KPMG’s Week in Tax: 18 - 22 December 2017 | KPMG | LU
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KPMG’s Week in Tax: 18 - 22 December 2017

KPMG’s Week in Tax: 18 - 22 December 2017

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

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U.S. Tax Reform

  • Both the U.S. House of Representatives and Senate passed H.R. 1, a revised version of the conference agreement. After “enrollment” of the bill, it will be sent to the White House for action by the president. The president has indicated he will sign the bill, but it is not known whether he will sign the bill in 2017 or in early January 2018.

Read KPMG’s analysis and observations about the tax bill: Conference agreement for H.R. 1 – Initial observations (that reflects modifications made as of 20 December 2017)

Read TaxNewsFlash-Tax Reform

BEPS and Transfer Pricing

  • Malaysia: The deadline for filing country-by-country (CbC) reporting notifications by some taxpayers is 31 December 2017 (that is, the notification as to which entity will be filing the CbC report). 
  • OECD: An update reveals there are approximately 1,400 jurisdictions ready to participate in automatic exchange of CbC reports. 
  • OECD: The latest edition of the OECD “Model Tax Convention” was released.
  • France: The French tax authorities officially announced a transition measure to address a situation when French companies/branches are held by an ultimate parent company located in a country that has not implemented a CbC regulation or the international exchange of information relationships that are formed through “qualifying competent authority agreements” (QCAAs) with France. If a parent company located in such a country or territory voluntarily files a CbC report for a fiscal year beginning from 1 January 2016, in accordance with the international standard, and that CbC report is transmitted by the foreign tax administration to the French competent authority, the subsidiaries or branches located in France will not be subject to the CbC reporting obligation.
  • Netherlands: The European Commission announced it has opened an in-depth investigation concerning two Dutch tax rulings that may have allowed a company to pay less tax and, thus, provided an “unfair advantage” over other companies, in breach of EU state aid rules.
  • Germany: A CJEU Advocate General issued an opinion about the German tax treatment (arm’s length adjustments) of income received by a German taxpayer from its business relationships with non-resident related companies even though similar adjustments would not be for income from business relationships between German (domestic) related companies.

Read TaxNewsFlash-BEPS and TaxNewsFlash-Transfer Pricing

Europe

  • Denmark: A CJEU Advocate General opinion—concerning the compatibility with EU law of the Danish withholding tax on dividends distributed to non-resident investment funds—concludes that the Danish law constitutes an infringement on the free movement of capital.
  • Germany: The CJEU issued a judgment in joint cases when foreign parent companies were exposed to the negative effects of the German anti-treaty shopping rule as it relates to dividends received from German subsidiaries. The CJEU found that the German provisions constitute an infringement of the EU freedom of establishment.
  • Germany: A revised position of the Ministry of Finance (BMF) concerns the value added tax (VAT) treatment of supplies of goods via consignment stocks. The new position applies in all “open cases.”
  • Norway: The tonnage tax system has been approved by the EFTA Surveillance Authority for another 10 years.
  • Luxembourg: The budget law for 2018 passed, with amendments made to three measures during the final legislative process.
  • Netherlands: The Dutch Supreme Court held that a request by Dutch “sister companies” to create a fiscal unity—when their common parent company was established in a third country (a country outside the EU and EEA)—did not have to be granted.

Read TaxNewsFlash-Europe

Americas

  • Canada: The deadline for employers to file Canada pension plan (CPP) and employment insurance (EI) refund applications is 31 December 2017.
  • Canada: There may be an opportunity for selected listed financial institutions (SLFIs) to save on goods and services tax / harmonized sales tax (GST/HST) and Quebec sales tax (QST).
  • Canada: The deadline for landlords owning leased residential property in Quebec to file the RL-31 slip is 28 February 2018.
  • Canada: Quebec will begin phasing out its input tax refund restrictions under the QST regime beginning 1 January 2018.
  • Canada: The Ontario “fall economic update bill” received Royal Asset. Among the enacted measures is a provision to reduce the small business tax rate to 3.5% (from 4.5%), effective for 2018.
  • Canada: Newfoundland and Labrador will reinstate the point-of-sale HST book rebate that applies to the provincial component of the HST for qualifying printed books, effective 1 January 2018.
  • Canada: The federal budget bill #2—that includes business, international, and indirect tax measures—received Royal Assent.

Read TaxNewsFlash-Americas

Asia Pacific

  • Australia: Guidance and a practice statement law was issued for the diverted profits tax.
  • Japan: An outline of tax reform proposals for 2018 has been agreed to by the ruling government coalition, with details expected to be subsequently unveiled in bills and tax law amendments, cabinet orders, and ministerial ordinances.
  • India: A tribunal held that a payment received by a foreign holding company from an Indian subsidiary on account of a corporate/bank guarantee was received by the taxpayer and was taxable in India. The fee did not fall within “interest” in view of the “other income” article of the India-UK income tax treaty. 
  • India: The Supreme Court of India held that a subsidy in the form of a concession of the entertainment tax with respect to new multiplex complexes was capital in nature.
  • India: A tribunal held that an Indian company of a U.S. group did not constitute a permanent establishment in India under the India-United States income tax treaty because the taxpayer was conducting its operations from the United States and not from India. 
  • India: The Supreme Court of India held that the taxpayer was not entitled to the benefit of deduction under Section 80-IB of the Income-tax Act, 1961 because it had lost its eligibility as a “small scale industrial undertaking” in subsequent years, even if in the initial year the eligibility criteria was satisfied. 
  • Turkey: The rate for corporate income tax is scheduled to increase to 22% (up from 20%) for the tax periods 2018, 2019, and 2020. However, the Council of Ministers is authorized to reduce the 22% rate to a rate as low as 20%. There are also tax changes for the communications and finance sectors.

Read TaxNewsFlash-Asia Pacific

Exempt Organizations

  • A report examines provisions in H.R. 1 that would affect tax-exempt organizations and their donors.
  • The U.S. Tax Court issued an opinion holding that the fees that a tax-exempt organization (comprised of hospitals and a medical school) received from third-party vendors for debt-collection services and group purchasing programs were subject to unrelated business income tax because the payments made to the organization by the vendors were derived from an “unrelated trade or business” that the organization regularly conducted.
  • The IRS issued a reminder of the new due date for filing W-2 and W-3 for 2017 with the Social Security Administration, and Form 1099-MISC when reporting non-employee compensation payments in box 7, and concerning changes to Form 1098-T, Tuition Statement.

Read TaxNewsFlash-Exempt Organizations

FATCA / IGA / CRS

  • OECD: A series of bilateral exchange relationships have been established under the common reporting standard (CRS) Multilateral Competent Authority Agreement (CRS MCAA), providing a total of over 2,600 bilateral relationships for the automatic exchange of CRS information.
  • Bermuda: An updated version of the tax information reporting portal user guide has been issued, providing an overview of the most commonly used functionality in the reporting portal with respect to entities meeting their reporting obligations under the CRS regime.
  • Guernsey: Guidance and further commentary has been issued on additional validations and corrections relating to FATCA and CRS reporting for 2016.

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • NAFTA: It was reported that little progress has been made in the NAFTA re-negotiations and some “no regrets” actions have been suggested.

Read TaxNewsFlash-Trade & Customs

United States

  • A revenue ruling concludes that a package of films licensed to customers in the normal course of business may be an item for determining the domestic production activities deduction under section 199.
  • Proposed regulations address the tax treatment of foreign currency gain or loss of a controlled foreign corporation (CFC) under the “business needs exclusion” from foreign personal holding company income (FPHCI).
  • The Arkansas Office of Revenue Legal Counsel issued a legal ruling addressing excess inclusion income issues for holders of REMICs, and concluded that because Arkansas has adopted IRC subchapter M in its entirety, excess inclusion income must be included and reported for Arkansas income tax purposes.
  • The Indiana Department of State Revenue found that a real property listings database was not subject to sales tax and that the taxpayer was entitled to a refund of sales taxes paid on granting customers access to that data. 
  • The Ohio Supreme Court held that a company engaged in the production of gift baskets qualified for a sales and use tax exemption for materials used in creating the gift baskets. The high court also addressed the taxability of the taxpayer’s labor charges.

Read TaxNewsFlash-United States

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