KPMG’s Week in Tax: 18 - 22 June 2018 | KPMG | US
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KPMG’s Week in Tax: 18 - 22 June 2018

KPMG’s Week in Tax: 18 - 22 June 2018

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

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United States

  • The U.S. Supreme Court issued a decision in South Dakota v. Wayfair, Inc.—a case concerning state taxation of remote sales. The Court concluded that the physical presence test for sales and use tax purposes was “unsound and incorrect,” and thus overturned the physical presence nexus requirement of Quill v. North Dakota.
  • The U.S. Supreme Court held that employee stock options are not taxable compensation for purposes of the Railroad Retirement Tax Act.
  • Notice 2018-48 lists the population census tracts designated by the Treasury Secretary as qualified opportunity zones.
  • An IRS Large Business and International released a “practice unit” on the issue of interest capitalization for self-constructed assets.
  • Rev. Proc. 2018-35 provides procedures by which certain taxpayers may obtain automatic consent to change their method of accounting with respect to expensing certain citrus replanting costs.
  • Proposed regulations address allocations of partnership liabilities under the disguised sale rule. The proposed regulations were issued in response to an Executive Order to mitigate the burden imposed by regulations previously identified as either imposing an undue financial burden on taxpayers, or adding excessive complexity to the tax system. These proposed regulations affect temporary and proposed regulations under section 707 (October 2016). No change is proposed to be made to the sections 707 and 752 final regulations, the section 752 temporary regulations relating to bottom dollar liabilities or the section 752 and section 704 proposed regulations (also October 2016).
  • The Colorado Department of Revenue issued guidance that any amounts included in income under IRC section 965 (transition tax for repatriation under the new federal tax law) must also be included in the amount of federal taxable income reported on the taxpayer’s Colorado return.
  • A New York administrative law judge found that a taxpayer engaged in generating electricity at a plant in New York was not a “qualified New York manufacturer” for the cap imposed under the state’s capital base liability measures.
  • Legislation enacted in North Carolina updates the state’s definition of the Internal Revenue Code to capture the Code as of 9 February 2018.
  • The Rhode Island Division of Taxation proposed a regulation to provide guidance on the corporate tax treatment of deferred foreign income or section 965 income for the 2017 tax year. 
  • A Texas state appeals court held that a telecommunications provider (that offered internet access, landline telephone services, and online video streams and that also sold landline phones) was not entitled to a refund of the state’s franchise tax because the taxpayer could not deduct electricity used to generate and transmit its telecom products as “costs of goods sold” (COGS). The taxpayer argued that its telecom products were “goods,” not “services.”

 

Read TaxNewsFlash-United States

Transfer Pricing and BEPS

  • Nigeria: Regulations were issued as guidance for country-by-country (CbC) reporting purposes.
  • OECD: New guidance addresses the application of the approach to hard-to-value intangibles and the transactional profit split method under Action 8 and Action 10 of the base erosion and profit shifting (BEPS) project.
  • Belgium: As a reminder, the transfer pricing documentation due dates are as follows: (1) the Local file must be filed with the taxpayer’s tax return before or by 27 September 2018; and (2) the CbC notification and the Master file must be filed within 12 months after the last day of the reporting period of the group.
  • OECD: Comments concerning potential amendments to the OECD Transfer Pricing Guidelines (Chapter IV (administrative approaches) and Chapter VII (intra-group services)) were submitted by KPMG.
  • Thailand: Transfer pricing proposals for related-party disclosures have advanced to the national legislative assembly, and are expected to become effective 1 January 2019. 

 

Read TaxNewsFlash-Transfer Pricing

Europe

  • Belgium: Companies with a financial year ending on 31 December 2017 are reminded to file their corporate/non-resident income tax returns by 27 September 2018.
  • Serbia: A law establishing a registry of “ultimate beneficial owners” was enacted 8 June 2018.
  • Luxembourg: The European Commission (EC) directed Luxembourg to recover €120 million in unpaid taxes. The EC found Luxembourg issued tax rulings that allowed the taxpayer companies to avoid paying taxes on almost all profits for a decade—and thus provided an undue advantage.
  • Ireland: Updated guidance clarifies operation of “pay as you earn” (PAYE) tax for short-term business visitors. 
  • Austria: Draft legislation would transpose the EU Anti-Tax Avoidance Directive (ATAD) into Austrian domestic tax law. The draft bill also includes measures concerning the introduction of controlled foreign company (CFC) rules.
  • Luxembourg: Bills to transpose the EU ATAD into domestic law and to ratify the multilateral instrument (MLI) advanced.
  • OECD: A release addresses attempts by multinational mining enterprises to avoid taxes through the use of tax incentives.
  • Sweden: The parliament passed legislation that clears the path for enactment of corporate tax measures: (1) implementation of the EU ATAD; (2) interest deduction limitation rules; and (3) phased-in reduction of the corporate income tax rate.

 

Read TaxNewsFlash-Europe

Africa

  • Mauritius: The first return of dividends relating to the income year beginning on 1 July 2017 and ending 30 June 2018, must be filed by 15 August 2018 by companies that pay dividends exceeding MUR 100,000 (approximately U.S. $2,850).

 

Read TaxNewsFlash-Africa

Americas

  • Canada: A tax bill in Prince Edward Island was enacted, and includes measures to reduce the small business tax rate to 4% (from 4.5%), effective 1 January 2018.

 

Read TaxNewsFlash-Americas

Asia Pacific

  • Hong Kong: There are tax implications of recent accounting changes concerning financial instruments, contracts with customers, and leases.
  • Myanmar: Withholding tax changes—including rules for withholding tax on payments for goods and services to residents and concerning threshold changes—are effective beginning 1 July 2018.
  • Australia: The capital territory 2018-2019 budget includes certain tax incentives.

 

Read TaxNewsFlash-Asia Pacific

FATCA / IGA / CRS

  • Luxembourg: FATCA and common reporting standard (CRS) guidance was issued.
  • Russia: A resolution on implementing the CRS has an effective date of 20 July 2018.
  • France: Updated versions of technical guidance for French financial institutions include technical description and specifications required for the transmission of FATCA and CRS returns.
  • Switzerland: An updated version of the CRS technical guidance provides detailed information on various data elements and the format for transmitting CRS returns.

 

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • EU: The EC adopted customs tariff measures in response to the U.S. tariffs on steel and aluminum. The measures will immediately target a list of products having a value of €2.8 billion and have an effective date of 22 June 2018.
  • United States: The tariff actions concerning China include a request for comments on the “section 301” investigation, and potential additional 10% tariffs on more imports from China. 
  • China: In response to U.S. tariff actions, China will impose an additional customs duty tariff of 25% on 659 products imported from the United States beginning 6 July 2018.

 

Read TaxNewsFlash-Trade & Customs

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