KPMG’s Week in Tax: 20 - 24 August 2018 | KPMG | US
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KPMG’s Week in Tax: 20 - 24 August 2018

KPMG’s Week in Tax: 20 - 24 August 2018

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

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United States

  • Proposed regulations were issued to address the cap on state and local tax (SALT) deductions under the new U.S. tax law and attempts to provide certain individual taxpayers with a tax credit that could be claimed as a charitable contribution deduction.
  • Proposed regulations concerning “global intangible low-taxed income” (GILTI)—a regime created by the new U.S. tax law—have been sent for administrative review prior to being formally released by the U.S. Treasury Department and IRS. Also, the IRS released draft versions of two forms concerning GILTI reporting for 2018.
  • Under the new U.S. tax law, Notice 2018-67 addressed new section 512(a)(6) that requires an organization subject to the unrelated business income tax under section 511, with more than one unrelated trade or business, to calculate unrelated business taxable income (UBTI) separately with respect to each trade or business. The notice provides transition rules and interim guidance under section 512(a)(6) on which organization may rely, pending publication of proposed regulations.
  • Reflecting the new U.S. tax law, Rev. Proc. 2018-44 provides guidance for “eligible terminated S corporations” that, because the S corporation election is terminated or revoked, realize a positive or negative adjustment on changing from the overall cash method of accounting to the overall accrual method. The revenue procedure also modifies the “list of automatic changes” as currently provided by Rev. Proc. 2018-3.
  • The IRS released Notice 2018-68 as initial guidance on the application of section 162(m)—as amended by the new U.S. tax law—concerning the allowable deduction for remuneration paid by any publicly held corporation with respect to a “covered employee.” The notice provides a transition rule applicable to certain outstanding arrangements (referred to as the “grandfather rule”).
  • Two more U.S. states—New Jersey and South Carolina—responded to the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. concerning the sales tax implications of remote or online sales.
  • The Colorado Department of Revenue ruled that a restaurant’s purchase of pre-packaged dressing that was mixed with other food products to produce a condiment that, in turn, was then sold to customers was not exempt as a wholesale purchase for resale, but was a purchase subject to sales tax. 
  • Oregon’s Supreme Court held that a Texas-based motor vehicle financing entity must include the income of two affiliate banks (based in Virginia and not having physical presence in Oregon) in computing its Oregon tax despite the lack of physical presence in Oregon. The banks had income from providing credit cards and consumer loans to Oregon customers, and thus were found to have income derived from sources in the state.
  • The Texas Comptroller issued a private letter ruling concluding that a taxpayer’s call tracking and monitoring services were not subject to sales and use tax. 
  • The Vermont Department of Taxes issued guidance concerning the implications of federal tax law changes for Vermont’s individual (personal) income tax laws—specifically, the deductions under the federal tax provision of IRC section 250 (known as the “GILTI”) and IRC section 199A.  

Read TaxNewsFlash-United States

Africa

  • Nigeria: The Federal Inland Revenue Service (FIRS) has started issuing notices, for business taxpayers to reconcile their unused withholding tax credit balances within 15 days of receiving the notice. Failure to do so would be construed as acceptance of the tax administration’s position and thereby foreclose any possible future reconciliation.
  • South Africa: A “memorandum of understanding” involving the South African Revenue Service (SARS) and the Broad-Based Black Economic Empowerment (B-BBEE) Commission appears to reflect the tax authority’s intention for greater vigilance regarding empowerment transactions.

Read TaxNewsFlash-Africa

Americas

  • Chile: The government announced its intention to introduce a tax reform bill that would modernize and simplify the Chilean tax system in an effort to promote investment, growth, and employment.
  • Canada: In Manitoba, the budget bill has been introduced and reflects certain corporate tax changes (including changes to tax credits) that were part of the province's 2018 budget. The measures are proposed to be effective 1 January 2019.
  • Canada: Large businesses are essentially no longer required to repay input tax credits under Ontario harmonized sales tax (HST).
  • Canada: Quebec will temporarily enhance the tax credit for investments relating to manufacturing and processing equipment.

Read TaxNewsFlash-Americas

Asia Pacific

  • Australia: Anti-hybrid measures include rules concerning imported or “upstream mismatches,” and the minimum taxation on foreign lenders.
  • Australia: Proposed changes to the research and development (R&D) tax incentive include an “intensity threshold test”—the more a company spends on R&D as a proportion of its total expenditure, the greater the tax offset for that incremental expenditure.
  • Korea: The tax authority intends to provide the tax administrations of some 60 countries with the South Korean financial account information of their residents by the end of September 2018.
  • India: The Central Board of Direct Taxes (CBDT) has proposed changes to the rules and form that apply concerning applications for a certificate of lower “withholding” (in India, referred to as “deduction”) or no withholding of tax at source. 
  • India: The CBDT issued a circular to suspend requirements for certain disclosures with respect to the general anti-avoidance rule (GAAR) and goods and services tax (GST). 
  • India: The Authority for Advance Rulings (AAR) concluded that both the conversion of electronic vault receipts into “e-units” and e-units into diamonds are to be treated as a supply for GST purposes. 
  • India: The AAR concluded that employees of a corporate office providing services to a “distinct person” are a supply subject to GST. Corporate offices and units located in different states are distinct persons.
  • India: A tribunal rejected the taxpayer’s method in applying unabsorbed loss carryforwards and unabsorbed depreciation for purposes of the minimum alternate tax computation. 

Read TaxNewsFlash-Asia Pacific

Europe

  • Serbia: A new law concerns the employment of foreigners and amends the rules for temporary assignments of workers abroad, effective 25 August 2018.
  • Czech Republic: The Supreme Administrative Court addressed the burden of proof in a matter when the value added tax (VAT) exemption of a cross-border supply of goods was challenged by the tax administrator. The high court held that in this case, the supplier could not plead good faith when it was “passive” and did not make any efforts to verify information provided by the customer(s).
  • Czech Republic: Changes to the law governing corporations in the Czech Republic—including amendments that would concern “elected bodies” of corporations and in particular when they are other corporate entities—are being considered.
  • Czech Republic: Amendments to the VAT law in the Czech Republic are scheduled to be effective in 2019. A KPMG report addresses questions that arise under the VAT amendments concerning limited liability company (LLC) statutory representatives, and the timing for declaring VAT.

Read TaxNewsFlash-Europe

BEPS

  • OECD: The Former Yugoslav Republic of Macedonia joined the base erosion and profit shifting (BEPS) inclusive framework—bringing the total number of jurisdictions having joined the BEPS inclusive framework to 117.

Read TaxNewsFlash-BEPS

FATCA / IGA / CRS

  • United States: The IRS: (1) published a new “frequently asked question” (FAQ) as guidance for qualified intermediaries / withholding foreign partnerships / withholding foreign trusts (QI/WP/WT); and (2) issued a reminder to all QI/WP/WT entities with a certification period ending in 31 December 2017 to log into the QI/WP/WT Application and Account Management System to select the periodic review year of their certification period by 1 September 2018.
  • Austria: Legislation contains amendments to the deadlines under the common reporting standard (CRS) rules. For CRS reporting, the annual deadline has been moved to the end of July (from the end of June) of the following calendar year.

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • United States: The U.S. Commerce Department announced its findings of affirmative preliminary determinations in the antidumping duty (AD) investigations of imports of large diameter welded pipe from Canada, China, Greece, India, Korea, and Turkey. Commerce preliminarily determined that exporters from these countries have sold large diameter welded pipe at less than fair value in the United States.
  • United States: The U.S. International Trade Commission (ITC) released its annual overview and report regarding the administration of U.S. trade laws and trade agreements. It is intended to be a comprehensive report regarding activities related to U.S. trade policies, agreements, and trade laws.
  • United States: The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced North Korea-related designations, continuing the implementation of existing United Nations (UN) and U.S. sanctions, that applies against two entities and six vessels and targets persons involved in the ship-to-ship transfer of refined petroleum products with North Korea-flagged vessels.
  • United States: The Office of the U.S. Trade Representative (USTR) held a public hearing concerning the “Section 301” tariff measures on an additional $200 billion of Chinese commodities.
  • United States: Turkey circulated a request to World Trade Organization (WTO) members for dispute consultations with the United States with respect to the additional import duties imposed by the United States on steel and aluminum imports from Turkey.
  • United States: It is being reported that U.S. Customs and Border Protection (CBP) will start testing blockchain functionality to verify NAFTA and CAFTA certificates of origin beginning in September 2018 to: (1) allow for more accurate information about imported goods from the country of export; and (2) verify that suppliers in other countries are compliant, along with their U.S. importers.
  • China: The customs authority in China revised the HS codes that apply for commodities. The new HS code system has been updated to reflect a 13-digit number. 

Read TaxNewsFlash-Trade & Customs

Cooperatives

  • The IRS has posted a draft version of Form 1120-C, U.S. Income Tax Return for Cooperative Associations, proposed for 2018.

Read TaxNewsFlash-Cooperatives

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