KPMG’s Week in Tax: 5 - 9 June 2017 | KPMG | US

KPMG’s Week in Tax: 5 - 9 June 2017

KPMG’s Week in Tax: 5 - 9 June 2017

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

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BEPS

  • OECD: Representatives from over 70 jurisdictions participated in an OECD ceremony for the signing of a multilateral convention to implement tax treaty-related measures to prevent base erosion and profit shifting (BEPS). The multinational instrument (MLI) enables all signatory countries to meet their treaty-related minimum standards under the BEPS project, and provides flexibility in various ways to accommodate the positions of various countries.
  • Hungary: Parliament approved legislation that adopts country-by-country (CbC) reporting.
  • Colombia: Reforms initiated by the government reflect an intention to implement the standards and practices developed under the BEPS project. 

Read TaxNewsFlash-BEPS

Transfer Pricing

  • Azerbaijan: A transfer pricing regime has been added to the tax law, with an effective date of 1 January 2017. The transfer pricing methods available are broadly based on the guidelines of the OECD, but with some specific local rules.
  • India: A tribunal addressed transfer pricing issues relating to advertising and marketing promotion expenses. The case was returned to the Transfer Pricing Officer for a new determination, but the tribunal agreed with the Transfer Pricing Officer’s treatment of the taxpayer’s marketing activity as a “function” (and not as a separate “transaction”) and in considering the advertising and marketing promotion expenses in the profit rates of comparable companies in the transfer pricing adjustment.

Read TaxNewsFlash-Transfer Pricing

Africa

  • South Africa: Guidance on the value added tax (VAT) treatment of fees paid to non-executive directors is effective 1 June 2017, and there are provisions that address VAT registration and the imposition of VAT on the directors’ fees for services rendered.
  • Nigeria: Legislation is pending that would revise the rules governing the petroleum sector. The legislation would establish a framework for the creation of commercially oriented, profit-driven petroleum entities and allow for internationalization of the petroleum industry. All existing oil and gas laws would be repealed.

Read TaxNewsFlash-Africa

Americas

  • Brazil: A project is being developed by the government to unify and digitalize a record system for tax, labor, and social security obligations. Version 2.2.02 has been approved, and a test environment will be available until 1 July 2017.

Read TaxNewsFlash-Americas

Asia Pacific

  • China: There are emerging opportunities for consolidation in the “new energy vehicles” (e.g., electric vehicles) industry that could lead to a sector realignment in 2017.
  • Pakistan: Amendments relating to sales tax on services were introduced in the 2017 finance bills for the Sindh and Punjab provinces.
  • India: A tribunal held that government authorisations or approvals are not licenses or rights having a business or commercial nature that, in turn, could be transferred to the taxpayer. Therefore, depreciation is not allowed on the value assigned such government authorisations. 
  • India: A circular announced exempt funds and trusts must file monthly statements under the Employees’ Provident Fund Act and using new software.
  • Kazakhstan: Tax developments include changes to VAT registration procedures, currency for customs payments, and business law rules for special investment contracts.
  • Philippines: The Bureau of Internal Revenue released several guidance items addressing the basis of properties transferred and shares received.
  • Saudi Arabia: The Kingdom of Saudi Arabia earlier this year released a unified agreement on VAT regime to be adopted by the cooperation council for the Arab States (the Gulf Cooperation Council or GCC). An English language (unofficial) version of the VAT agreement is now available.
  • Thailand: New customs measures will be effective in November 2017 and reflect changes to the existing customs measures.
  • Australia: As end of the financial year approaches—30 June 2017 for many taxpayers—there is a reminder to consider research and development (R&D) issues.
  • Australia: A bank levy will apply from 1 July 2017 to “authorised deposit-taking institutions” (ADIs) with total liabilities of more than AUS $100 billion. The levy will be imposed on a quarterly basis at a rate of 0.015% on an ADI’s “applicable liabilities amount.”

Read TaxNewsFlash-Asia Pacific

Europe

  • Norway: There are changes, new limitations, and amendments regarding the tonnage tax system.
  • Italy: Under an alternative tax regime, individual who are new tax residents of Italy can elect to be subject to a “flat-tax regime” if: (1) transfer their tax residence to Italy; and (2) have had foreign residence status for at least nine of the last 10 fiscal years.
  • UK: Prior to the 8 June general election, key tax pledges from all parties, including the Scottish National Party, are reviewed.
  • UK: Corporate interest restriction rules that were removed from Finance Bill 2017 following the announcement of the general election may reappear. A report looks at which financial statements would be used under this proposal.
  • UK: The First-tier Tribunal provided a supplementary judgment considering whether certain expenditures are to be treated as capital or revenue.

Read TaxNewsFlash-Europe

United States

  • An IRS “practice unit” (guidance for IRS personnel) was publicly issued concerning “functional currency determination.”
  • The U.S. Court of Appeals for the Ninth Circuit affirmed the U.S. Tax Court’s dismissal of a petition challenging a notice of Final Partnership Administrative Adjustment (FPAA) for lack of jurisdiction. The Ninth Circuit concluded that an entity’s disregarded status did not preclude its classification as a pass-thru partner. Note that legislation in 2015 repeals the subject TEFRA partnership audit rules for tax years beginning in 2018 and replaces them with new rules for partnership audits.
  • The U.S. Supreme Court issued an opinion concluding that a “church plan” maintained by a principal-purpose organization qualifies as a “church plan” for ERISA purposes, regardless of who established it.
  • Newly enacted legislation in Minnesota expands the sales and use tax nexus rules, and revises when a retailer is considered to have a sales and use tax collection obligation on sales made to in-state customers. There is also a collection requirement imposed on certain marketplace providers.
  • The New Jersey Tax Court held that a taxpayer that paid royalties to its parent company—a computer software developer—qualified for the “unreasonable exception” to the state’s intangible expense addback statute. Under New Jersey law, royalties and other intangible expenses paid to a related party are required to be added back in determining taxable income, but there are various exceptions to the addback requirement, including if requiring the addback would be “unreasonable.”
  • The Ohio Board of Tax Appeals held that certain promotional items purchased by a professional baseball team were not “resold” to patrons as part of the ticket price, and thus affirmed the use tax assessed on the costs of the items purchased by the baseball team. 
  • The Pennsylvania Commonwealth Court held that a township’s business privilege tax imposed on franchise fees of a Texas-based corporation owner and operator of convenience stores violated the Commerce Clause of the U.S. Constitution because the tax was not fairly apportioned. The franchise fees were paid in exchange for various services provided at the company’s Texas headquarters and elsewhere, and as such, the fees collected from the Pennsylvania stores were the product of interstate commerce and must be apportioned.

Read TaxNewsFlash-United States

 

  • U.S. Senate Finance Committee Chairman Orrin Hatch (R-UT) discussed current efforts of the Congress and the administration to unite behind a tax overhaul plan and stated that “virtually any potential offset for reduced tax rates should be on the table.”
  • The Trump Administration proposes that certain federal aviation-related excise taxes would “sunset” as part of a plan to reform and “privatize” the air traffic control system. The proposal would make the air traffic control entity a self-sustaining function, financed through fees paid by the users of the national air space instead of the current system of federal excise taxes.

Read TaxNewsFlash-Legislative Updates

 

  • The IRS reminded foreign financial institutions (FFIs) required to renew their FFI agreement of a 31 July 2017 due date and that failure to renew by 31 July 2017, will be treated as terminating the FFI agreements as of 1 January 2017.

Read TaxNewsFlash-FATCA / IGA / CRS

 

  • U.S. Customs and Border Protection announced that a long-delayed plan to transition to the Automated Commercial Environment (ACE) as the sole electronic data interchange system for processing electronic drawback and duty deferral entry and entry summary filings is now scheduled to be effective 8 July 2017.

Read TaxNewsFlash-Trade & Customs

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