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KPMG’s Week in Tax: 29 April – 3 May 2019

KPMG’s Week in Tax: 29 April – 3 May 2019

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

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Europe

  • Italy: A decree delayed the effective date of value added tax (VAT) imposed with regard to the remote sales of certain electronics but also added VAT reporting requirements for sales of all goods, beginning 1 July 2019.
  • Czech Republic: The Ministry of Finance announced plans for a new digital services tax that would in part resemble the proposed digital services tax currently being discussed in the European Union.
  • Italy: Tax incentives for corporate taxpayers include the reintroduction of an extra or bonus depreciation regime; a reduced corporate income tax rate on reinvested profits; an increase in the percentage of deductibility of local real estate tax; measures to simplify the patent box regime; and a business combinations bonus system is reintroduced.
  • France: An appellate court affirmed a decision of a lower court that an Irish entity of a multinational corporation did not have a permanent establishment (PE) in France because of the activities of a French related entity.
  • EU: The Court of Justice of the European Union (CJEU) issued an opinion finding that a mechanism for resolution of disputes between investors and EU Member States as provided for by the free trade agreement between the EU and Canada is compatible with EU law.
  • Slovakia: Guidance was issued on the tax treatment of a recreational contribution provided by employers to employees and on claiming such recreational contributions as a tax deductible expense.
  • Slovakia: Parliament voted to repeal a special tax levy that was imposed on supermarket chains, in response to a determination from the European Commission.
  • Cyprus: An EU directive (ATAD EU 2016/1164) that includes rules on earnings stripping, general anti-abuse, and controlled foreign companies (CFCs) has been transposed into Cypriot law.
  • Malta: The base erosion and profit shifting (BEPS) multilateral instrument (MLI)—estimated to affect 75% of Malta’s income tax treaties—has entered into force.
  • Russia: Full input VAT recovery on sales relating to the supply of services and to work performed outside of Russia will be available beginning 1 July 2019 (i.e., the next VAT period).
  • Switzerland: The Swiss Federal Supreme Court—in a decision concerning the Swiss stamp transfer tax—addressed what is required to be identified as a “securities dealer” and what is the appropriate treatment of direct proxy relationships and the relevance of such information in the Swiss stamp transfer tax journal.

Read TaxNewsFlash-Europe

 

Asia Pacific

  • Australia: Updated guidance from the Australian Taxation Office (ATO) concerns practical issues encountered by stakeholders when seeking to satisfy the general purpose financial statements (GPFS) regime.
  • India: The Mumbai Bench of the Income-tax Appellate Tribunal held that in determining the 90-day period for ascertaining whether there is a PE of a non-resident under the India-UK income tax treaty, an employee’s “leave period” is excluded, and the stay of employees in India on a particular day must be measured cumulatively and not independently (that is, multiple counting is to be avoided).
  • India: The Central Board of Direct Taxes (CBDT)—recognising issues relating to the attribution of profits to a PE as well as the need to bring greater clarity and predictability to the PE regime—formed a committee to examine the existing rules for the attribution of profit to PEs. The committee in April 2019 issued a report for public consultation, and the report includes recommendations for changes to the existing tax rules. 
  • India: The Supreme Court of India denied the government’s petition challenging a decision of the Kerala High Court that basically rejected rules that concerned the wage ceiling and pension contribution rules.
  • India: The Bombay High Court held that no tax is to be withheld (deducted) on the amount of salary paid by an Indian entity to an overseas “deputed” (seconded) employee even if a foreign entity exercised supervision and control over the seconded employee.

Read TaxNewsFlash-Asia Pacific

 

BEPS

  • Malta: The BEPS multilateral instrument (MLI) entered into force.

Read TaxNewsFlash-BEPS

 

FATCA / IGA / CRS

  • Russia: The tax authority updated the electronic format for reporting on foreign clients under the common reporting standard (CRS).
  • Bermuda: Updated guidance provides guidelines for Bermuda’s financial institutions to review, collect, and report information under the CRS regime.
  • Taiwan: The tax authority issued a document that contains a list of countries concerning the rules for the automatic exchange of information (AEOI) of financial accounts in Taiwan.

Read TaxNewsFlash-FATCA / IGA / CRS

 

Trade & Customs

  • United States:  A New York company agreed to pay approximately $870,000 to resolve alleged sanctions violations by its subsidiaries in China and Turkey with regard to certain transactions involving Iran.
  • United States: The Treasury Department’s Office of Foreign Assets Control (OFAC) issued guidance to provide a framework for entities to follow and use in complying with U.S. sanctions programs.
  • United States: The Commerce Department initiated an antidumping duty and countervailing duty investigation of imports of ceramic tile from China.
  • United States: The Federal Circuit affirmed the trade court’s judgment with regard to the tariff classification of sausage casings imported from Germany.
  • United States: The International Trade Commission (ITC) announced its findings that a U.S. industry is “materially injured” by reason of imports of laminated woven sacks from Vietnam. The Commerce Department will issue antidumping and countervailing duty orders on imports of this product from Vietnam.
  • United States: Commerce announced the “affirmative preliminary determinations” in the countervailing duty (CVD) investigations of imports of polyester textured yarn from China and India. Commerce will instruct U.S. Customs and Border Protection to collect cash deposits from importers of polyester textured yarn from China and India based on these preliminary rates.
  • United States: The U.S. Court of Appeals for the Federal Circuit affirmed a judgment of the trade court concerning the tariff classification of imported “Santa Claus” costumes. Several items of the Santa suits were found to be articles of normal wearing apparel and thus were excluded from a duty-free tariff classification as “festive articles.”
  • EU: The CJEU found a mechanism for resolution of disputes between investors and EU Member States as provided for by the free trade agreement between the EU and Canada (CETA) is compatible with EU law.

Read TaxNewsFlash-Trade & Customs

 

United States

  • Rev. Proc. 2019-20 expands the retirement plan determination letter program to include two additional areas—statutory hybrid plans and merged plans—for which retirement plan sponsors may now request determination letters.
  • Proposed qualified opportunity fund regulations (and a notice and request for information seeking public comments) were published in the Federal Register. A version of these regulations previously had been released by the IRS.
  • The IRS Large Business and International (LB&I) division released a “practice unit” that examines the tax treatment of shipping and air transport in light of the rules under section 887 that subject nonresident aliens and foreign corporations to a 4% tax on their U.S.-source gross transportation income.
  • A KPMG report looks at whether “technical corrections” to certain provisions of Pub. L. No. 115-97—the tax legislation that is commonly known as the “Tax Cuts and Jobs Act”—might be enacted this year and what could be the process for moving such possible technical corrections legislation through the U.S. Congress.
  • State lawmakers in California and Colorado passed economic nexus legislation to take advantage of the authorization contained in the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. (state sales tax implications of remote or online sales).
  • The Iowa Department of Revenue issued guidance on state tax law application of the limitation imposed on deductible business interest expenses under IRC section 163(j)—a measure enacted under the 2017 federal tax law.
  • The Comptroller of Maryland issued guidance on the taxation and apportionment of global intangible low-taxed income (GILTI).
  • The New Jersey Division of Taxation issued guidance on the state treatment of IRC section 951A (GILTI) and relating to the IRC section 250(a) deduction for businesses filing and reporting on a combined basis.

Read TaxNewsFlash-United States

 

Indirect Tax

  • Italy: The effective date for VAT on remote sales of imported electronics is delayed; however, there are new reporting requirements for remote sales of all goods.
  • Czech Republic: The Ministry of Finance announced plans for a new digital services tax that would in part resemble the proposed digital services tax currently being discussed in the European Union.
  • Luxembourg: The 2019 budget bill passed by Parliament includes VAT rate changes having an effective date of 1 May 2019.
  • Slovakia: Parliament voted to repeal a special tax levy that was imposed on supermarket chains.
  • Russia: Full input VAT recovery on sales relating to the supply of services and to work performed outside of Russia will be available beginning 1 July 2019 (i.e., the next VAT period).
  • Switzerland: The Swiss Federal Supreme Court—in a decision concerning the Swiss stamp transfer tax—addressed what is required to be identified as a “securities dealer” and what is the appropriate treatment of direct proxy relationships and the relevance of such information in the Swiss stamp transfer tax journal.
  • United States: State lawmakers in California and Colorado passed economic nexus legislation to take advantage of the authorization contained in 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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