KPMG’s Week in Tax: 21-25 March 2016

KPMG’s Week in Tax: 21-25 March 2016

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

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Asia Pacific

  • China: The tax authorities issued guidance providing the rates and rules on transitioning from the business tax to an expanded value added tax (VAT) regime that will apply for industry sectors including financial services, insurance, real estate, construction, and “lifestyle services” sectors beginning 1 May 2016.
  • India: The Mumbai Bench of the Income-tax Appellate Tribunal held that income arising from container services cannot be treated as income arising from a shipping business because the taxpayer did not own, charter or lease any vessel or ship. The tribunal concluded that the income was taxable as business income; however; absent a permanent establishment under the India-Singapore income tax treaty, none of the income was taxable in India.
  • China: The customs authority issued guidance to lessen restrictions on direct filing of customs clearances.
  • New Zealand: Two 2015 tax bills concerning goods and services tax (GST) and withholding tax on residential property transfers have been reported back from the Finance and Expenditure Select Committee of Parliament.
  • Australia: Customs compliance will focus, in part, on the correct use of tariff concession orders (TCOs) and correctly disclosing the customs value of imported goods.
  • Australia: Under the research and development (R&D) tax incentive regime, the Australian Taxation Office (ATO) will focus on reviewing documentation and other evidence supporting claims for R&D.

Read TaxNewsFlash-Asia Pacific


  • Canada: The 2016 federal budget, as delivered this week, includes tax measures, and provisions that reflect recommendations from the OECD’s base erosion and profit shifting (BEPS) project—including expanded transfer pricing documentation, measures to address treaty abuse (or “treaty shopping”), the automatic exchange of tax rulings, and a minimum standard for country-by-country reporting.  
  • Mexico: Tax incentives are available for employers that hire workers with disabilities including a deduction that references the income tax or claim a tax deduction equal to 25% of the amount of salary paid the employee.

Read TaxNewsFlash-Americas


  • OECD: A consultation document was released as part of the OECD’s follow-up work to BEPS Action 6 concerning treaty benefits for non-CIV (collective investment vehicle) funds.
  • EU: A draft proposal from the European Commission (EC) would require “public” country-by-country reporting by multinational groups with a total consolidated revenue of €750 million if EU parented or they have EU subsidiaries or branches.
  • OECD: The OECD released guidelines and a user guide for the standardized electronic format to be used in the exchange of country-by-country reports between jurisdictions.

Read TaxNewsFlash-BEPS

Transfer Pricing

  • India: The Delhi High Court rejected the taxpayer’s aggregation or bundling of imports of component parts under the transactional net margin method (TNMM) because the facts in this case demonstrated that the import arrangements, when viewed in their totality, differed from those that would have been made by independent enterprises acting in a commercially rational manner. The High Court upheld the approach of the Transfer Pricing Officer to benchmark the transactions pertaining to imports of the component parts separately. 
  • United States: The IRS issued a “practice unit” (guidance for use by IRS examiners) concerning the inbound resale price method (RPM) for routine distributors.

Read TaxNewsFlash-Transfer Pricing


  • UK: The Finance (No. 2) Bill 2016 was published.
  • Poland: The Court of Justice of the European Union (CJEU) concluded that insurance claims-handling services are subject to VAT if performed by a party that: (1) does not assume the insured risk; and (2) is not acting as an intermediary. The judgment has implications for insurers and those providing claims-handling services in other EU Member States including the Netherlands, Belgium, and the UK.
  • Netherlands: The Dutch Supreme Court held that a business subject to VAT can deduct the amount of VAT charged on the costs incurred for the management and the business activities of its own company pension fund.
  • EU: Customs authorities will be conducting re-assessments of all holders of AEO (authorized economic operator) certificates and any other customs authorizations that were issued prior to 1 May 2016, because a new customs law will be effective in the EU.
  • Italy: The Italian revenue agency issued a draft decree for implementing Italy’s new “branch exemption” regime. Under the regime, Italian resident enterprises may elect different treatment of the profits and losses of their foreign permanent establishments (PEs) as an alternative to the standard tax treatment with tax credits.
  • Switzerland: The Swiss National Council on 16-17 March 2016 addressed draft legislation for corporate tax reform, known in English as “Corporate Tax Reform III.” The National Council responded to certain international developments, in particular the BEPS project.

Read TaxNewsFlash-Europe


  • Australia: Common reporting standard (CRS) enabling legislation in Australia received Royal Assent and took effect on 18 March 2016. The start date for CRS obligations is 1 July 2017.

Read TaxNewsFlash-FATCA / IGA / CRS

United States

  • Notice 2016-27 provides additional time for basis reporting by estates. Under regulations issued earlier this month, the earliest time for furnishing and filing a statement under section 6035 was set as 31 March 2016. This week’s notice provides additional time—executors and other persons required to file or furnish a statement under section 6035 before 30 June 2016 need not do so until 30 June 2016.
  • Rev. Proc. 2016-22 updates and revises IRS practices with respect to the administrative appeals process for cases docketed in the U.S. Tax Court.
  • Louisiana’s special legislative session ended with lawmakers agreeing to tax increases and spending cuts, many of which are temporary, in an effort to address a budget deficit for the fiscal year beginning 1 July 2016.
  • An IRS announcement provides a transition period and guidance for when taxpayers may use the revised Form 3115, Application for Change in Accounting Method, and when the revised Form 3115 must be used.

Read TaxNewsFlash-United States

  • Congress passed a short-term version of H.R. 4721—a bill to extend the authorization of Federal Aviation Administration (FAA) programs and related taxes, thereby possibly creating an opportunity for tax legislation later this summer since the extension expires 15 July 2016.

Read TaxNewsFlash-Legislative Updates

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