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KPMG’s Week in Tax: 18 – 22 March 2019

KPMG’s Week in Tax: 18 – 22 March 2019

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

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Transfer Pricing

  • Canada: Transfer pricing measures in the 2019 budget include: (1) a new rule that stipulates that adjustments under the transfer pricing rules are to apply before any other provision of Canada’s tax law, and (2) an expanded definition of “transaction” that includes an arrangement or event and is intended to broaden the range of circumstances when such rules apply.
  • India: The Mumbai Bench of the Income-tax Appellate Tribunal issued a decision concerning the taxability of agency commission relating to the services rendered outside India. Because the claim of the taxpayer that actual profit attributable to India was found to be correct, no further adjustment could be made to the arm’s length price since the Transfer Pricing Officer concluded that the profit margin of the international transaction shown by the taxpayer was higher than the average margin of the comparable.
  • EU: Concerning taxation of the digital economy, the EU Member States have not yet been able to reach agreement on an EU-wide tax measure, and some believe it is doubtful whether such an agreement could be reached before there is an international solution from the Organisation for Economic Cooperation and Development (OECD).
  • Poland: The Ministry of Finance issued “explanations” to clarify the treatment of transfer pricing adjustments made in 2019, concerning transactions or other events occurring in 2018, and also addressed the rules for submitting information about transfer prices on ORD-U form for 2018.

Read TaxNewsFlash-Transfer Pricing

FATCA / IGA / CRS

  • Australia: The validation rules for 2018 common reporting standard (CRS) reports due 31 July 2019 will be updated by the Australian Taxation Office (ATO). The updated validations will trigger an error message and require correction for successful submission.
  • UK: An update to the FATCA and CRS regimes adds two new categories of non-reporting UK financial institutions to the list of deemed-compliant financial institutions.

Read TaxNewsFlash-FATCA / IGA / CRS

Americas

  • Canada: The federal budget for 2019 did not propose tax rate changes, but the budget included tax measures that would impose an annual cap on employee stock options; foster corporate innovation and research and development; support Canadian journalism; deny a mutual fund a deduction for portion of allocation made to a unitholder on redemption that is greater than the capital gain that would otherwise be realized on redemption; and deny derivative transactions the ability to convert income that would otherwise be taxable as ordinary income into capital gains. The budget also include transfer pricing and indirect tax measures.
  • Canada: The 2019 budget in New Brunswick did not contain any changes to the province’s corporate or individual tax rates. 
  • Costa Rica: An executive decree provides that certain basic food products will be exempt from the value added tax (VAT) until 1 July 2020.

Read TaxNewsFlash-Americas

Asia Pacific

  • China: Guidance was issued concerning the tax treatment of non-residents and residents not domiciled in China and is effective retroactively from 1 January 2019.
  • China: An announcement clarifies length of residence rules for individual income taxation purposes.
  • India: The Authority for Advance Ruling, Tamil Nadu ruled that an input tax credit is available only to the extent of payments made by the recipient to the supplier. In other words, an input tax credit attributable to post-supply discounts is not available regardless of the fact that the supplier has discharged tax on the full value of the supply.
  • India: The Supreme Court of India concluded that the amount raised by the taxpayer from various companies by means of shares issued at a premium is subject to income tax.
  • Australia: Authorities are expected to drop the proposed changes to the capital gains tax main residence exemption.

Read TaxNewsFlash-Asia Pacific

Europe

  • Netherlands: Withdrawal rules were published for citizens of the United Kingdom and their family members who lawfully reside in the Netherlands as of 29 March 2019, in anticipation of a possible “no-deal” Brexit. The release includes transitional rules applying until 30 June 2020, as well as a provision for cross-border workers.
  • Germany: The German Federal Tax Court concluded that prize money from a television show is not subject to VAT.
  • EU: Concerning taxation of the digital economy, the EU Member States have not yet been able to reach agreement on an EU-wide tax measure, and some believe it is doubtful whether such an agreement could be reached before there is an international solution from the Organisation for Economic Cooperation and Development (OECD). The OECD is currently discussing four proposals for a solution at the international level.

Read TaxNewsFlash-Europe

Africa

  • Nigeria: Consumer protection measures forbid restrictive agreements between business entities.

Read TaxNewsFlash-Africa

United States

  • The staff of the Joint Committee on Taxation (JCT) released its annual overview of the federal tax system that describes the individual income tax; the corporate income tax; the estate, gift, and generation skipping taxes; social insurance taxes; and certain major excise taxes as in effect for calendar year 2019.
  • Legislation in Washington State—signed by the governor concerning economic nexus for remote retailers and marketplaces—(1) codifies the Department of Revenue’s position on economic nexus for remote retailers and marketplaces as of 1 October 2018, (2) eliminates the 200 transactions threshold, (3) eliminates certain provisions of the law that are no longer needed, (3) makes the state’s economic nexus provisions uniform for both business and occupation (B&O) and sales tax, (4) and makes certain other changes to Washington’s tax laws.
  • “Renditions” of Texas personal property used in a business are due 1 April 2019. Thirty-day extensions are automatically granted, but the extension request must be submitted before the original filing deadline.
  • The U.S. Supreme Court affirmed a judgment of the Washington State Supreme Court, and concluded that motor fuel imported from Oregon over Washington’s public highways by the Yakama Nation (a Native American tribe) was not subject to Washington State tax because the tribe’s activities were pre-empted by a treaty (1855) between the United States and the Yakama Nation.
  • Following the release of the Trump Administration’s FY 2020 budget recommendations, the administration released “Analytical Perspectives, Budget of the United States Government, Fiscal Year 2020,” providing analyses designed to highlight specified subject areas or provide other significant presentations of budget data to place the budget in perspective.
  • Final regulations concern the income test used to determine whether a corporation may qualify as a regulated investment company (RIC) for federal income tax purposes.
  • A public hearing scheduled for 20 March 2019 relating to the proposed regulations under the “anti-hybrid” provisions was cancelled.
  • A KPMG report provides an update for officers and employees on FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR).
  • More states responded to the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. (state sales tax implications of remote or online sales) with legislation or with administrative guidance.
  • An administrative law judge in New York found that the broker-dealer sourcing rules do not extend to a non-broker single-member limited liability company (SMLLC).
  • The New York Department of Taxation concluded that a marketplace provider qualified as a vendor required to collect sales tax.
  • In Utah, a bill passed by the legislature and pending action by the governor includes measures to amend the rules for corporate nexus status.

Read TaxNewsFlash-United States

Exempt Organizations

  • The IRS issued a release reminding group ruling-holders (central organizations) with accounting periods ending 30 June 2019 that they must submit updates by 1 April 2019.

Read TaxNewsFlash-Exempt Organizations

Trade & Customs

  • The U.S. Trade Representative released a notice of the effective date for changes to the rules of origin for certain apparel goods of specified fabrics with respect to imports of these goods into the United States pursuant to a trade agreement between the United States and Morocco. The United States and Morocco agreed to implement the changes with respect to each other’s eligible goods, effective 1 April 2019.

Read TaxNewsFlash-Trade & Customs

Indirect Tax

  • Germany: The German Federal Tax Court concluded that prize money from a television show is not subject to VAT.
  • Canada: The federal budget for 2019 includes measures concerning goods and services tax (GST) and harmonized sales tax (HST).
  • India: The Authority for Advance Ruling, Tamil Nadu ruled that an input tax credit is available only to the extent of payments made by the recipient to the supplier. In other words, an input tax credit attributable to post-supply discounts is not available regardless of the fact that the supplier has discharged tax on the full value of the supply.
  • India: The Supreme Court of India concluded that the amount raised by the taxpayer from various companies by means of shares issued at a premium is subject to income tax.
  • Costa Rica: An executive decree provides that certain basic food products will be exempt from the value added tax (VAT) until 1 July 2020.
  • United States: Legislation in Washington State concerning economic nexus for remote retailers and marketplaces was signed by the governor.
  • United States: The U.S. Supreme Court affirmed a judgment of the Washington State Supreme Court, and concluded that motor fuel imported from Oregon over Washington’s public highways by the Yakama Nation (a Native American tribe) was not subject to Washington State tax because the tribe’s activities were pre-empted by a treaty (1855) between the United States and the Yakama Nation.
  • United States: The New York Department of Taxation concluded that a marketplace provider qualified as a vendor required to collect sales tax.
  • United States: More states responded to the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. (state sales tax implications of remote or online sales) with legislation or with administrative guidance.

Read TaxNewsFlash-Indirect Tax

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