KPMG’s Week in Tax: 21 - 25 January 2019 - KPMG Global
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KPMG’s Week in Tax: 21 - 25 January 2019

KPMG’s Week in Tax: 21 - 25 January 2019

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

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Transfer Pricing

  • China: The State Administration of Taxation released a report with data about advance pricing arrangements (APAs) for the period from 2005 to 2017.  

Read TaxNewsFlash-Transfer Pricing

FATCA / IGA / CRS

  • UK: The automatic exchange of information (AEOI) registration guidance was updated. The list of reportable jurisdictions was also updated for the 2018 reporting period.

Read TaxNewsFlash-FATCA / IGA / CRS

Africa

  • South Africa: Two court decisions concern the application of section 24C of the Income Tax Act—the provision that allows taxpayers to claim a deduction for an expenditure to be incurred in future tax years for the performance of the taxpayer’s obligations under a contract. The decisions highlight that taxpayers need to consider whether (1) the contract under which income is earned and (2) the contract giving rise to the obligation to incur future expenditures are the same or are at least inextricably linked.

Read TaxNewsFlash-Africa

Americas

  • Canada: New “significant control” reporting requirements for private federal corporations must be implemented by the effective date of 13 June 2019.
  • Canada: In British Columbia, property owners must complete an online registration process by 31 March 2019 if they want to be exempt from the province's new speculation and vacancy tax for 2018.
  • Canada: There are relief measures for employees who have received salary overpayments. Proposed rules will allow employers who have mistakenly overpaid their workers in a previous year to elect to be directly reimbursed by the Canada Revenue Agency for income tax and employment tax related to salary over-payments. Affected employees will only have to repay their employer for net salary overpayments.
  • Mexico: Tax provisions in an economic package for 2019 provided that effective 1 January 2019, taxpayers may offset certain tax balances related to the same type of tax. Concerning value added tax (VAT), the use of balances generally is limited to credit in subsequent months. This rule is effective for taxes imposed under the income tax law during 2019. 
  • Colombia: New tax provisions—effective 1 January 2019—include measures to reduce the corporate income tax rate from 33% to 30% and to provide certain tax incentives to promote investment, economic growth, and employment.
  • Chile: Recent tax developments concern the treatment of virtual and digital assets, advance sales invoices and returns, foreign corporate bonds issued via a Chilean taxpayer, and effects of divisions related to tax paid abroad.

Read TaxNewsFlash-Americas

Asia Pacific

  • New Zealand: Tax legislation is advancing, with a parliamentary committee’s report of amendments. The legislation—generally consisting of tax measures that would concern individual taxpayers—is expected to be enacted by 31 March 2019.
  • Australia: A consultation paper includes a proposal for all income relating to the commercial exploitation of a person’s fame or image to be included in that person’s assessable income—with income splitting to be denied.
  • Qatar: An excise tax on certain goods that are deemed to be damaging to a consumer’s health (such as tobacco products and certain beverages) is effective in 2019. 
  • India: The Calcutta High Court held that provisions of the Central Goods and Services Tax, Act 2017 and provisions under the Finance Act (Service Tax), 1994, may both apply so that a service tax audit may be conducted regardless of application of the goods and services tax (GST) regime.
  • India: The Central Board of Direct Taxes (CBDT) reversed prior guidance (Circular No. 10/2018) concerning application of section 56(2)(viia) of the Income-tax Act, 1961 with respect to a fresh issuance of shares, and effectively withdrew Circular No. 10/2018.  Future guidance is expected. 
  • India: The Authority for Advance Ruling, Maharashtra concluded that an Indian taxpayer’s back-office support services performed for its foreign group member companies were not “intermediary services” and thus were exports. 
  • India: The Reserve Bank of India issued new guidance concerning borrowing and lending between residents of India and residents outside India. 
  • India: The Delhi Bench of National Company Law Tribunal (NCLT) approved two “schemes of arrangement” involving the merger of promoter holding companies into listed companies, and rejected the tax authority’s claim that the purpose of the schemes was tax avoidance.

Read TaxNewsFlash-Asia Pacific

Europe

  • EU: The European Commission announced referrals to the Court of Justice of the European Union (CJEU) concerning: Germany for its rejection of certain applications for value added tax (VAT) refunds for businesses in other EU Member States; Italy for its preferential treatment of property registration tax that provides a reduced tax rate for Italians living abroad who are buying their first house on Italian soil; and the UK for its failure to comply with VAT rules for certain commodity markets.
  • Finland: The CJEU—in a case concerning the location of risk for purposes of the insurance premium tax for insurance related to M&A transactions—held that the place of risk for insurance covering the contractual risks associated with the value of shares and the fairness of the purchase price paid is the place where the policyholder is established.
  • Malta: The VAT rate on e-books was reduced to 5%--effective 1 January 2019—and five schemes allowing for a reduced duty rate on transfers of property have been extended to 2019.
  • Bulgaria: Changes to VAT law are generally effective in January 2019, including provisions concerning deferred VAT accrual upon import and electronically supplied services to “end customers.”

Read TaxNewsFlash-Europe

United States

  • The IRS posted final versions of forms and instructions for purposes of implementing certain provisions that were enacted by the U.S. tax law in December 2017.
  • KPMG reports provide initial impressions about the regulations under section 199A (the 20% deduction). One report relates to proposed regulations on the treatment under section 199A of dividends paid by real estate investment trusts (REITs).
  • More states—Indiana, Massachusetts, New York, North Dakota, Pennsylvania, and Wyoming—responded to the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. (state sales tax implications of remote or online sales).
  • The Georgia Department of Revenue issued two letter rulings addressing whether certain taxpayers’ purchases qualified for the sale for resale exemption or the sales tax exemption for equipment used in manufacturing. In the first ruling, the taxpayer purchased and leased copier and printing equipment that was made available to customers. The Department concluded that neither the resale exemption nor the manufacturing exemption applied to the taxpayer’s purchases and leases of copying equipment. In the second ruling, the Department concluded that a restaurant’s purchases of items used to furnish the restaurant and to prepare food items were not exempt from sales and use tax. Under Georgia law, restaurants are statutorily excluded from the manufacturing exemption.
  • The Missouri Supreme Court held that the operator of a cafeteria in a federal building was required to remit sales tax on sales of food items. The issue was whether the cafeteria was liable for sales tax on the food purchased by employees of the federal reserve bank building (an entity exempt from sales tax pursuant to federal law) when the bank subsidized the cost of food, influenced pricing, and set the cafeteria’s hours. The high court found that the cafeteria was a public place even though access was restricted.
  • The New York State executive budget for FY 2020 includes numerous income tax proposals including measures to codify the apportionment of  “global intangible low-taxed income” (GILTI) and to extend for five years, the top individual income tax rate of 8.82%.
  • The Oregon legislature convened this week to consider myriad proposals to make changes to the state’s corporate tax laws including bills that would increase the state’s corporate tax rate or the corporate minimum tax.

Read TaxNewsFlash-United States

Indirect Tax

  • EU: The European Commission announced referrals to the CJEU concerning: Germany for its rejection of certain applications for VAT refunds for businesses in other EU Member States; Italy for its preferential treatment of property registration tax that provides a reduced tax rate for Italians living abroad who are buying their first house on Italian soil; and the UK for its failure to comply with VAT rules for certain commodity markets.
  • Finland: The CJEU issued a judgment in a case concerning the location of risk for purposes of the insurance premium tax for insurance related to M&A transactions.
  • Canada: The deadline in British Columbia for property owners to register for an exemption from the speculation and vacancy tax is 31 March 2019.
  • India: The Calcutta High Court held that if a service tax audit may proceed despite the enactment of the Central Goods and Services Tax, Act 2017.
  • Malta: The VAT on e-books was reduced to 5%, effective 1 January 2019. Five schemes allowing for a reduced duty rate on transfers of property have been extended to 2019.
  • Mexico: Tax provisions an economic package for 2019 allow offsetting of VAT, but limited to credit in subsequent months. 
  • Bulgaria: Changes to the VAT law are generally effective in January 2019, including deferred VAT accrual upon import and electronically supplied services to “end customers.”
  • Colombia: New tax provisions—effective 1 January 2019—allow non-residents to appoint financial institutions as VAT collecting agents for electronic, digital, and royalty payments..
  • Qatar: An excise tax is imposed on goods deemed to be damaging to consumer’s health (tobacco products and certain beverages).
  • United States: The Georgia Department of Revenue issued two letter rulings addressing whether certain taxpayers’ purchases qualified for the sale for resale exemption or the sales tax exemption for equipment used in manufacturing.
  • United States: The Missouri Supreme Court held that the operator of a cafeteria in a federal building was required to remit sales tax on sales of food items.
  • United States: More states—Indiana, Massachusetts, New York, North Dakota, Pennsylvania, and Wyoming—responded to the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. (state sales tax implications of remote or online sales).

Read TaxNewsFlash-Indirect Tax

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