KPMG’s Week in Tax: 27 - 31 March 2017 | KPMG | GLOBAL

KPMG’s Week in Tax: 27 - 31 March 2017

KPMG’s Week in Tax: 27 - 31 March 2017

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

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Transfer Pricing

  • China: Guidance was released on special tax investigations, adjustments, and mutual agreement procedures (MAPs).
  • India: Five unilateral advance pricing agreements (APAs), involving transfer pricing issues for transactions of management cross-charges, were signed for a period of nine years each (i.e., five future years and four rollback years).
  • Poland: New legislation concerning the exchange of tax information with other countries was signed by the president on 20 March 2017. The new law imposes on entities belonging to large multinational corporations an obligation to indicate to the tax administration which unit from the group (and which country) submits the country-by-country (CbC) report. The law also clarifies the rules of the exchange of tax information between different countries.
  • United States: Announcement 2017-03 provides the annual report on the advance pricing and mutual agreement (APMA) program for 2016 that contains APA statistics for 2016.

Read TaxNewsFlash-Transfer Pricing

Europe

  • UK: The Prime Minister has triggered Article 50, beginning the two-year negotiations on the exit of the UK from the EU.
  • Cyprus: Cyprus signed two income tax treaties, one with Iran and another with Jersey.
  • Czech Republic: In response to a decision of the Supreme Administrative Court on the scope of banks’ reporting duties, an amendment to the tax procedure rules was submitted that would provide access to information about taxable entities and their bank accounts to taxation and other government authorities.
  • Czech Republic: Contractual relationships and the relevant reporting of sales with external carriers, messengers, or post-service providers for the dispatch of goods and collection of payments must comply with certain measures under the law on the electronic reporting of sales and the General Financial Directorate’s (GFD) interpretations.
  • Czech Republic: The GFD—responding to frequent inquiries regarding the VAT treatment on the purchase and sale of electronic communication services—clarified that application of a different regime before the effective date of an appendix would not be challenged if the regime has been applied in good faith and in mutual agreement of both parties.
  • Denmark: A political agreement has been reached on the framework agreement regarding investment incentives for the North Sea hydrocarbon activities.
  • Poland: New measures concern VAT settlements and introduce strict penalties with respect to “blank invoices.”
  • Serbia: Newly adopted VAT rulebooks relevant to determining the place of supply of services and amendments for the method and process for obtaining an exemption from VAT were published and are effective 1 April 2017.
  • Italy: Court decisions in Milan concern royalties taxation and the reduced withholding tax rate under an income treaty or the EU Parent-Subsidiary Directive.
  • Italy: A Supreme Court decision sets out guidance on the criteria for deciding whether a non-resident holding company qualifies as the “beneficial owner” of dividends distributed by an Italian subsidiary.

Read TaxNewsFlash-Europe

Americas

  • Canada: Major tax changes in the 2017-2018 Quebec budget include the reduction of the tax burden on individuals by reducing or eliminating the health tax, together with an immediate general tax reduction by increasing the basic tax credit available to individuals.
  • Canada: Companies in Canada doing business with the UK may need to consider the potential impact of the UK’s withdrawal from the European Union (EU), also known as “Brexit.” 
  • Costa Rica: Law N° 9428—previously declared unconstitutional due to the approval procedure inconsistencies—has been updated and provides for the “corporation flat tax.” This “new” tax establishes an applicable progressive rate.

Read TaxNewsFlash-Americas

Asia Pacific

  • China: Customs released the rules of origin of imported goods from the “least developed countries.” The decree represents the new requirements of China customs on administration of special preferential tariff treatment.  
  • India: The Central Board of Direct Taxes (CBDT) issued a circular of “frequently asked questions” (FAQs) clarifying income computation and disclosure standards-related issues.
  • India: Key amendments were passed in the Finance Bill, 2017.
  • India: The government has issued a notification to revise the rate of administrative charges, effective 1 April 2017.
  • India: A tribunal held that long-term capital loss on the sale of listed shares of a subsidiary company is allowed to be set-off against the long-term capital gain on the sale of unlisted shares. 
  • India: A press release was issued notifying that the social security agreement between India and Brazil has been signed.
  • India: The Supreme Court of India held that the taxpayer is not entitled to depreciate a property since it is not the owner of such property. The building belonged to a lessor firm and title in the building could not pass unless it were executed on a proper stamp paper and also were duly registered with the sub-registrar. Absent these actions, the taxpayer did not become the owner of the property.
  • India: The CBDT has issued directions for reduced or waiver of interest charged under section 201(1A)(i) of the Income-tax Act, 1961 in the specified classes of cases.
  • India: International workers who are covered under a social security agreement (SSA) between India and any other country can withdraw their accumulated provident fund balances under the Employees’ Provident Funds Scheme, 1952 on ceasing to be an employee in an establishment. Further, the notification stipulated that provident fund accumulations will be paid to international workers in their bank accounts directly or through the employer.
  • Japan: The 2017 tax reform bills passed by Japan’s National Diet include amendments with respect to corporate taxation; individual taxation; measures concerning an “anti-tax haven” or controlled foreign corporation (CFC) regime; and the consumption tax treatment of virtual currencies.
  • New Caledonia: The general tax on consumption (GTC), closely modeled after a value added tax (VAT), will be levied on supplies of both goods and services beginning 1 April 2017.
  • Singapore: Changes were announced to the “cooling measures” targeted at residential properties. The changes to the seller’s stamp duty and the total debt servicing ratio, as well as a new stamp duty termed an “additional conveyance duty,” were effective 11 March 2017.
  • Vietnam: “Official letters” guidance from the tax authorities provides, among other items: the corporate income tax incentive tax rate is not applicable for investment projects located in industrial parks; and a bonus granted to a group but then distributed to individuals is subject to individual (personal) income tax.
  • Australia: Pending legislation may reduce the corporate tax rate and increase research and development (R&D) benefits for small- and medium-sized enterprises.

Read TaxNewsFlash-Asia Pacific

Africa

  • Nigeria: New immigration regulations were released in addition to an improved “visa on arrival” scheme to attract foreign direct investment and boost tourism.

Read TaxNewsFlash-Africa

FATCA / IGA / CRS

  • Canada: The Canada Revenue Agency updated its FATCA guidance and released new guidance for common reporting standard (CRS), new optional self-certification forms, and the list of participating jurisdictions for CRS purposes.
  • Germany: Information released for for financial institutions and foreign “service providers” includes: the registration procedure for electronic submission of CRS returns; new FATCA/CRS guidance notes; changes to the reportable jurisdictions list; and revisions to the CRS communication manual.
  • Italy: The deadline for information submission of U.S. accounts has been extended to 31 May 2017, with an additional 15 days for correcting any errors (15 June 2017).
  • Russia: A new draft version of legislation to amend part one of the Tax Code of the Russian Federation and implement the automatic exchange of financial information with foreign countries (territories) for tax purposes under the CRS regime was released.
  • United States: All qualified intermediary (QI), withholding foreign partnerships (WP) and withholding foreign trust (WT) agreements in effect prior to 1 January 2017 must be renewed by 31 March 2017 to continue in effect without interruption.

Read TaxNewsFlash-FATCA / IGA / CRS

United States

  • A report prepared by KPMG LLP examines the U.S. GAAP income tax accounting implications of the UK’s notice that it will leave the EU.
  • Notice 2017-17 requests comments on a proposed revenue procedure that, if finalized, would provide procedures by which a taxpayer may request consent to change a method of accounting for recognizing income when the change is made for the same tax year for which the taxpayer adopts the new financial accounting revenue recognition standards and the change is made as a result of, or directly related to, the adoption of the new revenue recognition standards (a qualifying same-year method change).
  • Announcement 2017-04 provides relief from certain excise taxes under section 4975 of the Internal Revenue Code, and any related reporting requirements, to conform to the temporary enforcement policy described by the Department of Labor (DOL) with respect to the final fiduciary duty rule and related prohibited transaction exemptions, and certain amended prohibited transaction exemptions.
  • The IRS publicly released two written determination letters concluding that the taxpayer did not qualify as an exempt section 501(c)(15) insurance company because its primary activity is not insurance and the purported insurance or reinsurance transactions lack economic substance.
  • The Arizona Department of Revenue issued a taxpayer information ruling concluding that the use of software to provide services did not constitute the rental of tangible personal property for purposes of the state’s sales tax.
  • Recently introduced legislation (Senate Bill 238) in Colorado, if enacted, would make changes to the state’s controversial use-tax notice reporting requirements.
  • The New York Tax Appeals Tribunal concluded that the taxpayer—a large retailer whose retail facilities included a bakery—was not exempt from sales and use tax for utilities consumed to wash pans.
  • Pending legislation (Senate Bill 325) in North Carolina, the “Billion Dollar Middle Class Tax Cut,” would adopt market-based sourcing and reduce the corporate rate. 
  • Florida and other states may not conform to federal extended due date for calendar-year corporations.

Read TaxNewsFlash-United States

 

  • Life sciences companies may need to consider assessing their business readiness for potential comprehensive U.S. tax reform and give careful thought to potential future investment locations and the implications for the supply chain.

Read TaxNewsFlash-Tax Reform

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