KPMG’s Week in Tax: 18 - 22 July 2016

KPMG’s Week in Tax: 18 - 22 July 2016

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

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Americas

  • Brazil: The tax authority (RFB) clarified that new capital gain tax rates apply as of January 2017, and do not apply retroactively from January 2016.
  • Brazil: There are changes to the rates of the financial transaction tax (IOF) with respect to foreign exchange transactions and foreign loans. 
  • Canada: Oil, gas and mining companies operating in the United States, Canada, and the European Union and that are required to file annual transparency reports may be able to use that same report to meet the U.S., Canadian, and EU requirements.

 

Read TaxNewsFlash-Americas

Asia Pacific

  • Indonesia: New regulations provide a 50% increase to the standard amounts of income that, for individual taxpayers, are not subject to tax.
  • Thailand: Businesses have until the end of 2016 to take advantage of an additional tax deduction for capital spending on certain eligible assets, provided that the assets are purchased and placed in service before 31 December 2016.
  • India: Payments made for marketing support services and for the expansion of business abroad do not constitute “fees for technical services” under the provisions of the India-United Kingdom income tax treaty or the India-Singapore income tax treaty.
  • India: A draft version of a model goods and services tax (GST) was released for public consideration. Included in the draft GST law are provisions dealing with “demand and recovery”—for example, situations when the indirect tax has been collected but not deposited with the government.

 

Read TaxNewsFlash-Asia Pacific

BEPS

  • OECD: The Organisation for Economic Cooperation and Development (OECD) announced that Jamaica has joined, as the 85th jurisdiction, the base erosion and profit shifting (BEPS) framework.

 

Read TaxNewsFlash-BEPS

Europe

  • Austria: The Court of Justice of the European Union (CJEU) issued a judgment concluding that under Directive 2013/38, every worker is entitled to paid annual leave of at least four weeks, and when the employment relationship ends and the paid annual leave cannot be taken, the worker is entitled to an allowance to account for the unused annual leave.
  • Belgium: The parliament approved legislation modifying the Belgian patent box regime. There are plans for a new “deduction for innovation income” system. 
  • Belgium: The parliament approved legislation to harmonize and combine several Belgian bank taxes and levies into a single “bank tax.” The bank tax is expected to simplify compliance, but also to increase the overall tax contribution of the banking sector.
  • Netherlands: There is legislation pending that would simplify the refund process for value added tax (VAT) and energy tax in instances when the invoice for payment—the invoice that includes VAT or energy tax—will not be paid (that is, the invoice represents a “bad debt”).
  • Netherlands: The Dutch Immigration and Naturalization Service postponed new rules for work permits for Japanese citizens. The work permit requirements for Japanese citizens will apply as of 1 January 2017 (and not from 1 October 2016).
  • Poland: The Sejm (Senate) passed legislation approving a retail sales tax that is scheduled to be effective beginning 1 September 2016.
  • Sweden: The government directed the Swedish tax agency to review and consider a requirement that large companies must make their tax policy publicly available (such as posting their tax policies on their websites). 

 

Read TaxNewsFlash-Europe

Transfer Pricing

  • Czech Republic: Certain approaches by tax authorities—to assess additional tax by challenging the taxpayer’s functional and risk profile or by pointing out the existence of group relations that in turn require the group to compensate for a local entity’s losses—have been successfully challenged in recent cases before regional courts in the Czech Republic.
  • United States: The U.S. Tax Court issued a memorandum opinion, holding in abeyance a newspaper’s motion to intervene in a case concerning deficiencies determined with respect to a U.S.-based multinational entity’s cost-sharing arrangement entered into with a Luxembourg affiliate. 

 

Read TaxNewsFlash-Transfer Pricing

FATCA / IGA / CRS

  • Singapore: The Inland Revenue Authority of Singapore (IRAS) issued a reminder to Singapore reporting financial institutions that have not submitted their FATCA 2015 returns to do so immediately. 
  • United States: The IRS issued a reminder to financial institutions, to update the FATCA online registration system so that any changes to the contact information for their responsible officer and/or points of contact are up-to-date.
  • Finland: The tax administration released, for public comment, draft guidance for implementation of the common reporting standard (CRS) and the updated “directive on administrative cooperation” known as “DAC2.”
  • Panama: The OECD announced that Panama signed the multilateral convention on mutual administrative assistance in tax matters.
  • UAE: Representatives of the UAE Ministry of Finance and of the “free zone” Abu Dhabi Global Market (ADGM) signed a memorandum of understanding on the automatic exchange of information (AEoI) for tax purposes.

 

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • Belgium: Belgian authorities will accept a so-called “destination document” as alternative proof of an intracommunity transport.
  • EU: The European Union and China (and Hong Kong) agreed to expand the “smart and secure trade lanes” (SSTL) pilot project that allows testing end-to-end supply chain security instruments and mechanisms in line with the World Customs Organization framework of standards.

 

Read TaxNewsFlash-Trade & Customs

United States

  • IRS “practice units” (guidance for IRS personnel) publicly released this week concern the following topics or areas: (1) qualified business units; (2) IRC section 988 nonfunctional currency transactions; (3) character of exchange gain or loss on currency transactions; and (4) fixed, determinable, annual, or periodical (FDAP) income from sources within the United States that are not effectively connected with a trade or business in the United States.
  • Temporary and proposed regulations concern the income inclusion rules under section 50(d)(5) that apply to a lessee of investment credit property when a lessor of that property elects to treat the lessee as having acquired the property. The regulations will affect lessees of investment credit property when the lessor of the property makes an election to treat the lessee as having acquired the property, and an investment credit is determined under section 46 with respect to such lessee. 
  • The U.S. Tax Court granted summary judgment for the taxpayer—a service company that conducted marine surveys—finding that the taxpayer’s marine surveys and the survey data licensed by the taxpayer to its customers were “geological and geophysical expenses paid or incurred in connection with the exploration for, or development of, oil and gas” as required under section 167(h). The court held that the term “geological and geophysical expenses” is not limited to expenses incurred by taxpayers that own oil and gas interests.
  • In anticipation of questions concerning the FASB’s new standard on the recognition and measurement of financial assets and liabilities, a list of questions and answers (Q&As) is provided. 
  • IRS Announcement 2016-25 concerns the tax treatment of payments for relocation and cleaning expenses made to individuals because of a natural gas leak in an area of southern California.
  • Oil, gas and mining companies operating in the United States, Canada, and the European Union required to file annual transparency reports may be able to use that same report to meet the U.S., Canadian, and EU requirements.
  • The Alabama tax tribunal concluded that a restaurant intermediary (a website allowing customers to order food items from various local restaurants) was not liable for sales tax on the delivery fees charged to customers.
  • The Minnesota tax court held that the income and factors of a foreign disregarded entity were to be included, along with those of its domestic owner, in the Minnesota combined group’s taxable income for the tax years at issue. 
  • The South Carolina Department of Revenue issued guidance (a revenue ruling) concluding that amounts paid for streaming television programs, movies, music, and other similar content are charges for communication services that are subject to South Carolina sales and use tax whether paid as part of a subscription service, per item or per event.
  • Concerning the settlement of a property tax dispute with a city, the Wisconsin Supreme Court held that the taxpayer was entitled to a lower rate of interest on its recovery of the property tax refund from the city.

 

Read TaxNewsFlash-United States

 

  • Draft Schedule H, “Hospitals”—that must be filed by tax-exempt hospitals with Form 990, “Return of Organization Exempt from Income Tax”—has been issued for 2016.
  • An IRS private letter ruling concludes that a management contract entered into by an issuer of tax-exempt bonds for the management of a hotel will not result in private business use, notwithstanding that the contract did not qualify for an applicable safe harbor.

 

Read TaxNewsFlash-Exempt Organizations

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