KPMG’s Week in Tax: 3 - 7 July 2017 | KPMG | GLOBAL

KPMG’s Week in Tax: 3 - 7 July 2017

KPMG’s Week in Tax: 3 - 7 July 2017

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

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Asia Pacific

  • Australia: The diverted profits tax is effective from 1 July 2017, applying to significant global entity groups with a year-end of 30 June.
  • China: The ongoing state-owned enterprise reform may provide opportunities for private enterprises, multinational entities, and individuals to partner in joint ventures with state-owned enterprises.
  • China: China’s Ministry of Finance and State Administration of Taxation jointly issued guidance to clarify the value added tax (VAT) treatment of asset management products.
  • India: A tribunal found a “service permanent establishment” in India when the taxpayer had been furnishing services to the Indian company—even without any physical presence of the taxpayer’s employees in India. The tribunal also held that the services provided by the taxpayer were in the form of sharing or permitting to use the special knowledge, expertise, and experience of the taxpayer and could be taxed as royalty under the India-UAE income tax treaty.
  • India: A tribunal held that even in instances when no expenditure has been incurred, the tax authority must disallow any expenditure in instances involving exempt income.
  • India: The Employees’ Provident Fund Organisation issued guidance addressing the revised “certificate of coverage” application for Indian workers (holding an Indian passport) going to work in countries with which India has a social security agreement.
  • India: The definition of Indian international workers has been clarified with respect to employee provident funds. Earlier amendments brought international workers under the purview of the Indian social security regime.
  • Thailand: Draft legislation currently under public consultation includes provisions that would affect foreign e-commerce companies (for example, a foreign company selling intangible goods or rendering services by means of electronic media).
  • Vietnam: The General Department of Taxation has issued guidelines that may be viewed as an effort to require companies to declare and pay foreign contractor tax on all imported goods with “warranty terms attached” in periods prior to October 2014.
  • Bangladesh: Provisions in Finance Bill 2017 preserves current tax holidays for certain investments and make minor adjustments to corporate tax rates.
  • Egypt: The new VAT law replaces the current sales tax law and imposes VAT on all commodities and services, including local or imported commodities and services listed in a table attached to the tax law.
  • Gulf Cooperation Council: GCC member states signed a framework agreement to introduce VAT on the supply of goods and services at a standard rate of 5%, beginning in 2018.
  • Kuwait: A draft excise tax bill is in line with the Gulf Cooperation Council unified treaty for excise tax measures. Also, the Kuwait tax authority may consider authorizing contract owners and customers to release 5% tax retentions attributable to Kuwaiti shareholders in companies incorporated in Kuwait; the Kuwaiti shareholder in the Kuwaiti company would not be considered subject to corporate income tax in Kuwait.
  • Oman: There is: (1) new guidance on withholding tax; (2) a requirement to electronically file tax returns; and (3) licenses for the establishment of fully-fledged Islamic banks and Takaful (Islamic insurance).
  • Sri Lanka: There have been recent changes to the economic service charge and nation building tax, along with developments involving the new Inland Revenue Act, foreign exchange bill, and special deposit accounts.

Read TaxNewsFlash-Asia Pacific

BEPS

  • OECD: Public comments received with respect to a discussion draft of guidance on the implementation of the approach to pricing transfers of hard-to-value intangibles (as described in Chapter VI of the Transfer Pricing Guidelines) were released.
  • OECD: A representative of Mauritius signed the multilateral convention to implement tax treaty-related measures to prevent base erosion and profit shifting (BEPS).
  • OECD: A progress report was issued for leaders of the “G20” countries concerning efforts toward creating an effective international tax system, including BEPS.

Read TaxNewsFlash-BEPS

Transfer Pricing

  • Japan: The customs bureau in Japan has issued guidance concerning how retroactive transfer price adjustments are to be addressed from a customs valuation perspective.
  • Nigeria: In connection with reporting the results of a survey about taxpayer awareness of the transfer pricing regime in Nigeria, overviews of the transfer pricing system and of the transfer pricing audit process were provided by the KPMG member firm in Nigeria.

Read TaxNewsFlash-Transfer Pricing

Europe

  • Italy: Newly enacted measures provide taxpayers with an opportunity to settle tax disputes currently pending before the Italian courts, by paying only the amount of the tax liability (without having to pay interest and penalties). The settlement process is available if taxpayers submit a special application by 30 September 2017.
  • Romania: The Advocate General of the Court of Justice of the European Union (CJEU) issued an opinion concluding that Romanian law provisions that deny a VAT deduction with respect to services provided by an “inactive taxpayer” (one that has been removed from the register of taxable persons) conflict with the rules under an EU directive.

Read TaxNewsFlash-Europe

FATCA / IGA / CRS

  • British Virgin Islands: The deadline to submit enrollment applications to BVI Financial Account Reporting System for common reporting standard (CRS) has been extended from 30 June 2017 to 31 July 2017 and the deadline for submission of reports from 31 July 2017 to 18 August 2017.
  • OECD: A progress report was issued for leaders of the “G20” countries concerning efforts toward creating an effective international tax system, including CRS.
  • United States: New frequently asked questions (FAQs) have been published by the IRS concerning foreign financial institution (FFI) agreement renewal.

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • EU: The European Commission reported that representatives of the EU and New Zealand signed an agreement for cooperation and mutual administrative assistance in customs matters.
  • Japan: The customs bureau in Japan has issued guidance concerning how retroactive transfer price adjustments are to be addressed from a customs valuation perspective.

Read TaxNewsFlash-Trade & Customs

United States

  • A Cook County (Illinois) circuit court judge agreed to issue a temporary restraining order that temporarily blocked Cook County (Chicago) from requiring collection of the tax on “sweetened beverages.” The tax was scheduled to become effective 1 July 2017.
  • Rev. Proc. 2017-41 modifies and supersedes earlier procedures for issuing opinion and advisory letters on the form of qualified retirement plans submitted under the pre-approved plan program. Rev. Proc. 2017-41 simplifies the current program by restructuring the current master and prototype and volume submitter pre-approved programs into a single program that increases the types of eligible plans and permits greater flexibility in plan design options.   
  • Notice 2017-37 contains the “cumulative list of changes in plan qualification requirements for pre-approved defined contribution plans for 2017” (2017 Cumulative List). The 2017 Cumulative List identifies changes in the qualification requirements of the Code that must be taken into account in a plan document submitted to the IRS under the pre-approved plan program for purposes of receiving an opinion letter.
  • The U.S. Tax Court held that a partnership’s omission of its cost or other adjusted basis of contributed property from its appraisal summary (attached to an IRS form) did not substantially comply with the reporting requirements. Thus, the Tax Court agreed in denying, in full, the partnership’s claimed charitable contribution deduction of $33 million. In addition, the court determined that accuracy-related penalties apply because the partnership’s claimed fair market value of the remainder interest resulted in a gross valuation misstatement.

Read TaxNewsFlash-United States

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