KPMG’s Week in Tax: 3 - 7 April 2017

KPMG’s Week in Tax: 3 - 7 April 2017

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

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Transfer Pricing

  • OECD: Additional guidance was released for tax administrations and multinational enterprises to use in implementing country-by-country (CbC) reporting pursuant to the base erosion and profit shifting (BEPS) Action 13 recommendations.
  • Australia: Guidelines were issued for simplifying transfer pricing record-keeping options to reduce the Australian transfer pricing documentation compliance burden for certain taxpayers and international related-party dealings.
  • India: A tribunal deleted a transfer pricing adjustment made by the Transfer Pricing Officer for a payment for intra-group services made to a related party of the taxpayer. The tribunal rejected the Transfer Pricing Officer’s “nil” (zero) arm’s length price on management services under the comparable uncontrolled price method.
  • Germany: New documentation requirements for transfer pricing were introduced with legislation providing for a three-tiered approach to transfer pricing documentation.
  • United States: Transfer pricing documentation deadlines for Form 1120, U.S. Corporation Income Tax Return are changing for many C corporations.

Read TaxNewsFlash-Transfer Pricing

FATCA / IGA / CRS

  • OECD: Updated frequently asked questions concerning the common reporting standard (CRS) were released.
  • Sweden: Technical guidance was issued to help financial institutions comply with their common reporting standard (CRS) obligations for the 2016 calendar year.
  • Belgium: According to draft CRS business rules for financial institutions, a report can contain either new records or corrections/deletions, but must not contain a mixture of both.
  • Cayman Islands: Participating jurisdictions and reportable jurisdictions for the purposes of the tax information authority (international tax compliance, CRS) regulations were published.
  • South Africa: The third-party data annual submissions process is open for the period 1 March 2016 – 28 February 2017. Submissions will be accepted until 31 May 2017.

Read TaxNewsFlash-FATCA / IGA / CRS

Africa

  • Kenya: Tax provisions in the 2017/2018 budget include minimal tax increases but expand the “pay as you earn” (PAYE) tax bands.
  • Nigeria: Oil and gas industry developments include content performance audits and content compliance review.

Read TaxNewsFlash-Africa

Americas

  • Canada: The small business income threshold has increased in Nova Scotia.
  • Canada: New Brunswick’s 2017 budget includes corporate tax measures and a dividend tax credit for non-eligible dividends of 3.245%  of the taxable amount of the dividend.
  • Canada: The stock option deduction in Quebec has been raised to 50%, which harmonizes the Quebec rules with the federal rules.
  • Dominican Republic: A list was released of goods and services that are not considered exempt from value added tax (VAT); goods and services purchased with VAT exemption cards will be directly linked to the production activity of free trade zones.

Read TaxNewsFlash-Americas

Asia Pacific

  • Singapore: The Income Tax Board of Review disallowed a tax deduction for interest expense from shareholder bonds issued by the taxpayer. The bonds were a restructured form of capital from equity interests previously held by the shareholders.
  • India: A concessional taxation regime for patent income was created to encourage local research and development (R&D) activities and to make India a global R&D hub.
  • India: Key changes have been made to simplify income-tax return forms for assessment year 2017-2018. The total number of income-tax return forms has been reduced from nine to seven.
  • Singapore: The 2017 budget enhances two programs to attract companies to use Singapore as a base to conduct international physical trading activities and treasury management activities.
  • Hong Kong: The OECD base erosion and profit shifting (BEPS) initiatives pose issues for human resources (HR) and global mobility professionals, including the creation of permanent establishment.

Read TaxNewsFlash-Asia Pacific

Europe

  • Germany: Courts addressed issues on the retroactive effect of corrected invoices and VAT.
  • Germany: The federal tax court (BFH) addressed a situation in which a Dutch corporation held an ownership interest in a German partnership from which the Dutch entity received profit shares. The profit shares were subject to limited tax liability in Germany.
  • Netherlands: A draft bill would implement a requirement to maintain a central register with information about ultimate beneficial owners of companies and other legal entities incorporated in the Netherlands.
  • UK: There are practical implications of the anti-hybrid and other mismatch rules applying to the release of a loan that has a UK company borrower and a non-UK group company lender.
  • UK: Non-UK domiciled individuals who become deemed domiciled under the new Finance Bill rules will need to report to HMRC their worldwide income and capital gains and pay UK tax. 
  • UK: HMRC released a brief on the UK’s historic “bad debt relief” rules. Claims in relation to supplies before 1 April 1989 will be refused. Claims relating to supplies of goods made between 1 April 1989 and 19 March 1997 will be paid subject to “satisfactory evidence that the bad debts occurred and that the VAT hasn’t been previously reclaimed.”
  • UK: The government is requesting evidence on the taxation of employee expenses, to better understand how the relief is used.
  • UK: The Office of Tax Simplification has released a paper to draw attention to ongoing projects and recommendations on simplifying tax and reducing complexities in the tax system.

Read TaxNewsFlash-Europe

Trade & Customs

  • United States: President Trump signed an executive order directing the Secretary of Commerce and the U.S. Trade Representative to prepare a report identifying major trading partners with which the United States has a significant trading deficit.
  • United States: President Trump signed an executive order directing U.S. Customs and Border Protection and the U.S. Attorney General to increase enforcement and collection of antidumping and countervailing duties.
  • EU: Businesses in the EU must complete certain steps to benefit from preferential tariff treatment under a “comprehensive economic and trade agreement” with Canada.

Read TaxNewsFlash-Trade & Customs

United States

  • Final regulations extend the applicability date of regulations affecting the investment advice standard imposed on retirement investment advisers. The rules impose a fiduciary duty on persons providing retirement investment advice.
  • The Tax Court issued an opinion on an issue of first impression in a case on the disclosure of third-party taxpayer information, holding that the disclosure of worker’s tax return information to absolve an employer of its section 3402(a) tax liabilities is not barred under section 6103(h).
  • Rev. Proc. 2017-31 updates prior IRS guidance and adds new countries—Belgium, Colombia, and Portugal—to the list of countries with which the IRS and Treasury have determined that it is appropriate to have an “automatic exchange” relationship for reporting deposit interest payments of $10 or more made by U.S. financial institutions to nonresident alien individuals.
  • The Arizona Court of Appeals rejected a non-profit electric cooperative’s claim for refund of use taxes paid on purchases of coal and natural gas used in generating electricity because the fuels at issue did not directly enter into or become an ingredient or component part of the electricity and thus were not purchased for resale. 
  • The Connecticut Commissioner of Revenue Services announced that the state is stepping up efforts to enforce collection of sales and use taxes by internet retailers with a significant volume of sales into the state.
  • The Iowa Supreme Court held that a parent corporation lacked the requisite nexus to be included in a consolidated return with two LLC subsidiaries that had elected to be treated as corporations for both federal and Iowa tax purposes.
  • The Louisiana governor issued details of tax changes including sunsetting the new “clean penny” one cent sales and use tax, eliminating the corporate income tax deduction for federal taxes paid and reducing the highest marginal corporate income tax rate from 8% to 7%.  The plan would phase out the corporate franchise tax over a 10-year period and adopt a new gross receipts tax, the Louisiana Commercial Activity Tax or LACAT.

Read TaxNewsFlash-United States

 

  • KPMG has prepared a report with observations on whether and how a “destination-based cash flow tax with border adjustment” (“DBCFT”) like that described in the House Republican “blueprint” might apply to insurance and reinsurance transactions.

Read TaxNewsFlash-Tax Reform

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