KPMG’s Week in Tax: 21 - 24 December 2020

KPMG’s Week in Tax: 21 - 24 December 2020

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

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United States

  • Congress passed a bipartisan funding deal including over $900 billion for various COVID relief programs and many tax provisions (including tax extenders). The legislation includes a provision allowing recipients of Paycheck Protection Program (PPP) loans to deduct associated costs, and an extension and significant expansion of the employee retention credit. The president expressed disagreement with provisions of the bill, and the outlook for this legislation is unresolved.

Read TaxNewsFlash-Legislative Updates

  • The IRS posted a version of final regulations to simplify the application of tax accounting provisions for certain businesses having average annual gross receipts not exceeding $25 million and to provide special accounting rules for long-term contracts for corporate taxpayers.
  • The IRS posted to its website final regulations under section 451 concerning the revenue recognition rules and regarding the timing of income inclusion under an accrual method of accounting, including the treatment of advance payments for goods, services, and certain other items.
  • Notice 2021-2 provides the standard mileage rates for taxpayers to use in computing the deductible costs of operating an automobile for business, charitable, medical, or moving purposes in 2021.
  • Notice 2021-3 extends—through 30 June 2021—temporary relief from a requirement that retirement plan elections that require the signature of an individual participant, including spousal consents under section 417, must be witnessed in the physical presence of a plan representative or notary public.
  • Notice 2021-4 provides a “final extension” of the temporary dyed fuel relief for taxable fuel removals from certain Wisconsin terminals for the period 1 January 2021 through 31 December 2021.
  • A KPMG report highlights the changes made in the final regulations under section 162(m) limiting the deduction for compensation paid for covered employees.
  • The IRS publicly released a private letter ruling addressing the status of a “publicly offered” real estate investment trust (REIT) and the treatment of REIT preferential dividends.
  • The IRS Large Business and International (LB&I) division publicly released two “practice units” concerning the determination of liability allocations and recourse vs. nonrecourse liabilities.


State and local tax

  • A KPMG report provides—in table format—a “year-end checklist” and summary of state and local tax developments for the fourth quarter of 2020.
  •  In Louisiana, certain taxpayer-favorable legislative changes were made to the inventory tax credit, including an extended carryforward period for 10 years and to the property tax credit rules.
  • The Massachusetts appropriations legislation for 2021 includes provisions requiring certain vendors to make accelerated remittances of sales tax.  
  • The New Jersey Division of Taxation issued guidance concerning technical corrections to the corporation business tax (CBT) law.
  • A South Carolina administrative law court held that a taxpayer (a home improvement retailer) was properly assessed retail sales tax on items/materials that it subsequently installed in customers’ homes.

Read TaxNewsFlash-United States
 

Cooperatives

  • OMB’s Office of Information and Regulatory Affairs (OIRA) received for review final regulations relating to application of the domestic production activities deduction under section 199A for specified agricultural or horticultural cooperatives.

Read TaxNewsFlash-Cooperatives

Transfer Pricing

  • OECD: A KPMG report provides impressions on OECD guidance addressing application of the arm’s length principle in the context of the coronavirus (COVID-19).
  • Italy: The pending draft budget bill for 2021 includes measures that would amend the existing rules for advance pricing agreements (APAs).
  • Italy: The tax authority issued regulations to implement mutual agreement procedure (MAP) processes.
  • Turkey: The Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports (CbC MCAA) was approved and published in Turkey’s official gazette; thereby, Turkey is considered a signatory of the CbC MCAA and has activated its relationship with 38 countries regarding the automatic exchange of country-by-country (CbC) reports.
  • Turkey: The deadline for filing the first CbC report related to the fiscal year 2019 and the “special fiscal period” ending in January 2020 has been extended through 26 February 2021. The deadline previously was 31 January 2021.

Read TaxNewsFlash-Transfer Pricing

FATCA / IGA / CRS

  • Germany: The central tax office (BZSt) released a newsletter with updates under the FATCA regime.

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • United States: The U.S. Trade Representative extended certain product exclusions and made further modifications to remove Section 301 duties from certain medical-care products imported from China to address COVID-19. The product exclusion extensions will apply as of 1 January 2021 and extend through 31 March 2021.
  • United States: The Bureau of Industry and Security (BIS) of the U.S. Commerce Department released final rules amending the Export Administration Regulations (EAR) by adding a new “military end-user” list and removing the special administrative region of Hong Kong from the list of destinations in the EAR.
  • Ireland: Certain key actions relating to customs and VAT will be required of businesses trading with Northern Ireland, regardless of whether or not a Brexit tariff-free trade agreement is reached.

Read TaxNewsFlash-Trade & Customs

Europe

  • France: The Finance Law for 2021 includes an expected decrease in production taxes, as well as tax measures intended to support French businesses in response to the COVID-19 pandemic.
  • Poland: A ruling from the tax administration provides that allowances paid to employees as compensation for their increased electricity and internet bills incurred in working remotely because of the COVID-19 pandemic do not constitute income under the individual income tax law.
  • Serbia: Legislation effective 1 January 2021 amends the excise tax measures for smoking products.
  • Bulgaria: Value added tax (VAT) changes effective in Bulgaria beginning 1 January 2021 include changes concerning remote (distant) sales of goods.
  • Italy: The tax authority issued regulations to implement new tax dispute resolution mechanisms and mutual agreement procedure (MAP) processes.
  • Luxembourg: The government announced it would propose a draft law to extend the deadline for filing corporate and individual income tax returns for the years 2019 and 2020, as relief in response to the COVID-19 pandemic.

Read TaxNewsFlash-Europe

Americas

  • Costa Rica: Guidance provides rules for entities submitting a “declaration of the registry of transparency and final beneficiaries” for 2020.
  • Mexico: A decree amending tax provisions for Mexico City—effective 1 January 2021—concerns the payroll tax obligation for the subcontracting of personnel and also measures concerning property tax and the ticket tax for admission to shows or events.
  • Panama: The deadline is 31 December 2020 for multinational company headquarters licensed in Panama to comply with certain annual reporting requirements.
  • Dominican Republic: Taxpayers encountering economic challenges resulting from the COVID-19 pandemic may be able to improve their cash flow by acquiring transferrable tax credits. Taxpayers with a calendar year-end have until 31 December 2020 to enter into an agreement to purchase these tax credits if the intent is to use them on their 2020 tax returns (due 29 April 2021). 
  • Canada: The process has changed for claiming home office expenses for 2020—including a shortened qualifying period—to allow individuals to claim additional expenses and to provide a temporary “flat rate” method or “detailed” method for eligible individuals. These changes only apply to claims for the 2020 tax year.

Read TaxNewsFlash-Americas

Asia Pacific

  • Japan: “Frequently asked questions” (FAQS) in response to the coronavirus (COVID-19) pandemic concern: (1) tax returns filed for 2020; (2) relief concerning tax return filing and tax payment processes; and (3) a “grace period” for taxpayers encountering difficulty paying their taxes because of the economic situation caused by the pandemic.
  • Bahrain: There are considerations for registered businesses seeking to recover input VAT incurred on capital assets.

Read TaxNewsFlash-Asia Pacific

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