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KPMG’s Week in Tax: 4 – 8 March 2019

KPMG’s Week in Tax: 4 – 8 March 2019

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

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Asia Pacific

  • China: The value added tax (VAT) rates of 16% and 10% that apply to the supply of certain goods and services will be reduced to 13% and 9%, respectively.
  • Australia: A bill to deny the capital gains tax “main residence” exemption to non-residents from July 2019 has yet to be passed. There has been much media focus on the potential implications for Australians residing overseas as non-residents.
  • Australia: A consultation proposes a number of measures to increase the consistency of the information in voluntary tax transparency code-based reports. Submissions on the consultation paper are due by 26 March 2019.
  • India: The Gujarat High Court rejected a “pre-import condition” that a business must assert in order to be eligible for duty-free imports of inputs under an exemption scheme.
  • Thailand: Implications of tax compliance and historical tax exposures need to be considered for mergers and acquisitions (M&A) transactions.


Read TaxNewsFlash-Asia Pacific

Europe

  • Belgium: A decision of a Brussels court specifically finds Luxembourg SICAVs (collective investment vehicles) may have refund opportunities for Belgian annual tax and withholding tax.
  • France: A draft law proposes to introduce a “digital services tax” on entities that satisfy certain thresholds (digital review of more than €750 worldwide and more than €25 million in France). Consideration of the proposed digital services tax by the French Parliament is expected to start in April 2019.
  • France: A proposal would amend a scheduled reduction of the corporate income tax rate for certain “large companies.”
  • Luxembourg: A bill for the 2019 budget law includes certain tax measures announced at the end of 2018—including provisions concerning corporate income tax, VAT, and individual income tax.
  • Netherlands: A consultation on a draft bill addresses excessive borrowing from one’s own company (generally borrowings of more than €500,000) and if enacted, would apply for the first time to the 2022 calendar year.
  • Belgium: A new company code is effective 1 May 2019.
  • Italy: The Italian tax authority reached a different conclusion from a late 2018 case by the Supreme Court on application of the withholding tax exemption available under the EU Parent-Subsidiary Directive for dividends paid by Italian subsidiaries to European parent companies.


Read
TaxNewsFlash-Europe

Transfer Pricing

  • Luxembourg: The European Commission opened an investigation to examine whether tax rulings granted by Luxembourg to a food and drink packaging company headquartered in Finland may have given the company an unfair advantage over its competitors, in breach of EU state aid rules.
  • Serbia: The Ministry of Finance adopted a “rulebook” on arm’s length interest rates for 2019. The rulebook has transfer pricing implications because it contains the prescribed interest rates applicable for taxpayers that had or will have related-party financing during 2019.
  • United States: The IRS Advance Pricing and Mutual Agreement (APMA) program announced that it has developed a “functional cost diagnostic model” to facilitate its review of advance pricing agreement (APA) requests.


Read TaxNewsFlash-Transfer Pricing

Africa

  • Nigeria: Regulations have been issued concerning “flare gas” that would aim to reduce the environmental and social impact caused by the flaring of natural gas.
  • Namibia: Dividends paid by Namibian companies to foreigners are subject to a 10% tax known as the “non-resident shareholders tax.”
     

Read TaxNewsFlash-Africa

Americas

  • Brazil: New guidance concerns the procedures for verifying the country of origin of imports subject to preferential tariff treatment.
  • Brazil: A manual concerns the sale and acquisition of an integrated foreign trade system with respect to transactions involving services, intangibles, and other transactions that result in a change in equity.
     

Read TaxNewsFlash-Americas

United States

  • Notice 2019-20 offers penalty relief for partnerships that file and furnish Schedules K-1, but that fail to report information about the partners’ negative tax basis capital accounts for partnership tax years beginning after December 31, 2017, but before January 1, 2019.
  • Proposed regulations were released as guidance under section 250 concerning the deductions for “foreign-derived intangible income” (FDII) and “global intangible low-taxed income” (GILTI).
  • Public hearings have been announced concerning the following proposed regulations:
    • Proposed regulations for implementing “anti-hybrid” provisions—hearing scheduled for 20 March 2019
    • Proposed regulations intended to provide burden relief under chapter 4 (FATCA) and chapter 3—hearing scheduled for 10 April 2019
    • Proposed base erosion and anti-abuse tax (BEAT) regulations—hearing scheduled for 25 March 2019
  • A policy statement of the U.S. Treasury Department and IRS addresses the tax regulatory process, the use of notice-and-comment rulemaking, the limited use of temporary regulations, and limitations on notices announcing an intent to propose regulations. It also addresses “sub-regulatory” guidance—such as revenue rulings, revenue procedures, IRS notices, and IRS announcements.
  • Notice 2019-18 states that the Treasury Department and IRS no longer plan to amend the required minimum distribution regulations under section 401(a)(9) when retirees and beneficiaries, who are currently receiving annuity payments under a defined benefit plan, are offered a temporary option to elect a lump-sum payment in lieu of future annuity payments.
  • The U.S. Tax Court issued an opinion concluding that an Indian tribe was not liable for the employment tax liabilities of its corporate division.
  • Corrections were issued relating to the proposed foreign tax credit regulations. A hearing is scheduled for 14 March 2019.
  • The U.S. Supreme Court held that a railroad’s payment to an employee for working time lost due to an on-the-job injury is taxable compensation under the Railroad Retirement Tax Act (RRTA).
  • More states—California, Hawaii, Missouri, New Hampshire, New Jersey, Wisconsin—responded to the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. (state sales tax implications of remote or online sales).
  • Arizona’s Supreme Court upheld as constitutional, a rental car “surcharge” imposed by Maricopa County.
  • The California Franchise Tax Board issued a notice clarifying that the IRC section 367 regulations (disallowing deferred gain treatment for transfers of appreciated property to an entity that does not pay the otherwise applicable income tax) will be applied in situations involving the transfer of appreciated property to an insurer. One of the critical differences between California law and IRC section 367 is the treatment of complete liquidations of insurance companies.
  • The Kansas Board of Tax Appeals found the Internet Tax Freedom Act did not preclude the Department of Revenue from assessing sales and use tax on an internet service provider’s (ISP) purchases of equipment (in this case, taxpayer purchases of transmitters, facilities, cables, routers, and switches used to provide internet service to customers in underserved areas).


Read TaxNewsFlash-United States

FATCA / IGA / CRS

  • United States: A public hearing is scheduled for 10 April 2019 on proposed regulations intended to provide burden relief under chapter 4 (FATCA) and chapter 3.
  • United States: The IRS has updated a list of “frequently asked questions” concerning the FATCA regime.
  • Hong Kong: A new ordinance amends the provisions for implementing the common reporting standard (CRS) regime.
  • Malta: There is an updated version of the guidance for the implementation of the FATCA regime.
  • Singapore: The filing period for FATCA returns for reporting year 2018 will begin on 15 April 2019, and the deadline to file a return is 31 May 2019.
  • Switzerland: A consultation process was initiated concerning possible changes to the law and rules on the international automatic exchange of information in tax matters (AEOI). The consultation is to be completed by 12 June 2019, and the amendments are scheduled to be effective 1 January 2021.
     

Read TaxNewsFlash-FATCA / IGA / CRS

Indirect Tax

  • Ireland: Revenue has updated sections or added new sections to its manual on VAT.
  • France: A digital services tax has been proposed. It is expected that the French Parliament will take up the proposal in April 2019.
  • Luxembourg: A bill for the 2019 budget law includes certain tax measures announced at the end of 2018—including the extension of the “super-reduced” VAT rate (3%) that applies for electronic books, publications, and online press.
  • China: The VAT rates of 16% and 10% that apply to the supply of certain goods and services will be reduced to 13% and 9%, respectively.
  • United States: More states—California, Hawaii, Missouri, New Hampshire, New Jersey, and Wisconsin—responded to the U.S. Supreme Court’s landmark decision in South Dakota v. Wayfair, Inc. (state sales tax implications of remote or online sales).
  • United States: Arizona’s Supreme Court upheld as constitutional, a rental car “surcharge” imposed by Maricopa County.
  • United States: The Kansas Board of Tax Appeals found the Internet Tax Freedom Act did not preclude the Department of Revenue from assessing sales and use tax on an internet service provider’s (ISP) purchases of equipment.


Read TaxNewsFlash-Indirect Tax

Trade & Customs

  • India: The Gujarat High Court rejected a “pre-import condition” for a business to assert that it was eligible for duty-free imports of inputs under an exemption scheme.
  • United States: The expiration date of two Ukraine-related general licenses have been extended.
  • United States: The U.S. Trade Representative (USTR) announced that the United States intends to terminate India’s and Turkey’s designations as beneficiary developing countries under the Generalized System of Preferences (GSP) program because they no longer comply with the statutory eligibility criteria.
  • Brazil: New guidance concerns the procedures for verifying the country of origin of imports subject to preferential tariff treatment.
  • Canada: Changes to customs monetary penalties will be effective 1 April 2019 because, according to a customs notice, administrative monetary penalties have been identified as “being too low to improve compliance with trade programs.”
     

Read TaxNewsFlash-Trade & Customs

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