KPMG’s Week in Tax: 1 - 5 August 2016

KPMG’s Week in Tax: 1 - 5 August 2016

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

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Transfer Pricing and BEPS

  • Canada: Draft legislative proposals would implement certain measures originally announced in the 2016 federal budget—including country-by-country (CbC) reporting requirements. The CbC reporting would apply to reporting fiscal years of multinational entity groups that begin on or after 1 January 2016.
  • South Korea: Draft legislation would amend existing provisions of Korean law to implement certain OECD base erosion and profit shifting (BEPS) initiatives—including previously approved measures regarding rules for a Master file and a Local file, as well as introducing rules for filing a CbC report.
  • OECD: Additional consideration of interest deductibility rules for banks and insurers was issued as a discussion draft in follow-up to a final report on Action 4 (interest deductions and other financial payments). Responses are due by 8 September 2016.
  • OECD: While the BEPS project is primarily aimed at corporate income tax, a KPMG report examines not-to-be-overlooked indirect tax implications under BEPS.

 

Read TaxNewsFlash-BEPS and TaxNewsFlash-Transfer Pricing

Europe

  • EU: Comments made in response to a public consultation on the relaunch of the proposal for a common consolidated corporate tax base (CCCTB) have been published by the European Commission.
  • Spain: The Advocate General of the Court of Justice of the European Union (CJEU) issued an opinion concerning Spanish tax law provisions allowing companies that are tax residents in Spain to amortize the goodwill resulting from the acquisition of certain shareholdings in foreign companies. The Advocate General concluded that this treatment is selective, and therefore must be regarded as "state aid" that is incompatible with the common market.
  • Spain: Certain companies seeking a refund of value added tax (VAT) paid in the Spanish territory have until 30 September 2016 to file a VAT refund claim.  
  • Germany: Updates include discussions about: (1) the regional tax office of North Rhine-Westphalia's administrative guideline concerning the treatment of profit participation certificates for corporate income tax purposes—equity vs. debt; (2) a decision of the federal tax court (BFH), when binding ruling requests regarding the same matter are filed by both the controlling company and the controlled company, with these requests triggering fees for both requesting parties—not just a single fee; (3) a decision of the federal tax court (BFH) concerning the treatment of the required actuarial reserves of a mutual insurance company; and (4) a decision of the tax court of Lower Saxony concerning whether a profit and loss absorption agreement would be recognized for tax purposes.
  • Belgium: The EC announced that Belgian corporate tax provisions applicable to the wholesale diamond sector were in line with EU state aid rules. 

 

Read TaxNewsFlash-Europe

Asia Pacific

  • Japan: An outline of the proposals to be included in bills to postpone changes to the local taxation for companies and to defer an increase to the consumption tax rate (from 8% to 10%) was released.
  • India: Determining transaction value and market value for indirect tax purposes in India has almost always resulted in controversy. It appears that this uncertainty may continue under a goods and services tax (GST) regime.
  • Vietnam: There are 10 bilateral and multilateral free trade agreements between Vietnam and other counties, and the common goal is to reduce or eliminate tariffs so as to reach a common tariff between 0% and 5%. 
  • Vietnam: A decree, effective July 2016, provides details on goods and services that are not subject to VAT and sets forth provisions concerning VAT refunds for investment projects and for certain companies involved in exports. 

 

Read TaxNewsFlash-Asia Pacific

Americas

  • Canada: Finance released draft legislative proposals to implement certain outstanding measures that were originally announced in the 2016 federal budget, including international tax proposals concerning an extension of the back-to-back rules; "debt parking" to avoid foreign exchange gains; and cross-border surplus stripping.

 

Read TaxNewsFlash-Americas

FATCA / IGA / CRS

  • Curaçao: The intergovernmental agreement (IGA) between the United States and Curaçao is in force as of 3 August 2016.
  • Channel Islands: Guernsey issued guidance confirming that for common reporting standard (CRS) purposes, the IGA definition of an “investment entity” cannot be used.

 

Read TaxNewsFlash-FATCA / IGA / CRS

United States

  • Temporary regulations concern the election to apply the new partnership audit regime to partnership returns filed for tax years beginning after 2 November 2015 (the date the new regime was enacted) and before 1 January 2018. Absent such an “early election,” the new regime generally applies only to returns for partnership tax years beginning after 31 December 2017. The regulations provide the time, form, and manner for making the early election into the partnership audit regime.  
  • The IRS issued Notice 2016-48 to implement changes made to the individual taxpayer identification number (ITIN) program as made by legislation enacted in December 2015.
  • Proposed regulations concerning the valuation of interests in corporations, partnership, and other entities for purposes of the estate, gift, and generation-skipping transfer taxes address the treatment of certain lapsing rights and restrictions on liquidations in determining the value of the transferred interests. In an effort to prevent under-valuation of these transferred interests, the proposed regulations create a new class of restrictions that will be ignored when valuing gifts to family members of interests in family-controlled entities.
  • The Alabama tax tribunal concluded that fees charged to customers for the pickup of rented property were not subject to sales and use tax. 
  • The New York Division of Tax Appeals found the filing of a corporate franchise tax return does not trigger the statute of limitations for a portion of an assessment related to the Metropolitan Transportation Business Tax Surcharge. 
  • There is ongoing litigation in South Dakota concerning Senate Bill 106—enacted earlier this year for purposes of establishing economic nexus provisions for sales and use tax purposes. The state is seeking a declaratory judgment that certain online retailers satisfy the criteria in Senate Bill 106 and must collect and remit tax on sales made in the state, and that the new law is constitutional.   
  • A Texas administrative law judge concluded that certain securitization trusts holding student loans do not qualify as passive entities that are excluded from the Texas combined group.

 

Read TaxNewsFlash-United States

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