KPMG’s Week in Tax: 27 June - 1 July 2016

KPMG’s Week in Tax: 27 June - 1 July 2016

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

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The KPMG member firm in the United Kingdom developed a dedicated website to address “Brexit” issues, and to provide reports examining possible implications for businesses given the UK voters’ decision to leave the EU. 

  • A replay of a KPMG webcast, discussing initial steps that businesses need to consider in light of the EU referendum, is available. 
  • Various KPMG member firms—including those in France, Ireland, the Netherlands, Switzerland, Australia, and the EU Tax Centre—have considered possible implications of the “Brexit” vote for their taxpayers or with respect to cross-border transactions involving businesses the UK.
  • With the vote in the UK to leave the European Union, businesses also need to give consideration to trade and customs and value added tax (VAT) implications of “Brexit.”


Read TaxNewsFlash-Europe

Transfer Pricing and BEPS

  • United States: Final regulations were published, to require annual country-by-country (CbC) reporting by certain U.S. persons that are the ultimate parent entity of a multinational enterprise (MNE) group that has annual revenue for the preceding annual accounting period of $850 million or more.
  • OECD: The Organisation for Economic Cooperation and Development released guidance on the implementation of CbC reporting and that sets out: (1) transitional filing options for MNEs that voluntarily file in the “parent jurisdiction;” (2) guidance on the application of CbC reporting to investment funds; (3) guidance on the application of CbC reporting to partnerships; and (4) the impact of exchange rate fluctuations on the €750 million filing threshold for MNE groups.
  • OECD: Representatives of the governments of the Dominican Republic and Nauru signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, thus becoming the 97th and 98th jurisdictions to join the agreement. The convention will enter into force for Nauru on 1 October 2016.
  • India: The Delhi Bench of the Income-tax Appellate Tribunal held that when, in an earlier year, the taxpayer accepted the tax department’s position pursuant to mutual agreement procedure (MAP) proceedings, the taxpayer’s acceptance was not to be considered to be a basis for the taxpayer’s consent for a transfer pricing adjustment proposed by the tax authorities for a later year.
  • New Zealand: Three government reports advocate for (1) an independent review of New Zealand’s foreign trusts with significantly expanded disclosure and reporting requirements; (2) a taxation framework for inbound investment (a draft overview) for considering the effect on other countries when establishing New Zealand’s tax policy settings; and (3) a consultation under the base erosion and profit shifting (BEPS), with interest and hybrid proposals to be consulted on in the second half of the year.


Read TaxNewsFlash-Transfer Pricing and TaxNewsFlash-BEPS


  • EU: Electronic products used by consumers and businesses that are typically are subject to customs duty when imported into the European Union (EU) and other jurisdictions. A recently signed World Trade Organization (WTO) trade agreement on information technology is expected to eliminate customs duties on a range of electronic products for import into a number of markets, including the EU.
  • Finland: Concerning the treatment of claims for refund of withholding tax or exemption from withholding tax by non-residents of Finland, the Supreme Administrative Court concluded that a Luxembourg-based insurance company that offers unit-linked insurance policies to Finnish insurance companies can file a claim for refund of the withholding tax imposed with respect to dividends paid to the Luxembourg insurance company. 
  • Finland: The Finnish tax administration issued guidance that expands the application of a prior decision of the Supreme Administrative Court, concluding that a Norwegian government entity was entitled to an exemption from tax (much as a Finnish government entity would be allowed the tax exemption). 
  • Italy: Guidance was issued to implement a tax break—30% of employment income is exempt from the individual income tax (IRPEF)—made available for certain workers who move to Italy. The tax exemption is available for a five-year period.
  • Italy: The Italian tax agency issued regulations that update the “black list” of countries or territories for purposes of the financial transaction tax.
  • Turkey: A draft law submitted to the Turkish Parliament is intended to enhance the investment environment in Turkey, by introducing additional exemptions and incentives for taxpayers as well as regulating the use of certain financial instruments.
  • Luxembourg: The government submitted Bill n°7006 to the Parliament, with respect to a Protocol that would modify the existing income tax treaty between Luxembourg and the United States.
  • Bulgaria: Changes to the rules for registering companies located in “preferential tax regime” jurisdictions are effective 1 July 2016.


Read TaxNewsFlash-Europe

Asia Pacific

  • India: Among the tax developments reported this week: (1) the Central Board of Direct Taxes (CBDT) issued a notice of amendments concerning the disallowance of a claim for an expenditure relating to tax-exempt income; (2) the Chennai Bench of the Income-tax Appellate Tribunal held that a provision of the Income-tax Act, 1961 does not override a withholding tax rate prescribed by an income tax treaty; (3) the Gujarat High Court held that once the Department of Scientific and Industrial Research grants approval of the taxpayer’s scientific research, the Assessing Officer cannot attempt to verify that conditions were satisfied in order to deny a deduction; (4) the CBDT amended the general anti-avoidance rules (GAAR), to reflect an effective date 1 April 2017. 
  • Myanmar: A tax calendar for 2016 includes reminders of local filing dates and obligations.
  • Singapore: The Inland Revenue Authority of Singapore issued guidance concerning the status of suppliers and customers of services for the purposes of the goods and services tax (GST) and updating a guide with respect to GST partial exemption and input tax recovery. The guidance sets forth steps for GST-registered businesses to determine whether the customer is outside Singapore and, thus, whether GST is applicable with respect to such services.


Read TaxNewsFlash-Asia Pacific


  • Canada: The federal budget bill for 2016 has been enacted.
  • Canada: Saskatchewan's 2016 budget bill received its first reading.


Read TaxNewsFlash-Americas


  • Hong Kong: A bill to implement the common reporting standard (CRS) has been gazetted, and the anticipated effective date is set for 1 January 2017.
  • South Africa: The South African Revenue Service (SARS) issued the final version of the business requirements specification for both FATCA and CRS submissions due by the end of May 2017.
  • BVIs: The tax authority of the British Virgin Islands issued a notice extending the FATCA reporting deadline to 30 June 2016.
  • Cyprus: Guidance issued by the tax department extends the FATCA reporting deadline for financial institutions to 15 July 2016.


Read TaxNewsFlash-FATCA / IGA / CRS


  • Nigeria: The Federal Ministry of Finance approved recommendations from the Federal Inland Revenue Service to withdraw and revoke a rate reduction for withholding tax under the company income tax rules.


Read TaxNewsFlash-Africa

United States

  • The Federal Circuit affirmed-in-part, but reversed-in-part and remanded a summary judgment order of the U.S. Court of Federal Claims that had allowed a taxpayer’s claims for interest netting in situations involving merged entities. At issue was whether the post-merger entity was the “same taxpayer” making both the overpayment and underpayment of tax.
  • Rev. Proc. 2016-37 establishes the procedures under the determination letter program for individually designed plans and the six-year remedial amendment cycle system for pre-approved plans.
  • The Securities and Exchange Commission (SEC) announced rules to require resource extraction issuers to disclose payments made to governments—including tax payments—for the commercial development of oil, natural gas or minerals.
  • Alabama: An administrative law judge concluded that “canned” software customized for the specific needs of a customer is not subject to sales and use tax.
  • Minnesota: The Minnesota Supreme Court rejected a taxpayer’s Multistate Tax Compact (MTC) election, and held that the taxpayer could not apportion its income using the MTC’s three-factor formula. 
  • Texas: A state appeals court held that a health club was not entitled to the sale-for-resale exemption on certain purchases including purchases of exercise machines, weight racks, scales, and promotional flyers. 
  • Texas: The Texas Supreme Court held that an oil and gas producer did not qualify for the manufacturing exemption on certain types of machinery and equipment and services used in the oil production and extraction process.


Read TaxNewsFlash-United States


  • Tax reform: House Republicans released their “blueprint” for tax reform, that proposes to reduce tax rates for businesses and for individuals and to move the U.S. tax system closer to a consumption-based tax system through reforms of the income tax rules (without providing a value added tax or national sales tax). Although the direction, details, and timing of tax reform may be affected by the results of the November elections, businesses, individuals, and other stakeholders may want to consider carefully the blueprint’s proposals.  If Republicans continue to control the House next year, the blueprint can be expected to be the starting point for future House Republican tax reform efforts. Read KPMG’s report containing initial observations about the tax reform blueprint.
  • A bipartisan majority of the House Ways and Means Committee wrote to Treasury Secretary Lew regarding various aspects of the proposed section 385 regulations. 


Read TaxNewsFlash-Legislative Updates

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