KPMG’s Week in Tax: 24 - 28 September 2018 | KPMG | LU
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KPMG’s Week in Tax: 24 - 28 September 2018

KPMG’s Week in Tax: 24 - 28 September 2018

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

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Transfer Pricing

  • Korea: Proposed tax revision legislation for 2019 includes measures relating to transfer pricing, such as provisions to enhance the effectiveness of the arm’s length principle.
  • Panama: There is a new version of the form to be used by taxpayers to report their transfer pricing information for tax year 2018 and later.
  • Andorra: Country-by-country (CbC) reporting and notification requirements have been enacted as part of the tax law.

Read TaxNewsFlash-Transfer Pricing

Americas

  • Panama: Guidance issued by Panama’s customs authority establishes rules to allow for the duty-free imports of raw materials, components, equipment and products into Panama when such imports are used in an “improvement” process involving the imported merchandise.

Read TaxNewsFlash-Americas

Asia Pacific

  • Korea: Proposed tax revision legislation for 2019 includes measures that would affect corporate income tax as well as international tax, tax incentives, value added tax (VAT), and local tax provisions.
  • Thailand: A change in the tax authority’s practice no longer requires a taxpayer to present a photocopy of the taxpayer’s identification card or proof of house registration before being able to initiate any procedures under the tax law or regulations.
  • Thailand: The Thai Cabinet approved legislation that would allow for the creation of a trust for the purpose of personal asset management. 
  • India: A tribunal held that the amount of “assured return” received by a non-resident on an advance payment made for commercial space prior to occupancy was taxable as interest under the Article 11 of the income tax treaty between India and the UK (and not taxable as a return on investment). 
  • India: The rate for goods and services tax (GST) collection-at-source is 0.5% for intra-state supplies and 1% for inter-state supplies.
  • India: The Reserve Bank of India issued a circular liberalising some aspects of the “external commercial borrowings” policy including the policy on rupee-denominated bonds. 
  • India: An amendment to the Companies (Prospectus and Allotment of Securities) Rules, 2014 (effective 2 October 2018) requires unlisted public companies to issue securities only in de-materialised form and to facilitate de-materialisation of all existing securities.

Read TaxNewsFlash-Asia Pacific

Europe

  • Netherlands: The Dutch government launched a consultation seeking comments relating to (1) the Dutch tax treaty policy, and (2) the designation of low-taxed states with respect to proposed controlled foreign companies (CFCs) measures (as proposed on the “budget day”).

Read TaxNewsFlash-Europe

United States

  • Notice 2018-80 states that future proposed regulations will provide that accrued market discount is not includible in income under section 451(b).
  • The IRS released a draft version of the instructions for Form 1040, “U.S. Individual Income Tax Return” to be filed by individual taxpayers for tax year 2018. 
  • The U.S. Court of Appeals for the Second Circuit issued a decision that reversed and remanded to the U.S. Tax Court a case concerning the treatment of variable prepaid forward contracts (VPFCs) that were modified.
  • The U.S. Court of Appeals for the Ninth Circuit reversed and remanded in part a judgment of a federal district court in a taxpayer’s suit for refund of individual income tax. The refund was based on an overstatement of net income reported on the return of the taxpayer’s S corporation (a return that was filed by a bankruptcy trustee), and the issue addressed by the Ninth Circuit was whether statements or forms attached by the taxpayer to his amended returns satisfied the requirement under section 6037(c)(2)(A)(ii) for a “statement identifying the inconsistency” between the S corporation’s return and the taxpayer’s return (as the shareholder of the S corporation).
  • Tax relief has been provided for certain individual and business taxpayers in identified counties in North Carolina and South Carolina that were affected by Hurricane Florence. In general, the tax relief includes more time to file returns, pay taxes, and perform certain other time-sensitive acts for those taxpayers affected by Hurricane Florence.
  • Notice 2018-77 provides the 2018-2019 special per diem rates for taxpayers to use in substantiating the amount of ordinary and necessary business expenses incurred while traveling away from home.
  • Notice 2018-71 provides guidance—in a “question and answer” (Q&A) format—about the employer credit for paid family and medical leave under section 45S (as added to the Code by the new tax law in the United States).
  • The IRS and Treasury Department are considering guidance to address whether a business can qualify as an “active trade or business” if entrepreneurial activities—as opposed to investment or other non-business activities—take place with the purpose of earning income in the future, but no income has yet been collected. The IRS noted that some ventures during phases of research and development often collect no income (or negligible income) but incur significant financial expenditures. The day-to-day operational and managerial functions performed by these ventures historically have evidenced an “active” business. 
  • A reminder notes that the deadline for making a one-time claim for 2017 biodiesel and alternative fuel incentives is 29 September 2018.
  • The new U.S. tax law includes new rules for limiting the deduction of business interest expense. A KPMG report explains the application of new section 163(j); compares the new rules with the prior rules; and discusses selected issues the new statute has created for taxpayers, with a focus on non-partnership entities.
  • Minnesota’s tax court held that a taxpayer’s purchase of certain machinery and equipment to support and expand its document-retrieval system was not eligible for the sales tax exemption that is provided for “capital equipment” because the taxpayer’s system only allowed access to a client’s own data (and not access by all users). The court also concluded that the electricity used to power the equipment also was not exempt from sales tax.
  • The Texas Comptroller, in a private letter ruling, concluded that the taxpayer (an online clothing retailer) had an obligation to collect sales and use tax because the presence of its clothing in the state during the “try on” period (that is, the seven-day period that customers were allowed to keep the clothing before completing the purchase) created substantial nexus. The taxpayer continued to own the clothing during the seven-day period, and did not recognize revenue from sales of the clothing until after the seven-day period expired.

Read TaxNewsFlash-United States

 

  • The U.S. House of Representatives passed a bill that would extend through September 30, 2023, a number of aviation trust fund-related taxes that currently are scheduled to expire on September 30, 2018.

Read TaxNewsFlash-Legislative Updates

FATCA / IGA / CRS

  • The IRS issued a reminder that FATCA registration must always be updated with the current name and email address of the responsible officer and point of contact(s) as soon as there is a change.

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • The U.S. International Trade Commission (ITC) announced that it will institute an investigation of imports of certain unmanned aerial vehicles and related components (also known as drones and quadcopters) in response to a complaint that alleges violations of section 337 of the Tariff Act of 1930 (that is, that the imported products infringe certain U.S. patents).
  • The presidents of the United States and South Korea signed a revised United States-Korea free trade agreement. In connection with the signing, the U.S. Trade Representative issued a “fact sheet” about the outcome of the free trade agreement re-negotiations.
  • The ITC announced changes to its electronic document information system (EDIS)—an online document management tool and repository through which documents in all official ITC investigations must be filed.

Read TaxNewsFlash-Trade & Customs

Indirect Tax

  • Korea: Proposed tax revision legislation for 2019 includes measures relating value added tax (VAT).
  • India: The rate for goods and services tax (GST) collection-at-source is 0.5% for intra-state supplies and 1% for inter-state supplies.
  • United States: The deadline for making a one-time claim for 2017 biodiesel and alternative fuel incentives is 29 September 2018.
  • United States: Minnesota’s tax court held that a taxpayer’s purchase of certain machinery and equipment to support and expand its document-retrieval system was not eligible for the sales tax exemption provided for “capital equipment.” 
  • United States: The Texas Comptroller concluded that the taxpayer (an online clothing retailer) had an obligation to collect sales and use tax because the presence of its clothing in the state during the “try on” period (that is, the seven-day period that customers were allowed to keep the clothing before completing the purchase) created substantial nexus. 

Read TaxNewsFlash-Indirect Tax

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