KPMG’s Week in Tax: 7-11 March 2016

KPMG’s Week in Tax: 7-11 March 2016

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

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Asia Pacific

  • China: A major announcement this week unveiled a plan to expand the scope of the value added tax (VAT) regime. It was announced that VAT will be expanded to apply to several sectors (previously subject to business tax), beginning 1 May 2016. The new sectors subject to VAT include the real estate and construction sectors, financial services and insurance sectors, and “lifestyle services” (including hospitality, food and beverage, healthcare, and entertainment).
  • Myanmar: Parliament passed the Union Tax Law 2016 ahead of schedule, thereby providing taxpayers with more time to take into account any changes prior to the effective date at the start of the next fiscal year on 1 April 2016. In general, there were no changes to the income tax rates for individual and corporate taxpayers.
  • Thailand: The Ministry of Commerce issued a regulation providing that foreign companies conducting certain banking and insurance services are no longer required to obtain a “foreign business license” from the government.

Read TaxNewsFlash-Asia Pacific

Transfer Pricing

  • Australia: A bill has been proposed to increase the penalties for entities that do not comply with country-by-country reporting obligations. 
  • EU: An initial agreement was reached by the ECOFIN council (composed of financial ministers of the EU Member States) for the automatic exchange of tax-related financial information of multinational companies, i.e., country-by-country reporting.
  • India: A tribunal concluded that advertising, marketing, and sales promotion expenses were not an “international transaction” because these expenditures were not intended to benefit the foreign related company, but only the Indian taxpayer; and as such, the arm’s length price standard does not arise.
  • United States: A Treasury Department official issued a letter responding to a request from the Senate Finance chairman that Treasury consider whether the president could invoke the provisions of Code section 891 to counter allegations that U.S. corporations were being subjected to discriminatory taxation regarding EC investigations of tax rulings and advance pricing agreements granted to multinational corporations.
  • United States: The IRS posted several new “practice units” (guides for use by IRS examiners) including ones that concern the residual profit split method – outbound; allocation and apportionment of deductions for nonresident alien individuals; and fixed, determinable, annual or periodic (FDAP) income.

Read TaxNewsFlash-Transfer Pricing

FATCA / IGA / CRS

  • United States: A competent authority arrangement (CAA) for implementing the FATCA regime was signed between the United States and Barbados, and late last week the United States signed CAAs with both Brazil and Switzerland.
  • South Africa: Regulations to implement the common reporting standard (CRS) were published in March 2016. The regulations provide for general reporting rules, due diligence requirements for both pre-existing and new accounts, and definitions of terms.

Read TaxNewsFlash-FATCA / IGA / CRS

Americas

  • Canada: Financial institutions and certain businesses that have a 31 December year-end must file their GST/HST and/or QST annual information returns by 30 June 2016.
  • Canada: “Selected listed financial institutions” (SLFIs) that have a 31 December year-end have until 30 June 2016 to claim missed input tax credits (ITCs) and special attribution method (SAM) deductions.
  • Colombia: New rules allow payments in foreign currency between residents in Colombia. This may reduce certain administrative and financial costs relating to certain transactions.

Read TaxNewsFlash-Americas

Europe

  • Belgium: Guidance from the tax administration updates the prior treatment concerning the withholding tax on interest and capital gains realized with respect to dispositions of shares of an investment fund when such shares were acquired either before 1 July 2005 or before 1 July 2008.
  • Poland: The next round of grants for research and development (R&D) projects will begin in April 2016 and continue through July 2016. The grants for R&D activities are also directed to companies operating in special economic zones.

Read TaxNewsFlash-Europe

United States

  • Retailers and other companies selling gift cards redeemable for either goods or services may be able to extend the period over which they defer recognizing taxable income from these gift card sales, according to an IRS technical advice memorandum.
  • The Puerto Rico Treasury Department announced that a transition from the current sales and use tax system to the new VAT has been delayed until 1 June 2016. The VAT regime was originally scheduled to be effective 1 April 2016.
  • Notice 2016-15 issued by the IRS addresses the requirements for designating a terminal located within a secure area of an airport as a “secured airport terminal” for purposes of reduced fuel excise taxes. The notice includes procedures for a terminal operator to request that a terminal be placed on the list of secured airport terminals.
  • Notice 2016-21 provides the adjustments to the limitation on housing expenses for individuals outside the United States (pursuant to section 911) for specific foreign locations for 2016. 
  • Notice 2016-22 provides guidance and transition relief for employers claiming the work opportunity tax credit (WOTC) for certain employees. The guidance reflects legislative changes.

Read TaxNewsFlash-United States

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