KPMG’s Week in Tax: 7 - 11 May 2018 | KPMG | LU
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KPMG’s Week in Tax: 7 - 11 May 2018

KPMG’s Week in Tax: 7 - 11 May 2018

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

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Transfer Pricing

  • Taiwan: The three-tier transfer pricing documentation was adopted by Taiwan in its domestic rules. Taiwanese entities with an annual consolidated group revenue for 2016 exceeding NTD 27 billion (approximately U.S. $900 million) will be required to disclose whether they will be the filing entities for country-by-country (CbC) report purposes.
  • OECD: Two new projects are being considered to revise guidance in the OECD’s Transfer Pricing Guidelines. Possible changes could be made to Chapter IV (administrative approaches) and Chapter VII (intra-group services), with comments due no later than 20 June 2018.

Read TaxNewsFlash-Transfer Pricing

Europe

  • Poland: Guidance from the Ministry of Finance addresses the rules that limit the tax deductibility of certain intangible service fees and royalties paid to related entities. The tax deductibility limitation rules were added to the corporate income tax law, effective 1 January 2018.  
  • Luxembourg: The tax authorities published guidance concerning how the tax authorities will address countries included in the EU list of non-cooperative jurisdictions for tax purposes (the EU blacklist).
  • Serbia: Provisions under new value added tax (VAT) legislation generally are effective 1 July 2018. Provisions relating to VAT refunds for foreign entities will be effective 1 January 2019.
  • Ireland: The Advocate General of the Court of Justice of the European Union (CJEU) issued an opinion concluding that VAT with respect to professional services provided to the taxpayer is not deductible. The case concerned the deductibility of VAT on professional services incurred because the taxpayer company wanted to acquire shares of its competitor.

Read TaxNewsFlash-Europe

Americas

  • Canada: The deadline for financial institutions with a 31 December year-end to file goods and services tax / harmonized sales tax (GST/HST) or Quebec sales tax (QST) information returns is 30 June 2018.
  • Canada: The Prince Edward Island budget bill that includes tax measures such as a reduction in the small business tax rate, received first reading.
  • Canada: The prescribed interest rate for deemed interest income inclusion from pertinent loan or indebtedness (PLOI) for the third quarter of 2018 will decrease slightly.
  • Dominican Republic: The tax authorities issued notices that may have tax implications with respect to airline tickets. 

Read TaxNewsFlash-Americas

Asia Pacific

  • Australia: The 2018-2019 budget, presented this week, included tax measures that may have implications for business and individual taxpayers.
  • Australia: Victoria and the Northern Territory released state budgets, both containing adjusted payroll tax rules.
  • New Zealand: The first budget under the new Labour-New Zealand first coalition government is scheduled for 17 May 2018.
  • Taiwan: According to a tax ruling, the profit standard rate and contribution rate (the “simplified calculation method”) can be adopted by foreign entities engaging in importing, storage, manufacturing, and delivery of goods to domestic and foreign customers and is not limited to free trade zones or to bonded areas. In addition, the contribution rate is reduced in order to achieve a “more reasonable” tax burden.
  • India: The Supreme Court of India allowed a deduction of a lease equalisation payment relating to the lease (rental) income in accordance with a guidance note from the Institute of Chartered Accountants of India.
  • India: The Supreme Court held that an amount received on redemption of “stock appreciation rights” prior to the amendment of section 17(2) of the Income-tax Act, 1961 is not taxable. However, since the transaction pertained to period prior to the amendment, that transaction was not covered under the clause, absent an express provision of retrospective effect. 
  • India: A high court held that in order for an employee-related allowance to qualify as not taxable, it must have been specifically made related to the performance of office duties. Mere reimbursement to meet the high cost of accommodation and other personal expenditures while on assignment would not qualify as not taxable under the Income-Tax Act, 1961.
  • India: The Supreme Court held that waiver of a loan made for the purchase of a capital asset is not taxable as income because the benefit or perquisite arising from the business are in the form of cash or money. 
  • India: The Supreme Court held that the initiation of reassessment proceedings by the Assessing Officer was not allowed if based on a “change of opinion” and under the same facts and circumstances that were already known during the original assessment proceedings. 
  • India: The Supreme Court held that expenditures such as freight, telecommunication, and insurance attributable for delivery of software excluded from the “export turnover” must also be excluded from the “total turnover” for computing deduction under section 10A of the Income-Tax Act, 1961. 

Read TaxNewsFlash-Asia Pacific

FATCA / IGA / CRS

  • South Korea: A revised version of regulations was issued for implementing the automatic exchange of financial information with foreign countries (territories) for tax purposes under the common reporting standard (CRS) and FATCA regimes.
  • UK: Updated guidance was issued for the automatic exchange of information registration under the FATCA and CRS regimes.
  • Finland: The tax authorities issued a list of “frequently asked questions” (FAQs) relating to the FATCA, CRS, and DAC2 rules.
  • United States: The IRS added new FAQs with respect to certifications and periodic reviews of qualified intermediaries / withholding foreign partnerships / withholding foreign trusts (QI/WP/WT).

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • China: Implications for exporters and importers related to the trade conflict with the United States are considered.
  • United States: President Trump announced a decision to begin re-imposing nuclear-related sanctions with respect to Iran, following a “wind-down” period. 

Read TaxNewsFlash-Trade & Customs

United States

  • The third quarter update to the 2017-2018 priority guidance plan was released by the IRS and Treasury, and includes 13 new guidance projects.
  • Rev. Proc. 2018-29 sets forth new procedures for taxpayers changing their method of accounting for the recognition of income for federal income tax purposes under new financial accounting revenue recognition standards.
  • Rev. Proc. 2018-30 provides the inflation adjusted amounts for health savings accounts (HSAs) for calendar year 2019.
  • Rev. Proc. 2018-31 provides an updated list of automatic changes procedures with respect to accounting methods.
  • The U.S. Court of Appeals for the Federal Circuit reversed and remanded a federal claims court decision concerning application of the transition rule for extraterritorial income (ETI) earned after 2006 but pursuant to a transaction entered into in 2006. The Federal Circuit held that the transition rule allows an ETI exclusion for income earned after 2006 but with respect to transactions entered into in 2005 and 2006.  
  • Notice 2018-30 includes language modifying Notice 2003-65, in response to the additional first year depreciation deduction available under section 168(k)—the “immediate expensing” provision—under the new tax law (Pub. L. No. 115-97, enacted December 22, 2017).
  • The U.S. Securities and Exchange Commission (SEC) issued a package of proposed rules that would establish a standard of conduct for broker-dealers referred to as the “best interest” rule.
  • The U.S. Tax Court in a “reviewed opinion” held that in a TEFRA partnership-level proceeding, the IRS does not bear the burden of production under section 7491(c) with respect to penalty assessments.
  • The Alabama Department of Revenue issued guidance on the state’s treatment of amounts required to be included in income under IRC section 965. 
  • The Florida Department of Revenue issued guidance on the state’s corporate income tax treatment of repatriation income under IRC section 965.
  • The New York Department of Taxation and Finance and the New York City Department of Finance issued guidance offering a limited opportunity for withdrawing a commonly owned group election made on a 2015 or 2016 general business corporation combined franchise tax return. 
  • A South Carolina administrative law judge ruled that a taxpayer who offered a package consisting of bartending services and alcohol at customer events was selling tangible personal property at retail and was required to collect and remit sales tax.
  • The Texas Comptroller of Public Accounts issued a private letter ruling that found single-member LLCs that are wholly owned by a tax-exempt IRC section 401(a) pension trust (i.e., a federally disregarded LLC) must file franchise tax reports.

Read TaxNewsFlash-United States

Exempt Organizations

  • The IRS announced the introduction of “Tax Exempt Organization Search” (TEOS)—a new online tool that replaces EO Select Check, which had been available since 2012. The new tool is designed to provide faster, easier access to publicly available information about exempt organizations.

Read TaxNewsFlash-Exempt Organizations

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