewsFlash-Exempt Organizations

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