KPMG’s Week in Tax: 26 - 30 March 2018 | KPMG | LU
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KPMG’s Week in Tax: 26 - 30 March 2018

KPMG’s Week in Tax: 26 - 30 March 2018

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

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Transfer Pricing and BEPS

  • Argentina: The deadline to comply with a country-by-country (CbC) notification requirement was extended to 2 May 2018 when the “ultimate parent company” of a multinational entity (MNE) group has a fiscal year ending as of December 2017.
  • India: The Indian tax authorities concluded an advance pricing agreement (APA) that accepted the valuation of imports determined by Indian customs authorities as the arm’s length price for transfer pricing purposes.

Read TaxNewsFlash-Transfer Pricing

Americas

  • Panama: Tax returns normally due on 31 March will be timely if filed by 2 April 2018 because this year, 31 March falls on a Saturday and 2 April is the next business day.
  • Brazil: In the state of São Paulo, e-commerce and digital transactions—e.g., concerning software, programs, electronic games, applications and electronic files—are subject to the payment of ICMS (a state-level sales tax). Rules for reporting and filing returns with respect to these transactions are effective 1 April 2018.
  • Canada: General partners of investment limited partnerships may benefit from a transitional rule in the 2018 federal budget, provided they act by the 31 March 2018 deadline for goods and services tax / harmonized sales tax (GST/HST) remittances.
  • Canada: The Ontario budget for 2018 includes changes to the individual (personal) income tax rates and brackets, and repeal of the surtax. There are no changes to corporate income tax rates, but the budget provides increased tax credit rates for the Ontario research and development tax credit and the Ontario innovation tax credit for qualifying companies.
  • Canada: The 2018-2019 budget in Quebec offers relief for small and medium-sized businesses; provides for collection of the Quebec sales tax (QST) on e-commerce transactions; and harmonizes provisions to the federal measures on split income and other relief measures for families.
  • Canada: The 2018 budget in Newfoundland and Labrador does not include any changes to the corporate or individual (personal) tax rates, but it includes a reduced tax on automobile insurance and an increased exemption threshold of the provincial payroll tax. It also notes that Newfoundland and Labrador is still finalizing a carbon pricing regime.
  • Dominican Republic: Changes have been made to the corporate income tax return to require the reporting of the ultimate “beneficial owner.”

Read TaxNewsFlash-Americas

Asia Pacific

  • China: The value added tax (VAT) rates applicable to the supply of certain goods and services will be reduced to 16% and 10% (down from 17% and 11% rates, respectively). The VAT rate changes are effective 1 May 2018. There are also changes to VAT registration thresholds to align the thresholds that apply for goods with those for services.
  • Japan: Tax reform bills were passed by the National Diet. The legislation includes measures that concern corporate income tax, and also provides for a revised definition of permanent establishment.
  • New Zealand: The new government has committed to the re-introduction of a 12.5% research and development (R&D) tax credit, with a possible effective date of 1 April 2019.
  • Australia: The Treasury released details of new integrity measures to address the sustainability and tax integrity risks posed by “stapled structures” and the broader concessions available to foreign investors.
  • India: A tribunal held that marketing and business development services are not in the nature of “fees for technical services,” but that the payment for such services is in the nature of business income. Because the foreign entity did not have a permanent establishment in India, such business income was not taxable under the India-Singapore income tax treaty. 
  • India: The Supreme Court of India held that a deduction of an expenditure relating to exempt income was not allowed as a business expenditure.
  • India: A tribunal held that a transaction involving the conversion of a loan into equity and completed by the taxpayer by means of book entries (without any physical outflow of funds) was not in violation of Indian tax law. 
  • India: A tribunal held that once a claim for deduction was accepted in the first year of the taxpayer’s operations, then that claim cannot be withdrawn in subsequent years.

Read TaxNewsFlash-Asia Pacific

Europe

  • Netherlands: The rules for work-related costs concerning the provision or reimbursement of costs for tools, computers, and means of mobile communication have been evaluated by the government. No major changes are proposed for the foreseeable future.
  • Belgium: An optional VAT regime that applies for leases of real estate that is used for business purposes has been introduced with a general effective date of 1 October 2018.
  • Bulgaria: A new law defines the term “beneficial owner”—a definition that corresponds to the definition under an EU Directive.
  • Malta: A reduced transfer tax (duty) rate for the transfer of family businesses of 1.5% has been extended by six months, until the end of September 2018.
  • Malta: A notional interest deduction provides for equivalent tax treatment of debt and equity financing, by allowing an additional deduction for the amount of return on equity financing.

Read TaxNewsFlash-Europe

Exempt Organizations

  • The IRS released a summary of examination, determination, and compliance check data for FY 2017 by the Tax Exempt / Government Entities (TE/GE) division.

Read TaxNewsFlash-Exempt Organizations

FATCA / IGA / CRS

  • United States: With the IRS deployment of a new International Compliance Management Model (ICMM), several new file-level notifications as well as updates to the field-level error messages were added to make them more descriptive.
  • Belgium: There are new guidance items concerning common reporting standard (CRS) file validation, and requirements to report U.S. tax identification numbers (TINs) and the date of birth of certain account holders.
  • India: The Securities and Exchange Board of India issued a circular regarding the due diligence and reporting requirements under the FATCA and CRS regimes.
  • Cayman Islands: The Cayman Islands tax authority published a revised AEOI Portal user guide, updated CRS guidance notes, and an updated entity self-certification form.
  • Singapore: The second edition of a CRS XML schema user guide explains the information required to be included in each data element and reported in the CRS return XML schema.

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • United States: Negotiations with respect to changes under the United States-South Korea free trade agreement were concluded.
  • United States: Presidential proclamations list countries that, for the time being, will not have their exports of aluminum and steel subject to the 15% and 25% tariffs, respectively, on being imported into the United States. 
  • United States: The U.S. International Trade Commission (ITC) announced it will launch an investigation of certain programmable logic controllers, used to control machines that are typically part of factory assembly lines or have other industrial applications.
  • China: The Ministry of Commerce announced that it intends to impose tariffs on certain products imported from the United States, in response to the U.S. tariffs being imposed on imported aluminum and steel products.
  • North American Free Trade Agreement (NAFTA): A report describes the seventh round of NAFTA negotiations that concluded in March.

Read TaxNewsFlash-Trade & Customs

United States

  • Final regulations were issued concerning allocations of the research credit to corporations, trades or businesses under common control—i.e., allocations of the research credit to members of a controlled group. There were no substantial changes made from the proposed regulations.
  • Proposed regulations under a regulatory burden-reduction initiative aim to amend existing regulations related to the involvement of non-government attorneys in IRS summonses or administrative proceedings.
  • Notice 2018-23 offers transitional rules on the tax treatment of fines and penalties paid to a governmental or nongovernmental regulatory entity. The new tax law enacted in late December 2017 includes rules that deny deductions for such fines and penalties, and imposes new reporting requirements on the governmental entities.
  • The Arkansas Department of Finance and Administration ruled that fees charged for access to a taxpayer’s self-described “rage room” were subject to sales tax as fees for the use of amusement, entertainment or recreational facilities.
  • The Illinois Department of Revenue issued guidance on including on 2017 tax returns that foreign income that is subject to the “transition tax” (also described as mandatory repatriation) under IRC section 965, as enacted by the new tax law.
  • The New Jersey Division of Taxation issued a notice addressing the state’s treatment of amounts deemed repatriated under the transition tax provisions of IRC section 965.
  • New law in Utah includes measures to allow corporations to pay the state tax liability relating to repatriated foreign income (under IRC section 965) in installments, over a potential eight-year period.
  • A KPMG report provides a summary of state and local tax developments for the first quarter of 2018 in table format.

Read TaxNewsFlash-United States

 

  • A bipartisan proposal to improve IRS operations and tax administration was released as a “discussion draft” by leaders of the Ways and Means Oversight Subcommittee. 

Read TaxNewsFlash-Legislative Updates

Cooperatives

  • The Consolidated Appropriations Act, 2018 (the omnibus government funding legislation) made changes to section 199A regarding the application of a deduction for certain cooperatives and grain companies. 

Read TaxNewsFlash-Cooperatives

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