KPMG’s Week in Tax: 26 - 30 September 2016

KPMG’s Week in Tax: 26 - 30 September 2016

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

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Transfer Pricing and BEPS

  • Hong Kong: Hong Kong is promoting itself as a potential regional treasury hub and has introduced tax incentives for corporate treasury centres. An interest deduction is available for certain intra-group financing transactions, and a concessionary profits tax rate of 8.25% applies on certain income of qualifying corporate treasury centres. Still, taxpayers need to pay attention to transfer pricing under this regime.
  • Channel Islands: A consultation was released on the introduction of country-by-country (CbC) reporting in Guernsey. The consultation runs until 21 October 2016.
  • OECD: The Organisation for Economic Cooperation and Development (OECD) announced a public consultation on transfer pricing matters, for 11-12 October 2016 at the OECD facilities in Paris, France.
  • Sweden: The budget bill for 2017, presented in September 2016 to the Swedish parliament, includes provisions for CbC reporting.
  • Australia: The Australian Taxation Office (ATO) published additional guidance for taxpayers who are (or will be) subject to the CbC reporting regime.


Read TaxNewsFlash-Transfer Pricing and TaxNewsFlash-BEPS


  • France: The Ministry of Finance presented tax provisions that will be included in the draft Finance Bill for 2017, prior to the bill being submitted to the French Parliament.
  • Cyprus: The tax department submitted for discussion and approval a bill proposing the mandatory electronic submission of value added tax (VAT) returns in relation to legal entities.
  • Ireland: The Companies Act 2014 imposed a new requirement on directors to include a directors’ compliance statement in the annual directors’ report, and this possibly affects UCITS regulated funds.
  • Romania: A research and development (R&D) incentive provides salary income earned from conducting R&D activities is exempt from individual (personal) income tax.
  • Slovakia: Amendments to legislative proposals would reduce the rate of corporate income tax and revise the taxation of dividends. The amendments are expected to be approved by the Parliament by year-end, with an effective date of 1 January 2017.
  • Sweden: The budget bill for 2017 primarily focuses on social issues (welfare, jobs, accommodating refugees, gender equality, etc.), and contains very few reforms in the corporate tax area, except for some changes affecting taxation in the energy sector. There is also a focus on efforts to counter tax evasion and tax avoidance as well as CbC reporting rules.
  • Switzerland: Switzerland’s non-life insurance industry is being affected by a range of new and upcoming regulatory initiatives, including the disappearance of Switzerland’s tax privilege regime.
  • OECD: The OECD issued a release concerning “carbon pricing” and the “effective carbon rates” (or the sum of specific taxes on energy use, carbon taxes, and prices of tradable emissions permits) in specified regions.


Read TaxNewsFlash-Europe


  • Mauritius: The Finance Bill 2016, enacted in September 2016, includes a provision that imposes a penalty when companies file amended tax returns.


Read TaxNewsFlash-Africa


  • Canada: Certain investors must get ready to provide detailed goods and services tax / harmonized sales tax and Quebec sales tax (QST) information to distributed investment plans by 15 November 2016.
  • Canada: Quebec announced certain harmonization measures with respect to Canadian federal tax, and provisions to revise individual income tax and QST.
  • Mexico: An economic package for 2017 includes reform proposals in various tax areas, and it is expected the measures generally will be effective beginning in 2017.
  • Mexico: A chamber of the Supreme Court issued a decision upholding a limitation on certain deductions imposed on employers in connection to payments made to their employees, and the related limited deductibility of payments that in turn represent non-taxable or exempt income at the employee level. 


Read TaxNewsFlash-Americas

Asia Pacific

  • Japan: Notifications necessary for the entry into force of a new income tax treaty between Japan and Germany were completed on 28 September 2016; thus, the new Japan-Germany income tax treaty will enter into force on 28 October 2016 (30 days after the date of receipt of the latter notification).
  • Vietnam: Guidance issued by the Ministry of Finance amplifies tax law provisions and rules with respect to corporate income tax, VAT, and the “special consumption tax.”
  • India: A question that has not been resolved is whether a “trade discount” is an eligible deduction under the model GST law. The courts have applied conflicting standards concerning the treatment of trade discounts for goods and services tax (GST) purposes.  
  • India: A high court held that reimbursement of employee-related benefits (including retrenchment compensation and other retirement payments made with respect to employees of a transferred unit) are amounts paid for a business purpose, and as such, are an allowable business expenditure.


Read TaxNewsFlash-Asia Pacific


  • Switzerland: The OECD announced that Switzerland deposited its instrument of ratification for the multilateral convention on the mutual administrative assistance in tax matters that will enter into force for Switzerland on 1 January 2017.


Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • United States: U.S. Customs and Border Protection (CBP) announced that it is rescheduling the mandatory transition of post-release capabilities in ACE, as originally set for 29 October 2016, for a future date, possibly in January 2017.


Read TaxNewsFlash-Trade & Customs

United States

  • Notice 2016-58 provides the 2016-2017 special per diem rates for taxpayers to use in substantiating the amount of ordinary and necessary business expenses incurred while traveling away from home.
  • Notice 2016-59 announces: (1) a reduced user fee of $2,700 for substantially identical letter rulings for all requesting taxpayers, after the first standard user fee of $28,300 has been paid; and (2) a decreased user fee of $7,200 for a foreign insurance excise tax waiver agreement.
  • Proposed regulations concern corporations seeking to qualify as a regulated investment company (RIC) by providing guidance relating to the income test and the asset diversification requirements that apply in determining whether RIC status has been met. In a related development, the IRS released Rev. Proc. 2016-50 announcing that the IRS ordinarily will not issue rulings or determination letters on any issue relating to the treatment of a corporation as a RIC that requires a determination of whether a financial instrument or position is a “security” for purposes of RIC status.
  • Rev. Proc. 2016-49 concerns the procedures to disregard and treat as null and void for transfer tax purposes, a “qualified terminable interest property” (QTIP) election in situations when the QTIP election was not necessary to reduce the estate tax liability to zero ($0). With the availability of portability elections, the superseded QTIP election nullification procedures brought into question the ability of a decedent’s estate to make an otherwise unnecessary QTIP election.
  • An IRS “practice unit” (guidance for IRS personnel) concerns the sourcing of multi-year compensation arrangements, including stock options, with respect to the foreign tax credit limitation.
  • The U.S. Tax Court—in a case of first impression—held that an estate is entitled to a theft loss deduction under section 2054 when the estate’s interest in a family limited liability corporation (LLC) suffered a loss due to a Ponzi scheme. The court rejected the IRS’s claim that no theft deduction could be allowed because the LLC, and not the estate, suffered the loss.
  • A KPMG report explains the rule relating to “qualified real property business indebtedness.”
  • The Arizona Department of Revenue ruled that two companies operating as Medicaid contractors, were considered to be “insurance companies” and as such were exempt from paying Arizona corporate income tax.
  • The Kentucky Board of Tax Appeals found that optional liability waiver fees, charged by rent-to-own companies with respect to tangible personal property rented to consumers, were not subject to sales tax.


Read TaxNewsFlash-United States

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