KPMG’s Week in Tax: 29 August - 2 September 2016

KPMG’s Week in Tax: 29 August - 2 September 2016

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

Related content

Transfer Pricing

  • Ireland: The European Commission announced its findings that Ireland had granted undue tax benefits of up to €13 billion to a U.S.-based multinational corporation and that this action was “illegal” under EU state aid rules because it allowed the taxpayer company to pay substantially less tax than other businesses. The EC concluded that Ireland must now recover the illegal aid.
  • Germany: A German court referred a case concerning the German transfer pricing rules to the Court of Justice of the European Union (CJEU) concerning whether certain provisions in German law requiring a transfer pricing adjustment for transactions involving German and foreign related parties are compatible with EU law when no adjustment is required for transactions solely between German related entities.
  • Poland: The Ministry of Finance issued another release indicating actions that the tax authorities will take to address tax fraud and close “loopholes” in the tax collection system. The Ministry of Finance intends to reduce harmful tax "optimization" by addressing “artificial” activities or schemes, primarily used by multinational corporations and to address perceived fraud with regards to transfer pricing.
  • Brazil: Decree No. 8842/2016 includes measures concerning the automatic exchange of country-by-country (CbC) reports of multinational groups with business operations in Brazil and also for the exchange of administrative rulings issued by the tax authorities that grant special tax treatment to certain taxpayers.

 

Read TaxNewsFlash-Transfer Pricing

Asia Pacific

  • Australia: The Australian Tax Office (ATO) issued guidance on the tax implications of “negative” interest rates, that is, when LIBOR is negative.
  • India: For purposes of valuing works contracts under the model goods and services tax (GST) law, there can be issues regarding the taxability of “free of cost” supplies.  
  • India: A tax tribunal held that a non-resident individual is not eligible to claim any benefit under an income tax treaty. 
  • India: A tax tribunal held that to determine whether royalty income is effectively connected with a permanent establishment (PE), the “asset test” must be evaluated. To determine whether “fees for technical services” are effectively connect with the PE, the “activity test” or “function test” must be evaluated. Because these tests were not satisfied, the royalty income received by the taxpayer was not effectively connected with its branch office in India. Therefore, the royalty income was taxable at a rate of 20% on a gross basis under provisions of the India-Italy income tax treaty. 
  • Vietnam: Guidance issued by the tax authority concerning corporate income tax provides: (1) expenses relating to late-issued invoices (invoices issued after transfer of the ownership of the goods) are deductible, provided the taxpayer can provide other supporting documentation as evidence of the deductibility, and (2) investment incentives, including import duty incentives, will be determined based on corporate income tax law.

 

Read TaxNewsFlash-Asia Pacific

Africa

  • Nigeria: The Federal Inland Revenue Service (FIRS) is placing restrictions on taxpayers’ use of withholding tax credit notes to settle a company’s income tax liability, by limiting the ability to carry forward withholding credit notes to those liabilities relating to the basis period for the relevant tax year.

 

Read TaxNewsFlash-Africa

Americas

  • Canada: New housing builders have a short time to decide whether they need to make a new election to correct reporting errors on GST / HST-grandparented housing sales. Builders that want to make the election must file the new election in a reporting period that ends on or after 1 May 2016 and before 1 January 2017.

 

Read TaxNewsFlash-Americas

FATCA / IGA / CRS

  • Brazil: Decree 8.842/2016 (30 August 2016) was promulgated for purposes of implementing an international agreement for the automatic exchange of information under the common reporting standard (CRS) regime.
  • India: The Central Board of Direct Taxes announced that financial institutions were not required to close bank accounts by 31 August 2016 if account holders’ self-certifications were not obtained under an alternative procedure with respect to the FATCA regime.
  • Israel: The Knesset Finance Committee approved FATCA regulations with an effective date of 4 August 2016.

 

Read TaxNewsFlash-FATCA / IGA / CRS

United States

  • Leaders of the U.S. congressional tax writing committees responded to the EC’s state aid investigation findings that Ireland granted undue tax benefits of up to €13 billion to a U.S.-based multinational corporation.
  • Final regulations define marital status for federal tax law purposes. The marriages of couples of the same sex are to be treated the same as marriages of couples of the opposite sex under the federal tax. 
  • Final regulations clarify the definition of real property for purposes of real estate investment trusts—REITs.
  • The IRS Large Business and International (LB&I) division appears to be weighing changes to the “compliance assurance process” (CAP) program—a program that allows large corporate taxpayers to work collaboratively with an IRS team to identify and resolve potential tax issues before tax returns are filed. 
  • IRS Announcement 2016-30 provides relief for victims of the Louisiana storms and flooding that began August 11, 2016, by permitting easier access to victims’ funds held in workplace retirement plans and in IRAs. This relief is in addition to the relief previously provided by the IRS. 
  • The U.S. Securities and Exchange Commission (SEC) has new rules requiring resource extraction companies to disclose payments, or a series of payments, over $100,000 made to governments related to the exploration and development of oil, natural gas, or mineral resources. However, the SEC’s final rules provide some relief to address concerns.
  • The South Carolina Department of Revenue recently issued a “draft” revenue ruling to address various aspects of the state’s bank franchise tax law.
  • Alabama operators of a pumpkin patch (a fall festival site) must collection tax on sales of tangible personal property and gross receipts from operating an amusement.
  • The Arizona Department of Revenue is offering a tax amnesty program for the period from September 1 through October 31, 2016, with amnesty being offered for unpaid corporate and individual (personal) income tax, use tax, and transaction privilege (sales) tax.
  • A challenge to Colorado’s requirement that non-collecting retailers (that is, retailers engaged in interstate commerce and making sales into Colorado) must comply with the state’s use tax notice and reporting requirements is possibly pending appeal again to the U.S. Supreme Court, in the Direct Marketing Association case.
  • Maryland’s tax court granted an out-of-state taxpayer’s claim for corporate income tax refunds, on finding that the Comptroller’s policy with respect to federal obligation interest—which must be added back in computing state taxable income, whereas there is no requirement to add back interest from Maryland state obligations—was unconstitutional.

 

Read TaxNewsFlash-United States

© 2016 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Request for proposal

 

Submit

KPMG's new digital platform

KPMG's new digital platform