KPMG’s Week in Tax: 27 - 31 August 2018 | KPMG | US
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KPMG’s Week in Tax: 27 - 31 August 2018

KPMG’s Week in Tax: 27 - 31 August 2018

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

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United States

  • OMB’s Office of Information and Regulatory Affairs (OIRA) review of proposed Treasury regulations concerning section 385 and the treatment of certain interests between members of an expanded group has been completed. The U.S. Treasury Department and IRS will now be expected to release the proposed regulations.
  • Notice 2018-70 states that the U.S. Treasury Department and IRS intend to issue proposed regulations clarifying the definition of “qualifying relative” for the new $500 credit for dependents and head of household filing status for years in which the exemption amount is zero—for taxable years 2018-2025.
  • The IRS Large Business and International (LB&I) division publicly released a directive to provide guidance on the federal income tax treatment of AG 43 reserves for all open tax years, and principle-based reserves for the 2017 tax year.
  • The IRS announced changes to the “Compliance Assurance Process” (CAP) program for 2019. The IRS will shift the start of the application period to October 1, 2018, and it will close on November 30, 2018.
  • Rev. Proc. 2018-45 provides the domestic asset / liability percentages and domestic investment yields needed by foreign life insurance companies and by foreign property and liability insurance companies to compute their minimum effectively connected net investment income under section 842(b) for tax years beginning after December 31, 2016.
  • The U.S. Tax Court issued an opinion concluding that a facade easement did not result in a charitable contribution because the taxpayer failed to meet the requirements of section 170(h).
  • The California Court of Appeal, Fourth District, has held that California’s differential treatment of interstate and intrastate businesses (i.e., requiring interstate unitary businesses to file combined, but allowing intrastate unitary businesses to elect to file separately or combined) does not violate the Commerce Clause.
  • More U.S. states—Arkansas, Colorado, Nevada, South Carolina, South Dakota, Tennessee, and Texas—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 Superior Court for San Francisco County (California) declared two unclaimed property compliance requirements invalid and enjoined the State Controller’s Office from enforcement.
  • The Kentucky Department of Revenue issued guidance on the state’s treatment of global intangible low-taxed income (GILTI) noting that GILTI is considered nontaxable income for Kentucky income tax purposes.
  • The North Dakota Commissioner of Revenue addressed the state’s treatment of Code section 965 income, GILTI, foreign-derived intangible income (FDII), and base erosion anti-abuse tax (BEAT).
  • A Texas district court ruled in a taxpayer’s favor in a case addressing how a taxpayer should apportion its subscription revenue. The court concluded that Texas uses an origin-based method and the apportionment factors reported on the original return were consistent with the fair value of the taxpayer’s services performed in Texas.
  • The Texas Comptroller ruled that a lump-sum monthly charge for certain legal support services was subject to sales and use tax.

Read TaxNewsFlash-United States

Europe

  • Isle of Man: The governments of Isle of Man, Jersey, and Guernsey have been working together to address the concerns of the EU Code of Conduct Group regarding “economic substance.”
  • Romania: The KPMG member firm in Romania has produced a tax guide that provides overviews of the tax system for corporations and individuals. The tax guide also covers value added tax (VAT), excise tax, property taxes, and other indirect taxes.

Read TaxNewsFlash-Europe

Transfer Pricing

  • Nigeria: New transfer pricing regulations—effective retroactively from March 2018—include changes to penalties for non-compliance, procurement arrangement, and safe harbour, among others.

Read TaxNewsFlash-Transfer Pricing

FATCA / IGA / CRS

  • India: The tax department issued updated versions of Form 61B and user manuals under the FATCA and common reporting standard (CRS) regimes. 

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • NAFTA: The Office of the U.S. Trade Representative (USTR) announced the United States and Mexico have reached a preliminary agreement on the re-negotiations of the North American Free Trade Agreement (NAFTA).

Read TaxNewsFlash-Trade & Customs

Americas

  • Chile: Legislative text of a tax reform bill was submitted to Congress—thereby giving a first look at the proposals that would affect income tax, value added tax (VAT), international tax regime, the taxation of capital gains, and the rules concerning the tax treatment of reorganizations, among others.

Read TaxNewsFlash-Americas

Asia Pacific

  • Japan: The scope of tax payment obligations of inheritance tax / gift tax for foreign nationals was amended under 2018 tax reform.
  • India: The Direct Taxes Committee of Institute of Chartered Accountants of India released the implementation guide on the amendments made to Form 3CD to allow the taxpayers and auditors to implement the changes in the best possible manner. 
  • India: The Allahabad High Court reiterated its earlier holding that conveyance details in part B of the “e-way bill” are not required to be filled in, when the goods are transported within a distance of 50 km. 
  • India: The Central Board of Direct Taxes issued an instruction for the conduct of assessment proceedings through the e-proceedings facility during the year 2018-2019. 
  • India: The Supreme Court of India held that once the taxpayer has opted to claim a deduction under section 80-IC of the Income-tax Act, 1961 and the initial assessment year has commenced within the tax holiday period of 10 years, there cannot be another “initial assessment year” to allow the 100% deduction for the next five years.
  • India: The Madras High Court held that non-payment of service tax on the basis of an error in a software programme cannot be a reasonable cause.
  • Philippines: The Court of Tax Appeals held that a “final assessment notice”—even if duly received by the taxpayer—is void because the due dates for paying the alleged deficiency taxes were blank.
  • Australia: Parliament is scheduled to resume on 10 September 2018, with tax legislation still pending, including the public reporting of corporate entity tax.
  • Australia: Draft legislation proposes to expand the definition of “significant global entity” to include certain members of large business groups headed by proprietary companies, trusts, partnerships, and investment entities.
  • Australia: A proposed amendment would deny the ability to revalue assets solely for thin capitalisation purposes. This would reduce the amount of allowable tax-deductible debt to fund Australian operations.
  • Australia: The Senate rejected a proposed company tax rate reduction to 25% for all companies.

Read TaxNewsFlash-Asia Pacific

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