KPMG’s Week in Tax: 11 - 15 July 2016

KPMG’s Week in Tax: 11 - 15 July 2016

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

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BEPS and Transfer Pricing

  • China: The State Administration of Taxation released guidance concerning the reporting of related-party transactions and contemporaneous transfer pricing documentation. The new transfer pricing rules will apply for fiscal years beginning from 1 January 2016, and generally reflect the OECD’s base erosion and profit shifting (BEPS) recommendations, including country-by-country reporting and “Master files” and “Local files.”
  • OECD: The Organisation for Economic Co-operation and Development conducted a “tax talks” event at which the status of the BEPS project was reviewed.
  • OECD: The OECD released a discussion draft that addresses the design and operation of the “group ratio rule” under Action 4, Limiting base erosion involving interest deductions and other financial payments, of the BEPS project.
  • Hong Kong: Hong Kong has accepted the OECD's invitation to join—as an “associate”—the project and framework under the OECD's final reports and recommendations of the BEPS project.


Read TaxNewsFlash-BEPS


  • UK: Implications of the “Brexit” vote continue to be considered. The KPMG member firm in the UK has a webpage dedicated to Brexit and that examines the risks and opportunities.
  • Belgium: A “program law” extends a requirement to report payments totaling at least €100,000 per financial year, when the payments are remitted to persons or entities located in “tax haven” states or jurisdictions. The new provisions are effective 14 July 2016.
  • Portugal: The Court of Justice of the European Union (CJEU) issued a judgment concluding that Portugal’s withholding tax on interest paid to non-resident financial institutions was contrary to EU law because the tax was imposed on the gross amount of the interest paid—whereas resident financial institutions were taxed on their net income.
  • Italy: The Ministry of Economy and Finance issued a decree to implement a “fast-track” advance tax ruling program that aims at providing enhanced certainty for taxpayers in their dealings with the tax authority.
  • Norway: Certain airlines in Norway are retroactively collecting excise tax (duty) from passengers for tickets purchased prior to 1 June 2016 (the effective date of the tax) for travel after 1 June.
  • France: The prime minister announced certain tax relief measures and incentives as part of a plan to attract new investments—particularly in the financial sector—into France.
  • Netherlands: The Dutch Supreme Court referred two issues to the CJEU concerning: (1) foreign exchange losses realized on EU participations; and (2) the limitation imposed on the deduction of interest (“profit shifting”).
  • Spain: Initial impressions indicate that the Spanish tax implications of the UK's vote to leave the European Union will concern cross-border transactions, trade-related matters, and the structure of Spanish groups operating in the UK.


Read TaxNewsFlash-Europe


  • Canada: New Brunswick and Saskatchewan’s respective budget bills—each containing tax provisions—received Royal Assent, and Québec has announced changes in a recent information bulletin that will modify the concept of “taxable Québec property” along with other tax changes.
  • Dominican Republic: Following the release of the “Panama papers,” authorities in the Dominican Republic have turned their attention to address tax evasion and developing an anti-tax haven policy.
  • Argentina: Tax legislation would (1) repeal the 10% withholding tax on dividend distributions; (2) reduce the “wealth tax” imposed on foreign shareholders of Argentine companies; (3) “regularize” tax, social security, and customs liabilities and allow an installment plan for tax payments; and (4) offer a “tax amnesty” program, providing relief from penalties and accrued interest for undeclared amounts or assets under a tax transparency initiative.
  • Mexico: The second chamber of Mexico’s Supreme Court of Justice issued a judgment, in a case of “first impression,” concerning issues including the electronic accounting requirements for tax purposes, as provided for under provisions of the tax law of 2014.


Read TaxNewsFlash-Americas

Asia Pacific

  • New Zealand: The government accepted recommendations, made by an independent review of foreign trusts, to expand disclosure and reporting requirements (with some modifications) by foreign trusts. Legislation is expected to be introduced in August 2016.
  • New Zealand: The Inland Revenue Department proposed that payers of interest and dividends, portfolio investment entities (PIEs) and Maori authorities would be required to report investors’ income and tax details more frequently, and more investor details would be provided.
  • Qatar: Qatar, along with other members of the Gulf Cooperation Council, are to introduce a value added tax (VAT). The VAT rate on supplies of goods and services will range between 3% to 5%.
  • Australia: A new “angel” investor tax incentive came into effect on 1 July 2016 that allows angel investors to receive a 20% tax rebate and capital gains tax exemption when they invest in a company that qualifies as an early stage innovation company.
  • India: The Supreme Court of India held that benefits under the tonnage tax scheme is also available to the income from the “slot charter” arrangements.
  • India: A tribunal held that a taxpayer—providing satellite capacity and related services to Indian customers by means of communication system monitoring equipment owned by a related party in India—was rendering services in India.


Read TaxNewsFlash-Asia Pacific


  • EU: The European Union and Monaco signed a new tax transparency agreement, under which the signatories will automatically exchange information on the financial accounts of each other's residents from 2018.
  • United States: The IRS issued a release announcing the next testing phase for the FATCA International Data Exchange Service (IDES).
  • Luxembourg: The United States has been removed from the list of “participating jurisdictions” for common reporting standard (CRS) purposes.
  • OECD: The OECD released a standardised IT-format—“CRS status message XML schema”—for providing feedback on exchanged CRS information.


Read TaxNewsFlash-FATCA / IGA / CRS

United States

  • Proposed regulations in the United States would clarify the application of the “device” prohibition under section 355 and provide a minimum threshold of assets under the active business requirement.
  • Final regulations under section 7602(a) relating to administrative summonses concern: (1) the role of outside persons hired by the IRS; and (2) situations when the IRS contracts with outside persons to assist the IRS.
  • Revisions to the forms under the Form 5500 series were proposed, in an effort to improve employee benefit plan reporting.
  • An IRS “practice unit” (guidance for IRS personnel) concerns tax issues related to the foreign housing exclusion provided under section 911.
  • The Financial Accounting Standards Board (FASB) held a meeting during which its project on intra-entity asset transfers was discussed. The project has accounting for income tax implications. 
  • A North Carolina appeals court held that the Department of Revenue could not tax an out-of-state trust solely on the basis that one of the beneficiaries resided in the state. 
  • The Tennessee Department of Revenue proposed a rule to adopt the economic nexus standard for sales and use tax purposes, and this would require certain out-of-state dealers to register and collect and remit sales tax.  
  • The Texas Comptroller announced that, as a result of its losing two 2014 franchise tax cases, certain policies regarding when amounts qualify as exclusions from total revenue and which taxpayers can deduct costs of goods sold (COGS) have been revised.
  • Litigation concerning whether multistate taxpayers may elect to apportion income using the Multistate Tax Compact’s allocation and apportionment provisions continues to unfold across the country, and reflects a number of recent taxpayer losses.


Read TaxNewsFlash-United States


  • The House Ways and Means Committee approved a bill to exempt certain amounts paid by aircraft owners to aircraft management services companies from the excise taxes imposed on transportation of persons and property by air.
  • Both houses of Congress passed a bill to reauthorize Federal Aviation Administration (FAA) programs, and the aviation-related excise taxes that are scheduled to expire 15 July 2016.
  • The U.S. House of Representatives passed H.R. 4768, the “Separation of Powers Restoration Act of 2016,” that could be intended to affect application of the “Chevron doctrine” and the deference afforded regulations.


Read TaxNewsFlash-Legislative Updates

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