KPMG’s Week in Tax: 16 - 20 January 2017

KPMG’s Week in Tax: 16 - 20 January 2017

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

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Tax reform in United States

  • A brief discussion considers the possible effect of a new administration with respect to the base erosion and profit shifting (BEPS) initiative.
  • A KPMG report concerns possible issues for real estate under the House Republican “blueprint.”

Read TaxNewsFlash-Tax Reform

United States

  • Regulations provide rules relating to dividend equivalents for purposes of section 871(m).
  • Final regulations concern the qualifying income exception for publicly traded partnerships not to be treated as corporations for federal income tax purposes.
  • Rev. Proc. 2017-23 describes the process for filing a country-by-country report by ultimate parent entities of U.S. multinational enterprise (MNE) groups.
  • Rev. Proc. 2017-21 provides text and guidance concerning the withholding foreign partnership agreement (WP agreement) and withholding foreign trust agreement (WT agreement).
  • Rev. Proc. 2017-19 provides a safe harbor for taxpayer treatment of an energy-savings performance contract (ESPC) energy sales agreement (ESA) between an energy service company and a federal agency as a service contract.
  • Proposed regulations are released to implement a centralized partnership audit regime that, in general, assesses and collects tax at the partnership level.
  • Temporary regulations concern transfers of appreciated property by U.S. persons to partnerships with foreign partners related to the transferor.
  • The IRS has finalized Form 7004 that corporations, partnerships, estates, and a variety of other business entities are to use to apply for an automatic extension of time to file income tax returns and other information returns.
  • Final regulations concern the modified carryover basis rules for certain estates and other transfers under section 1022.
  • Notice 2017-14 supplements a list of hardships that provide a basis for exemption from the individual shared responsibility payment for health insurance purposes.
  • Rev. Proc. 2017-22 clarifies a safe harbor provided in guidance in 2010 under section 118(a) for certain transportation-related grants.
  • Legislation introduced in Delaware—if enacted—could provide additional “unclaimed property” reforms that would affect corporations.
  • Final regulations concern corporate-level tax that is imposed on certain transactions when property of a C corporation becomes the property of a real estate investment trust (REIT).
  • Notice 2017-15 concerns the treatment of the applicable exclusion amount for estate and gift tax purposes and the generation-skipping transfer (GST) exemption for gifts, bequests, and transfers by or to same-sex spouses.
  • Proposed regulations would amend the definitions of “qualified matching contributions” (QMACs) and “qualified nonelective contributions” (QNECs) under regulations relating to certain qualified retirement plans that contain cash or deferred arrangements under section 401(k) or that provide for matching contributions or employee contributions under section 401(m).
  • Rev. Rul. 2017-03 provides the schedules of prevailing state-assumed interest rates for use by insurance companies to compute their reserves for tax years beginning after 31 December 2015.
  • The FASB issued guidance that reestablishes the presumption of control by not-for-profit entities (NFPs) that are general partners of for-profit limited partnerships and similar legal entities. The FASB’s 2015 consolidation guidance did not specify how NFPs were to evaluate whether to consolidate for-profit limited partnerships.
  • The Georgia Department of Revenue issued a letter ruling that concludes a taxpayer engaged in paper shredding and sales of shredded paper was not a manufacturer and thus not exempt from sales and use tax.
  • The New York State Comptroller revised the reach-back period, from 20 years to 10 years, for unclaimed property holders that participate in the Comptroller’s unclaimed property voluntary compliance program. 
  • The rate of the metropolitan transportation business tax (MTA) surcharge in New York—imposed on a portion of the New York State franchise tax—has increased to 28.3% (up from 28%) for tax years beginning on or after 1 January 2017, and before 1 January 2018. 
  • The Ohio Board of Tax Appeals upheld the assessment of sales and use tax on a medical practice’s purchase of medical transcription services, finding that the services were taxable as automatic data processing services (and not exempt personal or professional services).
  • Two more states—Nebraska and Mississippi—would join other states if legislative proposals that would impose an economic nexus standard for sales tax purposes are enacted.

Read TaxNewsFlash-United States

Exempt Organizations

  • A revised Form 8868 reflects an automatic six-month extension of time to file as required by “Highway Bill” of 2015.
  • Rev. Proc. 2017-13 clarifies the safe harbor conditions under which a management contract does not result in private business use of property financed with governmental tax-exempt bonds or cause the modified private business use test for property financed with qualified 501(c)(3) bonds to be met.

Read TaxNewsFlash-Exempt Organizations

Americas

  • Canada: Labour unions are not required to file reports with the Canada Revenue Agency to disclose detailed financial information and information on political, lobbying and other non-labour relations activities, or to make that information publically available.
  • Canada: Income tax treaties between Canada and Israel and between Canada and Taiwan have entered into force.
  • Canada: Automobile deduction limits and expense benefit rates for 2017 have been announced.
  • Mexico: Guidance sets forth standards for compliance with the rule for electronically or digitally provided tax receipts.
  • Brazil: A tax regularization payment program provides Brazilian taxpayers with an opportunity to settle their federal tax debts.

Read TaxNewsFlash-Americas

Asia Pacific

  • Oman: The 2017 budget sets forth expectations for revenue collection from tax and other sources.
  • China: The import tax policy of a five-year plan reflects proposals for the coming five years.
  • China: New rules have been introduced to strengthen the supervision of foreign currency transactions.
  • China: Guidance is intended to clarify preferential tax treatment with respect to certain share traded on the Shenzhen-Hong Kong Stock Connect.
  • India: A tribunal allowed the taxpayer’s claim of depreciation on goodwill even though the claim was not made by the taxpayer on an amended return, but was made during the course of assessment proceedings.
  • India: A tribunal held that the foreign tax credit is applicable with respect to “income”—and not “gross receipts.” However, the tribunal allowed the taxpayer’s claim for foreign tax credit on the basis of “gross receipts.”
  • India: The Central Board of Direct Taxes issued guidance with respect to permanent account numbers (PANs) reflecting the links to bank accounts with PAN/Form No. 60. The rules were also amended to provide details of bank accounts in which cash deposits were made during the demonetisation period and making this information available to tax officers.
  • India: A tribunal held that: (1) the “tax sparing” credit is allowed on the interest income under the India-Cyprus income tax treaty; (2) a payment for clinical trials is not taxable as “fees for technical services” under the India-United States income tax treaty; and (3) a post-merger, weighted deduction on scientific research expenditure is allowed to the merged entity.
  • Singapore: A pre-budget report considers what companies are doing in the midst of this challenging environment and what can be done to help them develop into enterprises of the future.

Read TaxNewsFlash-Asia Pacific

Transfer Pricing

  • Australia: The KPMG member firm in Australia prepared a list of Q&As concerning country-by-country (CbC) reporting.
  • Singapore: New transfer pricing guidance has been released.

Read TaxNewsFlash-Transfer Pricing

Europe

  • Italy: New value added tax (VAT) measures include increased VAT rates and new rules for VAT groups.
  • Serbia: A “rulebook” applies for purposes of preparing the 2016 tax return.
  • Sweden: A new “chemical tax” would be imposed on chemicals associated with or used within certain electronic products that are sold in or brought into Sweden. The effective date is scheduled for 1 July 2017.
  • Romania: An executive order removes a value added tax (VAT) form.
  • France: A new “desk” tax audit method was introduced by a provision of the amended (“rectified”) Finance Act for 2016.
  • Hungary: There are new rules concerning accounting for derivative transactions.

Read TaxNewsFlash-Europe

FATCA / IGA / CRS

  • Cayman Islands: There has been Cabinet approval of provisions for the common reporting standard (CRS). 
  • United States: The IRS has launched a new application and account management system for certain withholding entities that enter into agreement with the United States to uphold these obligations. The system is to automate the IRS’s financial intermediary program.
  • Malta: There is a new FATCA XML schema that complies with the IRS FATCA XML schema v2.0.
  • Malta: An updated version of guidelines for implementation of the EU Council Directive 2014/107/EU (DAC2) and the common reporting standard (CRS) has been issued to help financial institutions comply with the CRS requirements.

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • United States: A final rule concerns support documentation for exports or re-exports to Hong Kong.

Read TaxNewsFlash-Trade & Customs

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