KPMG’s Week in Tax: 15-19 February 2016

KPMG’s Week in Tax: 15-19 February 2016

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

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United States

  • A newly revised “U.S. Model Income Tax Convention”—the first changes to the U.S. model income tax treaty since 2006—will serve as the baseline text for use by Treasury in negotiating tax treaties, and reflects certain but not all OECD base erosion and profit shifting (BEPS) recommendations.
  • The FIRPTA withholding tax rate increased to 15%, effective February 17, 2016, on certain amounts realized by foreign persons disposing of a "U.S. real property interest" (USRPI). Treasury and the IRS issued new versions of Form 8288 and the related instructions as well as proposed regulations reflecting these and other changes to the FIRPTA withholding tax rules.
  • Final regulations on information reporting by brokers for transactions involving debt instruments and options were issued.
  • A new IRS practice unit provides guidance on the “physical presence test” for purposes of individuals qualifying for section 911 tax benefits when outside the United States or working abroad.
  • Proposed regulations on the prohibition of certain contributions to Type I and Type III supporting organizations and the requirements for Type III supporting organizations.


  • Poland: A new law imposes a tax on banks, lending institutions, and insurance companies; given the broad definition of terms, the new financial institutions tax may affect entities and groups offering credit.
  • EU: A pilot project allows taxable persons to obtain advance rulings on value added tax (VAT) treatment of complex cross-border transactions.
  • France: News reports indicate there may be a possible extension of “exceptional depreciation” rules through 2016.
  • Luxembourg: New research & development (R&D) incentives are expected in the 2017 tax reform package.
  • EU: Changes to customs valuation rules reflect the repeal of the “first sale for export” concept.
  • EU: Public consultation to help identify ways to facilitate dispute resolution for businesses experiencing problems with double taxation.

Transfer pricing

  • India: Payment of 2% on sales considered to be at arm’s length, and transfer pricing adjustment is denied.
  • India: Guidelines concerning the valuation of related-party imports for customs purposes.
  • Romania: New requirements for transfer pricing documentation.

Asia Pacific

  • Indonesia: Reduced withholding tax rates with respect to interest income from certain deposits or savings in Indonesian banks.
  • China: Guidance providing incentives for “high and new technology enterprises.”
  • Myanmar: Because the stamp tax has been gradually updated over the last few years, investors need to verify that their contracts or leases are “stamped” and comply with the updated stamp tax rules. 
  • Thailand: Emergency decree providing a “tax audit exemption program” for eligible taxpayers (typically small and medium size entities).


  • Canada: British Columbia’s 2016 budget aims to improve housing affordability by providing an exemption from the property transfer tax for certain newly constructed residences.
  • Dominican Republic: Inflation adjustments are announced for the 2015 tax year.
  • Mexico: Customs and tax incentives are available for importers that obtain authorization under an incentive regime.


  • South Africa: Tax treatment of unrealised gains on foreign currency loans has been revised.
Read these and other items reported this week at the TaxNewsFlash United
and Global websites

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