KPMG’s Week in Tax: 12 - 16 September 2016

KPMG’s Week in Tax: 12 - 16 September 2016

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

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  • Switzerland: The Swiss Federal Supreme Court decided that a “group request” filed by the Netherlands, in seeking the identity of unnamed customers of a Swiss bank, was acceptable. The Dutch tax authorities used the group request to identify possible instances of tax avoidance by taxpayers with foreign bank accounts.
  • Belgium: It has been determined that the average return and the notional interest deduction rate will be 0.237% for assessment year 2018. For small and medium sized enterprises (SMEs), the rate will be 0.737%. These rates are still subject to official confirmation.
  • EU: The European Commission announced it is working to draw up a first common EU list of non-cooperative tax jurisdictions by presenting a pre-assessment (“scoreboard of indicators”) of all third countries according to key indicators.
  • Germany: The new double tax agreement with Japan will bring significant advantages to Japanese companies in Germany and future investors.
  • Poland: A new call for grants to fund research and development projects leading to the development of innovative solutions has been announced in Poland. The call for proposals will open between 3 October 2016 and 2 November 2016.


Read TaxNewsFlash-Europe

Transfer Pricing and BEPS

  • Costa Rica: The final rules and procedures for filing of an annual transfer pricing return have been published. 
  • Pakistan: An agreement (convention) for mutual administrative assistance in tax matters was signed, allowing for automatic exchange of country-by-country reporting.
  • United States: The Treasury Secretary addressed how the EC’s state aid investigations present an opportunity for the U.S. Congress to move forward on business tax reform.


Read TaxNewsFlash-Transfer Pricing and TaxNewsFlash-BEPS


  • Ghana: A tax policy that previously allowed taxpayers to defer and apply unused capital allowances (for instance, depreciation) from the tax year when incurred, to other tax years has been clarified. Taxpayers are no longer allowed to defer capital allowances.
  • Mauritius: The Finance (Miscellaneous Provisions) Bill 2016 was released for consultation and will be introduced in the parliament.


Read TaxNewsFlash-Africa


  • Canada: The Prince Edward Island harmonized sales tax (HST) rate will increase to 15% (from 14%) effective 1 October 2016.
  • Mexico: An economic package for 2017 presented by the executive administration to Congress includes various tax reform proposals including tax incentives.


Read TaxNewsFlash-Americas

Asia Pacific

  • Australia: The Tasmanian government will introduce statutory exemptions for corporate reconstruction and corporate consolidation transactions.
  • Hong Kong: A practice note provides guidance about and clarifies recent amendments made to the Inland Revenue Ordinance with respect to “qualifying corporate treasury centres” (QCTC).
  • India: The Direct Selling Guidelines 2016 offer guiding principles for state governments to consider regulating the businesses of direct selling and multi-level marketing. The guidelines aim to strengthen the existing regulatory rules.
  • India: India’s tax authorities (CBDT) issued a set of “frequently asked questions” (FAQs) aimed at clarifying certain direct tax dispute resolution measures.
  • India: The Mumbai Bench of the Income-tax Appellate issued a decision concerning the taxability of capital gain and a 150-year “call option” granted to a Mauritian company.
  • India: The Authority for Advance Rulings (AAR) cannot reject an AAR application notice because the “scrutiny notice” issued by the Assessing Officer did not address any specific question and did not disclose items identified on the income tax return.
  • Vietnam: When a foreign party allows another party to use a trademark for purposes of selling the trademarked goods, the activity is considered to be the transfer of a right to use a trademark, distinguishable from the transfer of intellectual property, and this trademark transfer is subject to value added tax (VAT).
  • Indonesia and Singapore: A tax amnesty program in Indonesia offers wealthy individuals (and companies) an opportunity to disclose and repatriate their undeclared assets by paying what is described as a modest clearance levy on the declared assets. Indonesians have up to 30 September 2016 to enjoy the lowest tax bracket. The tax amnesty program may affect residential property values in Singapore, as Indonesians have historically been keen investors in Singapore property.


Read TaxNewsFlash-Asia Pacific


  • Mauritius: The final version of guidance notes for the implementation of the common reporting standard (CRS) in Mauritius was released.
  • UK: HM Revenue & Customs (HMRC) announced a new consultation that takes forward the “no safe havens” strategy for addressing offshore tax evasion. 
  • Russia: A draft version of legislation for public consultation was released, and if enacted, the law generally would implement rules for the automatic exchange of financial information for tax purposes with foreign countries under the common reporting standard (CRS) regime.
  • Sweden: The Swedish tax agency issued a notification form that a financial institution must submit when it either: (1) meets the criteria for reporting obligations; or (2) ceases to have any reporting obligations and no longer meets the criteria for reporting requirements under the CRS and the DAC 2 regimes.
  • Hong Kong: The Inland Revenue Department (IRD) provided reference materials concerning the “automatic exchange of information” (AEoI) rules.
  • Portugal: The intergovernmental agreement (IGA) between Portugal and the United States, signed in 2015, entered into force.
  • United States: The IRS issued a release that includes updated International Data Exchange Service (IDES) data preparation tools.


Read TaxNewsFlash-FATCA / IGA / CRS

United States

  • IRS Notice 2016-52 adds two new categories of splitter arrangements, referred to as “foreign-initiated adjustment splitter arrangements,” that will be added to the section 909 regulations.  Both involve transactions undertaken to separate a section 902 corporation’s earnings from foreign taxes imposed on those earnings in a subsequent year.  Unlike the splitter arrangements described in the final section 909 regulations, the new splitter arrangements apply to foreign taxes paid with respect to pre-2011 years.
  • Ways and Means Chairman Kevin Brady (R-TX) released a statement requesting that Treasury slow down the release of final regulations under section 385.
  • The Eleventh Circuit affirmed findings of the Tax Court’s that the taxpayers were liable for a tax deficiency of approximately $1.78 million due to the improper characterization of income from the sale of real property as capital gain, rather than as ordinary business income.
  • Under a proposed Accounting Standards Update (ASU), FASB would provide additional opportunities for an entity to align its hedge accounting with its risk management activities. The ASU has the potential to reduce the cost and effort required to apply hedge accounting.
  • The Indiana Department of Revenue has a long history of rejecting transfer pricing studies when attempting to use its discretionary authority to adjust a taxpayer’s income or to force a taxpayer to file a combined return with affiliates, but a “Letter of Findings” indicates that the Department may be revising its position in light of two recent tax court decisions.
  • The First Circuit affirmed a federal district court’s grant of a request by a taxpayer for a permanent injunction against Puerto Rico’s enforcement of its recently amended corporate alternative minimum tax (AMT).
  • An Administrative Law Judge for the Utah Tax Commission recently determined that a taxpayer owes sales tax on amounts paid to a related corporation for reimbursements of employee labor for repairing personal property.


Read TaxNewsFlash-United States


  • The House Ways and Means Committee approved and reported out four tax bills reflecting priorities of members of the committee. The overall revenue cost associated with the bills was not offset.
  • The House of Representatives passed a bill that would lower the adjusted gross income threshold for an itemized deduction for unreimbursed medical expenses—from 10% to 7.5%—for all taxpayers, regardless of age. Under the bill, the threshold would continue to be 10% for AMT purposes.


Read TaxNewsFlash-Legislative Updates


  • “System outages” have affected the ability of certain section 501(c)(4) organizations to electronically file Form 8976 by the due date, but there is potential penalty relief.


Read TaxNewsFlash-Exempt Organizations

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