KPMG’s Week in Tax: 21 - 25 August 2017 | KPMG | LU

KPMG’s Week in Tax: 21 - 25 August 2017

KPMG’s Week in Tax: 21 - 25 August 2017

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

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Asia Pacific

  • Indonesia: The controlled foreign company (CFC) rules were amended and now apply with respect to indirectly owned (non-listed) CFCs.
  • UAE: A new law concerns tax procedures and is related to the administration, collection, and enforcement of tax. It also addresses the authority of the tax administration as well as the rights and obligations of taxpayers and their agents.
  • China: An advisory opinion of the World Customs Organization on the inclusion of royalties and license fees in the customs value of imported goods has implications for China customs-related matters.
  • India: A tribunal held that profits relating to services rendered both inside and outside India by the taxpayer, in respect of Indian projects, were taxable in India as being attributable to the supervisory permanent establishment (PE) because the taxpayer and the PE were effectively connected with each other. 
  • India: The Supreme Court of India held that it is the prerogative of the tax authorities to decide who would be the “right person” subject to income tax under a provision of the Income-tax Act, 1961. 
  • India: The Central Board of Direct Taxes issued a revised tax form and aligned it with accounting standards requirements, allowing for a more uniform treatment of book profit.
  • India: A tribunal addressed late remittances of tax withheld-at-source on payment of professional charges and corporate maintenance charges and the tax treatment of server maintenance charges under provisions of India’s income tax treaties with Germany, the UK, and Italy.  
  • Australia: The Australian Taxation Office issued guidance for superannuation funds using “propagation arrangements” for reporting capital gains.

Read TaxNewsFlash-Asia Pacific

BEPS and Transfer Pricing

  • Country-by-country (CbC) reporting: A timeline and an overview of the CbC reporting notification requirements are provided for all countries that have implemented final CbC reporting legislation as of 2016.
  • Australia: The practical experiences on filing Part A of Australian Local files for some “significant global entities” are examined.
  • Australia: A corporate taxpayer decided to withdraw an appeal to the High Court in a case challenging Australia’s transfer pricing rules and the appropriate method for establishing an arm’s length interest rate for related-party loans.

Read TaxNewsFlash-BEPS and TaxNewsFlash-Transfer Pricing

Europe

  • Montenegro: A new value added tax (VAT) law was passed by the parliament and includes an increased tax rate.
  • Romania: Draft legislation clarifies certain aspects of the value added tax (VAT) split-payment mechanism that will be optional beginning 1 October 2017 and mandatory beginning 1 January 2018.
  • UK: While “Brexit” negotiations are pending, some advocate the need for a transition period incorporating customs issues; automation would be an important process to simplify the manual border clearance system.

Read TaxNewsFlash-Europe

Americas

  • Brazil: Guidance addresses the compliance rules for companies benefiting from tax incentives relating to research and development in information technology. 

Read TaxNewsFlash-Americas

FATCA / IGA / CRS

  • Monaco: A government webpage now includes hyperlinks to the common reporting standard (CRS) XML schema v1.0 and to the CRS schema user guide issued by the OECD.
  • Hong Kong: An updated version (v2.0) of the CRS user guide was issued. 
  • Liechtenstein: The tax authority released two guidance items for financial institutions—one concerning an updated version of the automatic exchange of information (AEOI) guidance, and the other, an updated version of the CRS reporting instructions.
  • France: An updated version of the CRS technical guidance was issued to provide French financial institutions with the technical description and specifications required for transmitting the CRS returns.
  • Japan: A Japanese translation of the XML user guide and a set of frequently asked questions (FAQs) related to the CRS were released. The FAQs answer questions primarily related to the electronic filing of CRS reports.
  • Singapore: An entity that is currently or becomes a reporting Singapore-based financial institution at any time during 2017 must apply for the CRS registration by 21 March 2018.

Read TaxNewsFlash-FATCA / IGA / CRS

United States

  • The U.S. Tax Court issued an opinion finding that amounts paid by the taxpayers to a “captive insurance company” were not insurance premiums for federal income tax purposes and were not deductible. The case offers a template for examining captive insurance arrangements.
  • The U.S. Tax Court released an opinion concerning the effects of “net gifts” on the marital deduction under the federal estate and gift taxes. 
  • IRS Notice 2017-44 provides model amendments that sponsors of qualified defined benefit plans may use to amend their plan documents to offer bifurcated benefit distribution options to participants—that is, the payment of benefits partly in the form of an annuity and partly as a single sum (or other accelerated form). 
  • The U.S. Tax Court issued a memorandum opinion on the correct depletion percentage rate of 14% for calcium carbonates to be applied by a cement company. The court also found that the costs of minerals purchased from third parties were non-mining costs.
  • An IRS Chief Counsel Advice memorandum addresses the issue of whether reserves with respect to certain annuity contracts are “life insurance reserves” as defined by section 816(b). The issue concerns a taxpayer’s characterization as a life or nonlife insurance company under subchapter L (that could substantially affect the taxpayer’s taxable income calculation because the proration calculations for tax-exempt interest and the dividends received deduction differ significantly for life and nonlife insurance companies).
  • The Colorado Department of Revenue held a public hearing concerning proposals on the state’s use tax notice and reporting requirements that would affect retailers making sales into the state.
  • An Arkansas administrative law judge found that the sale of tax credits by a corporate taxpayer generated business income.
  • Minnesota’s tax court held that the IRC section 382 limitation (when a loss corporation undergoes an ownership change, the amount of post-change income that can be offset by pre-ownership change losses cannot exceed the section 382 limitation) was not required to be apportioned.
  • A Texas appeals court held that a private company operating detention facilities for government detainees did not qualify for the residential-use exemption from the sales and use tax for gas and electricity sold.
  • A Texas appeals court held that the taxpayer’s use of the federal costs of goods sold (COGS) calculation as a starting point for calculating the Texas COGS deduction did not provide sufficient evidence to support the claimed deduction. The court held that the Texas COGS deduction is to be computed on an item-by-item basis, and allowed the taxpayer to deduct subcontractor payments in calculating the taxable margin.

Read TaxNewsFlash-United States

 

  • A notice from the U.S. Trade Representative (USTR) initiates an investigation for purposes of determining whether acts, policies, and practices of the government of China related to technology transfers, intellectual property, and innovation are “actionable” under U.S. law.
  • The U.S. Commerce Department and USTR are conducting industry outreach and requesting comments as to the possible implications of a “Buy American” program and also how it would affect domestic procurement preferences.
  • Representatives from the governments of the United States and Korea conducted a meeting to address potential modifications and amendments to the free trade agreement between the two countries.
  • An advisory opinion of the World Customs Organization on the inclusion of royalties and license fees in the customs value of imported goods has implications for China customs-related matters.

Read TaxNewsFlash-Trade & Customs

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