KPMG’s Week in Tax: 7 - 11 December 2020

KPMG’s Week in Tax: 7 - 11 December 2020

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

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Europe

  • Netherlands: The Dutch Supreme Court (Hoge Raad) issued decisions in two asset management cases, holding the value added tax (VAT) exemption for collective asset management can also apply to individual asset management whereby investments are pooled on the basis of investment profiles.
  • Poland: The Ministry of Finance confirmed that it does not intend to further delay the 1 January 2021 effective date of Poland’s retail sales tax.
  • Belgium: Pending draft legislation, expected to be approved before year-end, includes measures concerning: (1) the interest deduction limitation (“earnings stripping rules”); (2) implementation of the EU list of non-cooperative jurisdictions; (3) an exemption from paying wage withholding tax with regard to the training of employees; and (4) an investment deduction for small and medium-sized enterprises (SMEs).
  • Belgium: There are year-end actions regarding research and development (R&D) incentives concerning: (1) the exemption of professional withholding tax for researchers; (2) the end of the patent income deduction (and conversion to the innovation income deduction); (3) the deadline for pre-filing innovation income deduction rulings; and (4) various other deadlines.
  • Czech Republic: The Chamber of Deputies passed a bill that includes tax law amendments for 2021, such as: (1 repeal of the super-gross wage, (2) introduction of progressive taxation of individuals, (3) acceleration of tax depreciation, (4) a revision to the taxation of discounted bonds, and (5) introduction of a cap on the exemption of income from the sale of securities. The bill is now pending consideration by the Senate.
  • Netherlands: A KPMG report provides an overview of recent tax developments that may affect financial institutions.
  • Sweden: The rules on tax withholding for work performed in Sweden (scheduled to change beginning 1 January 2021) may have implications regarding permanent establishments.
  • EU: New measures adopted by all EU Member States will allow EU countries to put in place a temporary VAT exemption for coronavirus (COVID-19) vaccines and testing kits being sold to hospitals, doctors, and individuals. 
  • Romania: Beginning 1 January 2021, supplies of residential properties will be subject to a reduced VAT rate of 5% when supplied to individuals, if certain conditions are met.

Read TaxNewsFlash-Europe

Africa

  • Nigeria: Taxpayers are reminded of the availability of a waiver of interest and penalties relating to outstanding taxes arising from desk examinations, audit exercises, investigations or all other forms of tax assessments. The deadline for application of interest and penalty relief is 31 December 2021.

Read TaxNewsFlash-Africa

Asia Pacific

  • Bahrain: VAT relief available for the construction and real estate sector includes zero-rated (0%) supplies with regard to the construction of new buildings; the supply of “bare land” and buildings has been made exempt.
  • Vietnam: The effective date for mandatory e-invoicing has been delayed to 1 July 2022.
  • Vietnam: Recent tax guidance items concern corporate income tax, foreign contractor tax, individual (personal) income tax, export / import tax, special consumption tax, tax administration and customs administration, foreign exchange control, and tax reporting and filing obligations.
  • Australia: An alert from the tax administration concerns Australian taxpayers involved in certain arrangements intended to provide imputation benefits in respect to a parcel of shares and that may not be entitled to imputation benefits.
  • Saudi Arabia: New regulations define the terms, requirements, and conditions related to electronic invoices (e-invoices). The new rules must be applied by 4 December 2021. The Saudi Arabian General Authority of Zakat and Tax (GAZT) also issued guidelines and a set of “frequently asked questions” (FAQs) that provide further detail on application of the e-invoicing rules. 

Read TaxNewsFlash-Asia Pacific

Transfer Pricing

  • Australia: The tax authority released updated guidance regarding cross-border related-party financing arrangements and related transactions, and concerning interest-free loans between related parties. The guidance concerns the risk score assigned to outbound interest-free loans between related parties.
  • Vietnam: Revised transfer pricing guidance is effective beginning 20 December 2020, and applies for the tax year 2020 and later. 
  • Russia: A measure added to the tax law provides a broader range of upper and lower limits for interest rates on controlled debt obligations for the period from 1 January 2020 to 31 December 2021—effectively expanding the list of controlled debt obligations that do not require a transfer pricing analysis.

Read TaxNewsFlash-Transfer Pricing

FATCA / IGA / CRS

  • United States: The IRS issued a reminder that for the period ending 31 December 2019, responsible officer certifications are due no later than 15 December 2020.
  • Liechtenstein: The tax authority of Liechtenstein issued guidance providing updated information about FATCA and the automatic exchange of information (AEOI) rules. Revisions are effective 1 January 2021.

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • United States: President-elect Biden is reported to have selected Katherine Tai to be the U.S. Trade Representative.
  • United States: An interim final rule makes three changes to the Section 232 tariff exclusions process for steel and aluminum imports.
  • UK: An announcement reveals the UK would not continue the large civil aircraft-related tariffs imposed by the European Union (EU) on imports from the United States beginning 1 January 2021.   
  • Australia: Proposed legislation intends to clarify the tariff classification of vitamin products, nutraceuticals, and food supplements by treating these products as dutiable as food supplements (unless they are imported from a free trade partner, and eligible for free trade agreement preferential duties).
  • EU: The European Commission announced that Sint Maarten has fulfilled two pre-requisites for application of the “registered export” (REX) system as from 7 December 2020.
  • India: A new government initiative aims at making India a self-reliant nation in trade and business. The initiative confirms the key focus of the government to “Make in India” and to increase the share of the manufacturing sector in the country’s gross domestic product. 

Read TaxNewsFlash-Trade & Customs

United States

  • Final regulations released for publication in the Federal Register concern the source of income for certain sales of personal property under section 863. The IRS previously posted a version of these final regulations on its website in September 2020.
  • The IRS posted a version of final regulations concerning the extended rollover period for a qualified plan loan offset (a type of plan loan offset) as enacted by a provision of the U.S. 2017 tax law.
  • Updated “frequently asked questions” (FAQs) concerning the Paycheck Protection Program (PPP) explain why recipients of PPP loans of $2 million or more are receiving questionnaires from the Small Business Administration (SBA).
  • The IRS posted a version of final regulations concerning the deduction disallowed for qualified transportation fringe benefits, including qualified parking, provided to an employee, effective for amounts paid or incurred after 31 December 2017.
  • Notice 2020-86 provides guidance in a “question and answer” (Q&A) format regarding certain provisions of the “Setting Every Community Up for Retirement Enhancement Act of 2019” (SECURE Act) with respect to “safe harbor plans” under sections 401(k) and 403(b).
  • The IRS has started sending letters to taxpayers that attached (or indicated they attached) a Form 8996, Qualified Opportunity Fund, to their tax returns. The IRS letters advise taxpayers that they may need to take additional action related to qualified opportunity funds.
  • The IRS announced that certain taxpayers in Puerto Rico affected by a September severe storm and flooding have until 15 January 2021 to file individual and business tax returns and to make certain tax payments.
  • A KPMG report examines—in light of recent negative economic conditions and the number of companies expected to emerge from bankruptcy—accounting for income taxes considerations of attribute reduction that may follow emergence from bankruptcy for those companies.

State and local tax

  • Voters in Arizona approved Proposition 208 that, effective 1 January 2021, imposes an additional tax at a rate of 3.5% on taxable income above $250,000 annually for single filers and on taxable income above $500,000 annually for married persons filing jointly. A court challenge is pending.
  • Chicago recently increased the personal property lease transaction tax rate to 9% (from 7.25%) as applied to nonpossessory leases of computer property, effective 1 January 2021. This tax has been interpreted by officials as applying to transactions involving access to cloud-based services, remotely hosted software, and certain online services if the lessee/user is located in Chicago.
  • The West Virginia Supreme Court concluded that an oil and gas production company was entitled to the state’s “direct use” sales tax exemption for purchases and rentals of crew quarters and related equipment, and portable toilets, sewage systems, and related water systems as being necessary to the taxpayer’s operation and monitoring of the drilling operations.
  • The Multistate Tax Commission’s Executive Committee voted unanimously to advance revisions to the Commission’s statement on Pub. L. No. 86-272 to the next stage of approval. Under the revised statement, if a business interacts with a customer via the business’s website or app, the business is generally considered to be engaged in a business activity within the customer’s state.

Read TaxNewsFlash-United States
 

  • The U.S. House of Representatives passed the “Marijuana Opportunity Reinvestment and Expungement Act” (MORE Act), that includes a new excise tax on some cannabis products. Action in the Senate is uncertain.

Read TaxNewsFlash-Legislative Updates

Exempt Organizations

  • FEMA’s disaster declaration following September storm and flooding in Puerto Rico allows certain employer-sponsored charities to provide disaster relief programs for affected employees.

Read TaxNewsFlash-Exempt Organizations

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