KPMG’s Week in Tax: 9-13 November

KPMG’s Week in Tax: 9-13 November

Countries continue to consider how to implement recommendations of the OECD’s base erosion and profit shifting (BEPS) project.

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  • UK: Among consultations following the release of the BEPS deliverables is one concerning the deductibility of a corporate interest expense and how this treatment would be affected by BEPS Action 4 (which seeks to develop recommendations in the design of rules limiting the deductibility of interest and other financial payments made to third parties and related parties). The UK’s current interest deductibility rules reside in the UK transfer pricing statutory provisions and apply an arm’s length test. A move towards the OECD’s proposed fixed rate of interest would constitute a fundamental change for all debt-funded businesses in the UK, with most taxpayers expected to experience a reduction in tax deductible interest expense.
  • France: Legislative proposals being considered in the National Assembly would require the automatic filing of transfer pricing documentation and, as part of this documentation, country-by-country reporting would be compulsory and based on the model provided in BEPS Action 13.

Read TaxNewsFlash-Transfer Pricing

FATCA / CRS developments

  • Luxembourg: A pending bill would transpose into Luxembourg domestic law, an EU directive amending a 2011 directive for administrative cooperation and concerning the exchange of information on request. The directive is referred to as “DAC 2” and is akin to the OECD’s common reporting standard (CRS).
  • EU: The EU savings taxation directive that allowed tax administrations to have access to information about “private savers,” was repealed by the European Council, given the strengthening of global standards (notably, the CRS).
  • FATCA: The U.S. Treasury Department posted text of an intergovernmental agreement (IGA) signed on 9 November 2015 under the FATCA regime by the United States and Angola.
  • Austria: Application of the CRS exchange of information will begin in 2018 (instead of 2017 as in most EU Member States). Austria voluntarily agreed to apply the new financial account “due diligence” requirement for accounts opened on or after 1 October 2016, and will exchange information from such new accounts in 2017 with other EU Member States and in 2018 with other CRS jurisdictions.

Read more at TaxNewsFlash-FATCA

Other tax news

  • Czech Republic: The Supreme Administrative Court looked to the economic substance (and not merely tax reasons) of a corporate reorganization in a case concerning a claim for deduction of interest on a loan related to the ownership acquisition.  
  • Poland: A draft of new value added tax (VAT) legislation would provide a number of amendments to existing VAT law.

Read TaxNewsFlash-Europe


  • Japan: Under the 2015 tax reform, when an individual resident taxpayer claims income deductions for non-resident family members, the taxpayer must submit or present “documents proving family members” and “documents for money transfers” beginning from 2016.

Read TaxNewsFlash-Asia Pacific


  • United States: The Senate Foreign Relations Committee reported out, to the full Senate, income tax treaties and/or Protocols with Switzerland, Luxembourg, Hungary, Chile, OECD, Spain, Poland, and Japan. These agreements have been pending Senate approval since they were signed in 2009, 2010, and 2013. A senator has put a “hold” on these agreements. Accordingly, when—or if—the Senate would consider these agreements is uncertain. 

Read TaxNewsFlash-United States


  • India: The Mumbai Bench of the Income-tax Appellate Tribunal held that an Assessing Officer cannot “mechanically” refer a taxpayer’s international transactions to a Transfer Pricing Officer for a determination of the arm’s length price, but must first independently conclude that the taxpayer did not determine the arm’s length price or did not maintain appropriate documents based on statutory provisions. The tribunal also found that there cannot be a transfer pricing adjustment when there would be no tax avoidance.

Trade and customs developments

  • United States: The Bureau of Industry and Security (BIS) made available a web-based tool for determining whether non-U.S. made items are subject to the Export Administration Regulations.
  • United States: U.S. Customs and Border Protection (CBP) released a final rule concerning “continuous bonds.” The release finalizes measures concerning the CBP bond program (as proposed in 2010) but with certain changes.
  • EU: The next step concerning sanctions relief for Iran and related changes in the EU dual-use list for export controls would be the “implementation date,” which will be when the International Atomic Energy Agency (IAEA) verifies that Iran has taken all of the key nuclear-related steps.

Read TaxNewsFlash-Trade & Customs


Read these and other items reported this week at the TaxNewsFlash United States and Global websites.

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