KPMG’s Week in Tax: 15 - 19 January 2018 | KPMG | US
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KPMG’s Week in Tax: 15 - 19 January 2018

KPMG’s Week in Tax: 15 - 19 January 2018

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

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U.S. Tax Reform

Reports about specific provisions in the new tax law in the United States:

Transfer Pricing

  • United States: The IRS released an updated version of “frequently asked questions” (FAQs) and other information for U.S. multinational enterprises in filing their country-by-country (CbC) reporting forms.
  • Brazil: Costa Rica, Madeira, and Singapore were removed from the list of “tax havens” in Brazil, but certain specific regimes within those jurisdictions are listed as “privileged tax regimes” and thus trigger application of the transfer pricing rules.
  • United States: The IRS Large Business and International (LB&I) division released a set of five LB&I directives as guidance with respect for examinations of transfer pricing issues. 
  • Denmark: Amendments to the Danish tax control law include provisions related to transfer pricing and the rules for preparing and submitting transfer pricing documentation.

Read TaxNewsFlash-Transfer Pricing

Americas

  • Canada: Quebec will harmonize with Canada's new dividend gross-up factor (that is, a federal measure to reduce to 16%, from 17%, the gross-up factor that applies to non-eligible dividends). The authorities in Quebec also introduced measures to exempt certain transfer duties involving partnerships.

Read TaxNewsFlash-Americas

Asia Pacific

  • Australia: The federal government in Australia announced reforms relating to the administration and conduct standards for organisations with “deductible gift recipient” status.

Read TaxNewsFlash-Asia Pacific

Europe

  • Hungary: “Online invoicing”—a new tool to address potential tax issues including tax avoidance—will take effect and “go live” on 1 July 2018. 
  • Bulgaria: Changes to the excise tax rules in Bulgaria are effective 1 January 2018. Measures include an amendment to the definition of “energy products used for heating” and an exemption from excise tax for waste or “natural losses” in the normal course of business.
  • EU: The European Commission proposed new rules to give EU Member States greater flexibility to set value added tax (VAT) rates and to create a better tax environment to help small and medium-sized enterprises (SMEs) flourish.
  • Denmark: An opinion of the Advocate General of the Court of Justice of the European Union (CJEU) concluded that the Danish rules on the deductibility of losses from foreign permanent establishments (PE)—in instances when (1) the taxpayer did not elect to apply for the Danish international joint taxation regime; and (2) the “Marks & Spencer exception” applies (i.e. losses are considered final)—are contrary to the freedom of establishment concept in the EU.
  • Belgium: Corporate tax reform measures are effective in 2018, 2019 and 2020. Among the corporate tax provisions that will be effective for tax periods beginning in 2020 include a corporate tax rate reduction, a research and development partial exemption from wage withholding tax, and changes to the rules that apply for tax-free reserves, interest deduction limits, permanent establishments, and company cars (among others).
  • France: The General Court of the European Union agreed with a decision of the European Commission that France had to recover approximately €1.37 billion from Électricité de France, given that the treatment afforded the company was found to represent “state aid” in the form of a waiver of the tax on the reclassification of rights in capital.
  • Italy: Changes to the corporate income tax law (IRES) and the regional tax (IRAP) included in Budget Law 2018 are generally effective 1 January 2018.
  • Sweden: New deductible amounts for business or promotional gifts apply from 1 January 2018.
  • Poland: The European Commission announced the opening of an investigation into a Polish tax incentive for shipyards. 

Read TaxNewsFlash-Europe

FATCA / IGA / CRS

  • Australia: Updated guidance on the automatic exchange of information relates to the FATCA and common reporting standard (CRS) regimes.
  • France: The “corrective” Finance Law 2017 includes amendments relating to the automatic exchange of financial account information under the FATCA and CRS regimes.
  • Japan: An updated version of “frequently asked questions” (FAQs) includes a modification regarding country codes to be used in preparing reports under the CRS.
  • Vietnam: The banking authority of Vietnam issued technical guidance for implementing the FATCA regime.
  • Isle of Man: Updated guidance provides assistance to entities affected by the intergovernmental agreement (IGA) under the FATCA regime and generally reflects removal of references to the UK IGA.
  • OECD: Panama signed the CRS multilateral competent authority agreement (CRS MCAA), becoming the 98th jurisdiction to join the network of jurisdictions under the CRS MCAA.

Read TaxNewsFlash-FATCA / IGA / CRS

United States

  • Notice 2018-10 provides penalty relief relating to certain failures to deposit the medical device excise tax imposed under section 4191.
  • A Chief Counsel Advice memorandum provides an arrangement involving foreign currency fluctuations between an affiliated group and a related captive insurer does not constitute insurance for federal income tax purposes.
  • In Arkansas, coal used by the taxpayer to operate pollution-control equipment was not exempt from sales and use tax under provisions that allow an exemption for purchases of pollution-control machinery and equipment. A hearing officer concluded only chemicals that acted directly on air or water to remove or alter impurities qualified for the exemption. The state taxing authority sustained this determination administratively.
  • The California State Board of Equalization determined that no use tax applied when the taxpayer made conditional gifts of certain surgical instruments because: (1) the customers essentially received title when they received the instruments; and (2) the instruments were shipped from outside California, so that the gifts were completed outside of the state.
  • A tax amnesty program in Ohio began 1 January 2018.
  • The Pennsylvania Department of Revenue announced that it will be mailing non-participation penalty assessments to delinquent taxpayers that failed to participate in a 2017 tax amnesty program.

Read TaxNewsFlash-United States

Trade & Customs

  • Beginning 24 February 2018, the Automatic Commercial Environment (ACE) will be the sole electronic data interchange system authorized by CBP for processing certain electronic drawback filings; and the National Customs Automation Program (NCAP) test regarding reconciliation will become operational, and the program will transition to ACE.
  • The U.S. House of Representatives passed H.R. 4318, the “Miscellaneous Tariff Bill Act of 2018” that will now head to the Senate for its consideration. The bill would temporarily reduce tariffs on approximately 1,700 different products that are not otherwise available in the United States.

Read TaxNewsFlash-Trade & Customs

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