KPMG’s Week in Tax: 18 - 22 September 2017 | KPMG | US

KPMG’s Week in Tax: 18 - 22 September 2017

KPMG’s Week in Tax: 18 - 22 September 2017

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

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Transfer Pricing and BEPS

  • United States: New content published by the IRS concerning country-by-country (CbC) reporting includes a list of “frequently asked questions” and an updated table of jurisdictions that have recently signed competent authority arrangements for the exchange of CbC reports.
  • United States: The IRS Large Business and International division publicly released two “practice units” concerning topics having transfer pricing implications: (1) competent authority Rev. Proc. 2015-40 guidance and U.S. initiated adjustment(s); and (2) high value services with respect to technical and marketing fees (inbound).
  • OECD: New information technology (IT) and guidelines on technical implementation of the exchange of tax information by tax authorities on CbC reporting and in relation to tax rulings.
  • OECD: Comment letters with respect to BEPS Action 7 (Attribution of profits to permanent establishments) and BEPS Action 10 (Revised guidance on profit splits) were sent in response to OECD discussion drafts.

Read TaxNewsFlash-Transfer Pricing

Europe

  • EU: The European Commission released a communication on a “fair and efficient tax system” that proposes a digital single market. There are proposals for both long-term—a fundamental reform of the international corporate tax framework—and multiple sort-term solutions.
  • Court of Justice of the European Union (CJEU): Judgments from the European court disallow a value added tax (VAT) exemption with respect to services supplied by independent groups of persons (IGPs) to their members in the financial or insurance sector. Legislative actions in Belgium and Luxembourg were immediately anticipated.
  • Netherlands: “Budget day” (19 September) releases include or concern: 
    • Tax plan for 2018
    • Bill on withholding obligation holding cooperative and expansion of the withholding exemption
    • Plan to repeal the VAT agricultural scheme law
    • Proposals for changes to payroll taxes
    • Bill to repeal the difference in tax treatment when there are profit distributions by holding cooperatives—in principle, not subject to dividend withholding tax—and profit distributions by private limited liability companies (BVs) or public limited companies (NVs) that are, in principle, subject to tax
  • UK: The Court of Justice of the European Union (CJEU) issued a judgment in a case concerning the refusal by the UK to grant a tax credit to resident shareholders receiving UK sourced dividends, when those dividends originate from foreign sourced profits.
  • UK: The CJEU issued a judgment in a case concerning the compatibility with EU law of a UK “exit tax” imposed when the majority of trustees of a UK trust became residents outside the UK.
  • Poland: Under a proposal, a new system of special economic zones would provide tax benefits and would apply from the first quarter of 2018. The proposal is subject to legislative approval.
  • EU: EU Finance Ministers discussed corporate taxation challenges of the digital economy at an “Ecofin” meeting. 

Read TaxNewsFlash-Europe

Africa

  • Nigeria: The tax agency for the Nigerian state of Lagos issued guidance addressing the perceived abuse of tax avoidance schemes by individual taxpayers and provided clarifications in certain provisions of the individual (personal) income tax law.
  • South Africa: On selling a business, taxpayers need to consider multiple value added tax (VAT) issues.

Read TaxNewsFlash-Africa

Americas

  • Costa Rica: The tax administration announced measures with respect to the enforcement of a requirement for issuing electronic invoices, that are mandatory for professionals who render professional services.
  • Canada: A draft of legislation includes measures affecting financial institutions—some of the measures may be seen to be “tax surprises”—and also provisions that would provide some relief for investment fund corporations as well as new rules affecting certain limited partnerships. 

Read TaxNewsFlash-Americas

Asia Pacific

  • Australia: Proposed “churning measures” may affect foreign-owned groups under the new consolidation integrity measures—specifically foreign-owned groups that sell their non-land rich Australian subsidiaries to other members of the Australian tax consolidated or multiple entry consolidated (MEC) group potentially would be allowed a step-up in the tax cost of their assets.
  • Australia: Under draft legislation, a new corporate collective investment vehicle regime would be taxed in a similar manner to a managed investment trust.
  • UAE: The tax authorities issued a registration user guide with respect to the excise tax law (the excise tax measures are effective 1 October 2017).

Read TaxNewsFlash-Asia Pacific

FATCA / IGA / CRS

  • OECD: There are new information technology (IT) guidelines on technical implementation of the exchange of tax information by tax authorities under the common reporting standard (CRS) regime.
  • Japan: Guidance was issued by the tax authorities to help financial institutions in preparing XML and CSV files required for filing reports under the CRS regime.
  • Bermuda: An updated version (v2.0) of the tax information reporting portal user guide was issued, providing guidance to Bermuda financial institutions on viewing transmission progress, recording errors, and submitting CRS corrections.
  • Finland: Three documents were released to provide information on topics relating to FATCA, the CRS, and DAC2 regimes.

Read TaxNewsFlash-FATCA / IGA / CRS

United States

  • Rev. Proc. 2017-52 introduces an 18-month pilot program expanding the scope of letter rulings concerning the tax consequences of a distribution of stock (or stock and securities) of a controlled corporation under section 355.
  • The IRS provided tax relief to taxpayers affected by Hurricane Irma, including:
    • Postponed deadlines—taxpayers in the State of Georgia have until 31 January 2018 to file certain individual and business tax returns and to make certain tax payments.
    • Penalty relief on certain uses of “adulterated fuels” that do not comply with applicable Environmental Protection Agency (EPA) regulations, in response to shortages of ultra low sulfur diesel (ULSD) fuel.
  • Concerning federal income tax deductions relating to casualty losses from hurricane damage, under the basic principles of the Code’s casualty loss provisions, the measures apply somewhat differently to property used in a trade or business or held for investment as compared with property used for personal purposes. A KPMG report focuses on business or investment property that has been damaged in a casualty such as Hurricane Harvey or Irma.  
  • Proposed regulations would allow the use of “truncated” social security numbers—that is, truncated taxpayer identification numbers (TTINs)—on statements that employers furnish to their employees, specifically on Form W-2. The aim is to aid employer efforts to protect their employees from identity theft.
  • An Alabama appeals court held that losses can be shared among affiliated group members. In that case, the losses were generated by a parent company before the filing of a consolidated return. The taxpayer was allowed to use the losses to offset the income of related entities in a later year, when a consolidated return was filed.
  • An Illinois tax tribunal determined that insurance premium financing entities were sales finance companies, and not general corporations (for purposes of the unitary combined group rules).
  • A Massachusetts regulation on vendors making internet sales is expected to be published on 22 September 2017. Vendors subject to the rule would be required to begin collecting sales and use taxes starting 1 October 2017, if during the preceding 12 months (ending 30 September 2017) they had in excess of $500,000 in Massachusetts sales from transactions completed over the internet and made sales resulting in a delivery into Massachusetts in 100 or more transactions.

Read TaxNewsFlash-United States

Cooperatives

  • The IRS posted a draft version of instructions for Form 1120-C, U.S. Income Tax Return for Cooperative Associations, proposed as guidance for filing the form for 2017.

Read TaxNewsFlash-Cooperatives

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