KPMG’s Week in Tax: 8 - 12 October 2018 | KPMG | LU
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KPMG’s Week in Tax: 8 - 12 October 2018

KPMG’s Week in Tax: 8 - 12 October 2018

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

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Transfer Pricing

  • OECD: The 2017 global mutual agreement procedure (MAP) statistics for 85 jurisdictions provide information on each jurisdiction as well as aggregated global information.
  • Israel: The tax authority published guidance on the characterization and selection of the most appropriate transfer pricing method for distribution or sales and marketing activities as well as the introduction of safe harbors for intra-group sales and services activities. The KPMG member firm in Israel provided unofficial English translations of the guidance (originally provided in Hebrew).

Read TaxNewsFlash-Transfer Pricing

Africa

  • Kenya: The Finance Bill, 2018, as enacted, includes the introduction of value added tax (VAT) on petroleum products and an excise tax on telephone and data services and on fees charged by financial institutions.
  • Tunisia: Changes to the amounts of the deduction relating to family expenses will affect employee withholding, beginning in 2019.
  • Nigeria: An executive order offers some relief to Nigerian taxpayers holding offshore assets and income if they voluntarily declare those assets and income and pay the related income tax, interest, and penalties.
  • Nigeria: Measures affecting the oil and gas sector include “tougher sanctions” (including forensic audits and prosecution) on companies that have defaulted in paying their Nigerian content development levy. 
  • South Africa: The South African Revenue Service (SARS) intends to require additional disclosures on income tax returns filed by trusts. 

Read TaxNewsFlash-Africa

Americas

  • Canada: The Canada Revenue Agency has addressed the "advantage tax rules" to impose a 100% tax on certain advantages related to individuals' registered plans. Rules for investment management fees are still under review. 
  • Mexico: Business transactions conducted via the internet would be subject to tax on income even if the entities have no or very little physical presence in Mexico.
  • Brazil: An initiative in São Paulo state intends to increase tax collection by classifying taxpayers based on certain factors such as prior compliance with timely filing requirements.
  • Costa Rica: Companies within a free trade zone are not exempt from paying the education and culture stamp tax.
  • Costa Rica: Updates to the income tax brackets for individual taxpayers and “small” corporate taxpayers for the tax year 2019 were published in the official gazette.

Read TaxNewsFlash-Americas

Asia Pacific

  • Australia: The government plans to “fast track” a tax rate reduction for certain companies. 
  • Myanmar: There are action steps for entities to comply with registration requirements under the new companies law.
  • Bahrain: Measures implementing a value added tax (VAT) system will be effective 1 January 2019.
  • Macau: The government has proposed repealing the existing offshore company regime as part of Macau’s commitment in joining the OECD’s inclusive framework to combat cross-border tax evasion and promote tax transparency.
  • Qatar: A VAT regime is expected to be introduced in 2019, with a standard VAT rate of 5%. The VAT regime would affect all businesses, specifically the retail sector.
  • China: Recent tax reform measures affect individual taxpayers.
  • Indonesia: The Ministry of Finance released new guidance that is expected to ease refunds of tax overpayments.
  • India: The Reserve Bank of India issued a circular liberalising certain aspects of the “external commercial borrowings” policy for public sector oil marketing companies due to rising crude oil prices. 
  • India: The Central Board of Direct Taxes (CBDT) issued guidance clarifying when the securities transaction tax applies with respect to acquisitions of equity shares.
  • India: The Authority for Advance Ruling, Kerala ruled that for goods and services tax (GST) purposes, medicines and related items provided on an in-patient basis by a hospital through its pharmacy were provided as part of the composite supply of health care treatment and were not taxable. However, supplies of medicines and items provided on an out-patient basis were taxable.
  • India: The Authority for Advance Ruling, Uttarakhand ruled that for GST purposes, the supply of solar energy inverters, controllers, batteries, and panels would be covered under the term “solar power generating system”; therefore, the entire supply would fall under a “composite supply” subject to a GST rate of 5%—and not a “mixed supply” subject to a GST rate of 18%.
  • India: A tribunal rejected an arrangement involving the merger of a promoter holding company into a listed company, given certain objections raised by the income tax authorities that this treatment could lead to a potential revenue loss. The tax authorities cited the general anti-avoidance rule provisions. 

Read TaxNewsFlash-Asia Pacific

Europe

  • EU: The Economic and Financial Affairs Council agreed on transitional measures and short-term adjustments for the new “definitive” VAT system. It also reached agreements on the VAT rate for e-books, and the reverse charge mechanism.
  • Ireland: Details of the 2019 budget included proposed tax measures that would affect certain businesses (e.g., corporation tax rate and exit tax) and individuals (e.g., standard band of income and marginal rate of tax).
  • Norway: The state budget 2019 includes some tax rate changes, but for the most part, does not propose significant corporate tax changes—in particular, measures relating to the Norwegian petroleum tax regime. There are no significant corporate tax changes with respect to income from petroleum-related activities on the Norwegian continental shelf.

Read TaxNewsFlash-Europe

FATCA / IGA / CRS

  • Australia: The Australian Taxation Office (ATO) announced the release of a tool and instructions for use by FATCA “small reporters” (that is, financial institutions with less than 50 individual and 50 entity reportable accounts) in converting the FATCA information to the required XML format.

Read TaxNewsFlash-FATCA / IGA / CRS

United States

  • The U.S. Treasury Department and IRS released a “notice of availability” of additional previously issued guidance—Notice 2018-78—regarding the transition tax under section 965. 
  • The IRS posted a “special update” to a list of questions and answers (Q&As) about reporting related to section 965 on tax returns for 2017. It allows taxpayers more time to file a transfer agreement with respect to an acceleration event that occurred before 10 September 2018.
  • New Jersey’s governor signed legislation: (1) containing both technical corrections and substantive changes to the corporation business tax law; and (2) establishing an economic nexus threshold for remote sellers and requiring certain marketplaces to collect tax on sales they facilitate (effective 1 November 2018).
  • Puerto Rico’s Treasury Department issued guidance on mandatory electronic filing of withholding tax, estate tax and gift tax, and excise taxes. The requirements for mandatory electronic reporting are to be phased in over a period of time. 
  • Reports prepared by KPMG LLP address provisions under the new U.S. tax law including discussions about
    • Cross-border income inclusions (including GILTI) to be treated as qualifying income for purposes of a real estate investment trust (REIT)
    • The definition of a covered employee, grandfathering under the prior section 162(m) rules, and material modifications
    • Proposed regulations under section 199A
  • A KPMG report addresses the “begin construction” requirements for solar property.
  • More U.S. states—California, Georgia, Nevada, New Jersey, and West Virginia—responded to the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. (state sales tax implications of remote or online sales).
  • A California appeals court addressed when factors of a single-member limited liability company (SMLCC) would be included in computing the owner’s apportionment formula when the owner of the SMLLC declined to consent to California tax jurisdiction and the LLC filed and paid taxes as a standalone entity. The court held that the plain language of the statute and the legislative history illustrate that the taxpayer was to have included the property, payroll, and sales of the SMLLC in the numerators of the combined reporting group’s apportionment factors. 
  • The Massachusetts Appellate Tax Board concluded that a retailer was not liable for sales tax that was not collected from customers during certain sales tax holidays. The customers learned of the upcoming sales tax holidays and canceled pending orders. The goods then were repurchased during the designated sales tax holidays. The Board determined that neither title nor possession passed to the customers prior to the goods being delivered (any sales that had already been delivered were not eligible to be canceled and reordered during the sales tax holiday). The Board concluded that the taxpayer (retailer) was entitled to a full abatement of taxes and penalties.
  • Lawmakers in South Carolina passed federal tax conformity legislation that was then signed into law. The conformity bill applies to tax years beginning after 2017, and expands the list of IRC sections that were not adopted by South Carolina—including section 250 (providing a reduced rate for GILTI and FDII); section 163(j) (limiting business interest deductions); section 118(b)(2) (including in income any contribution by any governmental entity or civic group, other than a contribution made by a shareholder as such); and section 199A (allowing a deduction for qualified business income).  

Read TaxNewsFlash-United States

Indirect Tax

  • Kenya: The Finance Bill, 2018, as enacted, includes the introduction of value added tax (VAT) on petroleum products and an excise tax on telephone and data services and on fees charged by financial institutions.
  • Costa Rica: Companies within a free trade zone are not exempt from paying the education and culture stamp tax.
  • EU: The Economic and Financial Affairs Council agreed on transitional measures and short-term adjustments for the new “definitive” VAT system. It also reached agreements on the VAT rate for e-books, and the reverse charge mechanism.
  • Bahrain: Measures implementing a value added tax (VAT) system will be effective 1 January 2019.
  • Ireland: The 2019 budget includes VAT proposals.
  • Qatar: A VAT regime is expected to be introduced in 2019, with a standard VAT rate of 5%. The VAT regime would affect all businesses, specifically the retail sector.
  • India: The Authority for Advance Ruling, Kerala ruled that for goods and services tax (GST) purposes, medicines and related items provided on an in-patient basis by a hospital through its pharmacy were provided as part of the composite supply of health care treatment and were not taxable. However, supplies of medicines and items provided on an out-patient basis were taxable.
  • India: The Authority for Advance Ruling, Uttarakhand ruled that for GST purposes, the supply of solar energy inverters, controllers, batteries, and panels would be covered under the term “solar power generating system”; therefore, the entire supply would fall under a “composite supply” subject to a GST rate of 5%—and not a “mixed supply” subject to a GST rate of 18%.
  • United States: New Jersey’s governor signed legislation: (1) containing both technical corrections and substantive changes to the corporation business tax law; and (2) establishing an economic nexus threshold for remote sellers and requiring certain marketplaces to collect tax on sales they facilitate (effective 1 November 2018).
  • United States: More states—California, Georgia, Nevada, New Jersey, and West Virginia—responded to the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. (state sales tax implications of remote or online sales).

Read TaxNewsFlash-Indirect Tax

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