KPMG’s Week in Tax: 17 - 21 September 2018 | KPMG | LU
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KPMG’s Week in Tax: 17 - 21 September 2018

KPMG’s Week in Tax: 17 - 21 September 2018

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

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Transfer Pricing and BEPS

  • Luxembourg: The European Commission announced findings of an investigation about “tax rulings” provided a U.S. multinational corporation. The effect was that there was no tax on certain profits of the taxpayer in Luxembourg, and the EC found that this was not illegal state aid because this tax treatment was in line with national tax laws and with the Luxembourg-United States income tax treaty.
  • Nigeria: The Federal Inland Revenue Service published a notice about the requirements for multinational enterprise (MNE) groups to comply with the notification requirement under the country-by-country (CbC) reporting rules.
  • OECD: Representatives of the government of Saudi Arabia signed the base erosion and profit shifting (BEPS) multilateral convention (the multilateral instrument or MLI).
  • United States: The IRS issued reminders for MNE groups about the processes for complying with and filing CbC reports on Form 8975 and Schedules A (Form 8975).

Read TaxNewsFlash-Transfer Pricing and TaxNewsFlash-BEPS

Africa

  • Nigeria: Taxpayers in the electricity industry sector need to consider the effects of value added tax (VAT) on financial liquidity.

Read TaxNewsFlash-Africa

Asia Pacific

  • Hong Kong: Individuals in same-sex civil partnership, civil union, or marriage and individuals in opposite-sex civil partnership or civil union (with an eligible sponsor) may apply for a dependent visa and obtain a work permit, effective 19 September 2018.
  • Indonesia: The rate of import tax that applies for over 1,000 goods increased to a rate of up to 10% (from 2.5%), effective 13 September 2018.
  • India: With respect to the goods and services tax, there are new guidance items and circulars addressing “tax deducted at source” (that is, tax withheld at source) and tax collected at source. These rules have an effective date of 1 October 2018.
  • Thailand: There are amendments to the rules for work permits for foreigners working in Thailand.
  • Korea: A new income tax treaty between the Czech Republic and South Korea is pending ratification.

Read TaxNewsFlash-Asia Pacific

Europe

  • Netherlands: The Dutch government presented the 2019 tax plan to the lower house. The legislative proposals include a withholding tax bill for 2020, green tax measures for 2019, and small business modernization, among others.
  • Belgium: Parliament approved a draft law that introduces a deduction for innovation income—effective retroactively from 1 July 2016. This innovation income deduction would replace the patent income deduction. 
  • Belgium: “Ultimate beneficial owner” register measures are effective 31 October 2018. The measures include requirements to identify and provide certain information about the “ultimate beneficial owners” of Belgian companies, foundations, not-for-profit associations, trusts, and other similar legal entities.
  • Luxembourg: The European Commission announced the findings of its investigation about the non-taxation of certain profits of a U.S. multinational corporation in Luxembourg. The EC found there was no illegal state aid.
  • Ireland: A discussion looks at tax reform as a possible method for assisting Irish businesses ahead of “Brexit.”
  • Czech Republic: The mere production of tax documents for services rendered may no longer be sufficient evidence of the claimed expenses. Therefore, taxpayers that receive services from intracompany or external providers need to consider appropriate documentation to claim the tax deductions.
  • Czech Republic: A new income tax treaty with South Korea is pending ratification. 

Read TaxNewsFlash-Europe

FATCA / IGA / CRS

  • Cayman Islands: The AEOI portal is open for notifications and reporting for all years. There is also updated information on FATCA and common reporting standard (CRS) error notifications.

Read TaxNewsFlash-FATCA / IGA / CRS

United States

  • Notice 2018-72 provides extensions of phase-in periods and transition rules concerning the rules for withholding in the context of securities lending and sale repurchase agreements under section 871(m).
  • Rev. Proc. 2018-49 clarifies the availability of certain changes in method of accounting for taxpayers that were “early adopters” of a method of recognizing revenues under new financial accounting standards (FASB and IASB).
  • Notice 2018-74 modifies two “safe harbor” explanations with respect to eligible qualified plan rollover distributions, to reflect legislative changes as well as to take into consideration other guidance.
  • The European Commission announced the findings of its investigation that the non-taxation of certain profits of a U.S. multinational corporation in Luxembourg did not lead to illegal state aid.
  • Because of shortages of undyed diesel fuel caused by Hurricane Florence, the IRS will waive a penalty when dyed diesel fuel is sold for use or is used on the highway in North Carolina. 
  • Certain taxpayers in counties located in North Carolina and affected by Hurricane Florence have until 31 January 2019 to file individual and business tax returns and to make certain tax payments.
  • The IRS issued a release that includes reminders for MNE groups on the processes for filing country-by-country reports on Form 8975.
  • The U.S. Tax Court granted motions for summary judgment for the IRS, finding among other items, that the taxpayers’ controlled foreign corporation (CFC) in Hong Kong was not a domestic corporation or a qualified foreign corporation. Thus, the CFC’s distribution to the taxpayers was not “qualified dividend income” but was taxable to the taxpayers at ordinary income rates. 
  • The U.S. Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau (TTB) issued guidance concerning the “single taxpayer” rules under the new U.S. tax law that apply for excise tax credits and reduced tax rates on beer, wine, and distilled spirits produced in the United States.
  • More U.S. states—California, Colorado, Illinois, Nevada, South Dakota, Texas, and Wisconsin—responded to the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. (state sales tax implications of remote or online sales).
  • The Alabama civil appeals court held that an out-of-state bookseller was not required to collect and remit Alabama use tax on its sales of books to students in the state. The court determined that using in-state representatives (teachers who compiled orders from students into a single master order) was not “other contact” as contemplated under the “catch-all provision” of the Alabama legislation.
  • The Massachusetts Department of Revenue issued guidance on certain issues related to federal tax reform—clarifying that Code section 965 income would be treated as dividend income for Massachusetts corporate excise purposes and that a taxpayer would not lose its manufacturing status as a result of having Code section 965 or “global intangible low-taxed income” (GILTI) income.

Read TaxNewsFlash-United States

Trade & Customs

  • The Office of the United States Trade Representative (USTR) released a “notice of modification of action” concerning additional customs duties to be imposed on imports into the United States of certain products from China. This notice followed the release of a list of approximately $200 billion worth of Chinese imports that will be subject to the additional tariffs initially imposed at a rate of 10%—effective 24 September 2018. Beginning 1 January 2019, the rate of the additional tariffs will increase to 25%.
  • The USTR released a notice about products excluded from the safeguard measure applied to certain solar products—specifically crystalline silicon photovoltaic (CSPV) cells and other CSPV products containing these cells.
  • The U.S. International Trade Commission (ITC) announced that a U.S. industry is materially injured by reason of imports of stainless steel flanges from India.
  • The USTR released a notice and request for comments concerning requests for exclusions of certain products or goods from the additional customs duty being imposed on imports from China under the “Section 301” procedures.

Read TaxNewsFlash-Trade & Customs

Indirect Tax

  • India: With respect to the goods and services tax (GST), guidance items and circulars give effect to certain provisions relating to “tax deducted at source” (that is, tax withheld at source) and tax collected at source. These rules are effective 1 October 2018.
  • Nigeria: Taxpayers in the electricity industry sector need to consider the effects of value added tax (VAT) on financial liquidity.
  • United States: The IRS will waive excise tax-related penalties when dyed diesel fuel is sold for use or is used on the highway in North Carolina because of shortages of undyed diesel fuel caused by Hurricane Florence.
  • United States: More U.S. states—California, Colorado, Illinois, Nevada, South Dakota, Texas, and Wisconsin—responded to the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. (state sales tax implications of remote or online sales).
  • United States: The Alabama civil appeals court held that an out-of-state bookseller was not required to collect and remit Alabama use tax on its sales of books to students in the state.
  • United States: The U.S. Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau (TTB) issued guidance concerning the “single taxpayer” rules for excise tax credits and reduced excise tax rates on beer, wine, and distilled spirits produced in the United States.

Read TaxNewsFlash-Indirect Tax

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