KPMG’s Week in Tax: 1 - 5 October 2018 | KPMG | LU
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KPMG’s Week in Tax: 1 - 5 October 2018

KPMG’s Week in Tax: 1 - 5 October 2018

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

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Transfer Pricing

  • Thailand: A new transfer pricing law was approved by the National Legislative Assembly, and will be effective for accounting periods beginning on or after 1 January 2019


Read TaxNewsFlash-Transfer Pricing

BEPS

  • Australia: The multilateral instrument (MLI)—Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS)—was ratified by Australia and will enter into force on 1 January 2019.
  • Japan: The MLI will enter into force 1 January 2019 and has implications for existing income tax treaties.
  • Qatar: Country-by-country (CbC) reporting requirements have been published in the official gazette, with an effective date of 10 September 2018.


Read TaxNewsFlash-BEPS

Africa

  • Nigeria: A KPMG report analyzes the excess dividend tax and its implications for businesses in light of a 2016 judgment of Nigeria’s Federal High Court.


Read TaxNewsFlash-Africa

Americas

  • Canada: A tentative trade agreement was reached with the United States and Mexico. Approval from Canada's Parliament will be required as part of the ratification process. The new agreement is expected to take effect in late 2019 or 2020.


Read TaxNewsFlash-Americas

Asia Pacific

  • Australia: A discussion paper was released by the Australian Treasury to consider the taxation of the digital economy and to consider whether and how the corporate tax rules might need to evolve to address digitalised business models.
  • Australia: The prime minister announced plans for legislation for goods and services tax (GST) reforms.


Read TaxNewsFlash-Asia Pacific

Europe

  • Finland: Proposals to amend the interest deduction limitation rules pursuant to implementation of the EU Anti-Tax Avoidance Directive (2016/1164/EU) would, if enacted, be effective as of 1 January 2019. 
  • France: The Court of Justice of the European Union (CJEU) concluded that France had failed to comply with its obligation under the EU treaties to refer a question to the CJEU when there is uncertainty about the interpretation of EU law and there was no judicial remedy available under French law. The case concerns the compatibility with EU law of the French refund mechanism for the tax paid by French companies receiving dividends from non-resident subsidiaries. The European Commission referred France to the CJEU for a failure to comply with the obligation to refer a question to the CJEU when no judicial remedy is available under national law.
  • France: The CJEU Advocate General issued an opinion concerning recovery of value added tax (VAT) on costs incurred by a fixed establishment that are also used for the activities of a foreign head office.
  • Belgium: An optional value added tax (VAT) regime for business-related property rentals is effective beginning 1 January 2019.
  • Netherlands: The Dutch Ministry of Finance announced its intention to work with other EU Member States to continue the VAT cost-sharing exemption for the financial services sector at the EU level. This is in response to a September 2017 judgment of the Court of Justice of the European Union (CJEU) holding that the VAT exemption for cost-sharing groups does not apply to the financial and insurance sector.
  • Switzerland: Tax reform legislation was accepted by Parliament. There are measures affecting corporate taxpayers including patent box measures, the research and development expense deduction, and a notional interest deduction, among others.
  • Italy: Provisions to transpose, into Italian tax law, two EU directives on anti-tax avoidance are pending before the Italian parliament. Among the measures are items concerning interest limitation rules, exit taxation rules, general anti-avoidance rules (GAAR), controlled foreign company (CFC) rules, and hybrid-mismatch rules
  • Estonia: A change to the VAT law replaces the term “plot” of land with the term “building land”—effective 1 October 2018.
  • EU: The Economic and Financial Affairs Council of the EU (ECOFIN) agreed to remove Palau from the EU “blacklist” of non-cooperative jurisdictions, thus reducing the number of remaining blacklisted jurisdictions to six. The EU Finance Ministers also agreed to remove Peru and Liechtenstein from the “grey list.”


Read TaxNewsFlash-Europe

FATCA / IGA / CRS

  • Saint Vincent and the Grenadines: The Inland Revenue Department of Saint Vincent and the Grenadines announced that it has officially written to the IRS and the Organisation for Economic Cooperation and Development (OECD), requesting a 60-day extension to the FATCA and common reporting standard (CRS) reporting deadline to 30 November 2018.
  • Switzerland: An updated version of the automatic exchange of information (AEOI) “questions and answers” provides additional explanations about certain matters related to AEOI implementation. In addition, the Swiss Parliament approved AEOI-related agreements with Hong Kong and Singapore, both being effective from 1 January 2018.


Read TaxNewsFlash-FATCA / IGA / CRS

United States

  • Proposed regulations relating to the “global intangible low-taxed income” (GILTI) provisions under the new U.S. tax law were released by the Treasury Department and IRS for publication in the Federal Register.
  • Rev. Proc. 2018-53 provides procedures for taxpayers that request private letter rulings involving “divisive reorganizations”—that is, reorganizations under sections 368(a)(1)(D) and 355, in which debt of the distributing corporation is assumed by the controlled corporation or satisfied with consideration that the distributing corporation receives from the controlled corporation in the reorganization.
  • Notice 2018-76 serves as guidance on the deductibility of expenses for certain business meals under section 274 (as amended by the new U.S. tax law).
  • Notice 2018-78 concerns the basis election allowed with respect to the proposed regulations under section 965 and reflects that requiring taxpayers to make a binding basis election before the proposed regulations are finalized “would be too onerous.” 
  • Charles Rettig was sworn in as the Commissioner of Internal Revenue.
  • More U.S. states—Illinois, Maryland, Massachusetts, Nebraska, New Jersey, New Mexico, South Carolina, and South Dakota plus the District of Columbia—responded to the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. that concerns the sales tax implications of remote or online sales. 
  • Effective 1 October 2018, sellers without a physical presence in 11 states are required to begin collecting tax on sales into the state if they meet the state’s economic nexus threshold.
  • The California governor signed legislation that incorporates into California law certain federal provisions related to partnership audits. However, there are a number of important differences.
  • A California appellate court held that a taxpayer—a large telecommunications company—did not qualify for an exclusion allowed for “telephone and telegraph lines” from sales and use tax for its purchases of telephone cables, conduit, and telephone poles. The court distinguished “telephone lines” as a completed installed system from “telephone cables.” 
  • A New York tax appellate tribunal found that the taxpayer did not qualify for an exemption from sales and use tax for its telephone directories (promotional materials) delivered in the state because the method for delivery of the directories did not follow the rules that the delivery must be made by means of a “common carrier, United States postal service or like delivery service.”


Read TaxNewsFlash-United States

 

  • The U.S. Senate passed a bill that would extend through 30 September 2023 a number of expiring aviation trust fund-related taxes.


Read TaxNewsFlash-Legislative Updates

Trade & Customs

  • The U.S. State Department released an interim final rule to remove certain notification requirements from the International Traffic in Arms Regulations (ITAR) and to revise several entries on the United States Munitions List (USML) to remove items that no longer warrant inclusion.
  • The U.S. Commerce Department initiated investigations with its determination that exporters from China and Italy have sold forged steel fittings in the United States at percentages significantly less than fair value.
  • The U.S. International Trade Commission (ITC) announced it has instituted a general factfinding investigation regarding the effects on the U.S. economy of duty suspensions and reductions enacted under the “American Manufacturing Competitiveness Act.”
  • U.S. Customs and Border Protection (CBP) issued a release that serves as a reminder of changes to the user fee schedule, effective 1 October 2018.
  • Representatives of the United States, Mexico, and Canada agreed to revise the 24-year-old NAFTA (North American Free Trade Agreement). The U.S. Trade Representative (USTR) released four “fact sheets” about the outcomes of the new “USMCA” trade agreement.


Read TaxNewsFlash-Trade & Customs

Indirect tax

  • France: The CJEU Advocate General issued an opinion concerning recovery of VAT on costs incurred by a fixed establishment that are also used for the activities of a foreign head office.
  • Australia: A discussion paper was released by the Australian Treasury to consider the taxation of the digital economy and to consider whether and how the corporate tax rules might need to evolve to address digitalised business models.
  • Belgium: An optional value added tax (VAT) regime for business-related property rentals is effective beginning 1 January 2019.
  • Netherlands: The Dutch Ministry of Finance announced its intention to work with other EU Member States to continue the VAT cost-sharing exemption for the financial services sector at the EU level. This is in response to a September 2017 judgment of the Court of Justice of the European Union (CJEU) holding that the VAT exemption for cost-sharing groups does not apply to the financial and insurance sector.
  • Australia: The prime minister announced plans for legislation for goods and services tax (GST) reforms.
  • Estonia: A change to the VAT law replaces the term “plot” of land with the term “building land”—effective 1 October 2018.
  • United States: More U.S. states—Illinois, Maryland, Massachusetts, Nebraska, New Jersey, New Mexico, South Carolina, and San Diego plus the District of Columbia—responded to the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. that concerns the sales tax implications of remote or online sales. 
  • United States: A California appellate court held that a taxpayer—a large telecommunications company—did not qualify for an exclusion allowed for “telephone and telegraph lines” from sales and use tax for its purchases of telephone cables, conduit, and telephone poles. The court distinguished “telephone lines” as a completed installed system from “telephone cables.” 
  • United States: A New York tax appellate tribunal found that the taxpayer did not qualify for an exemption from sales and use tax for its telephone directories (promotional materials) delivered in the state because the method for delivery of the directories did not follow the rules that the delivery must be made by means of a “common carrier, United States postal service or like delivery service.”


Read TaxNewsFlash-Indirect Tax

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