KPMG’s Week in Tax: 16 - 20 October 2017 | KPMG | GLOBAL

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

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

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

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BEPS and Transfer Pricing

  • OECD: A progress report announced that governments have dismantled, or are in the process of amending, approximately 100 preferential tax regimes as part of the OECD/G20 base erosion and profit shifting (BEPS) standards to improve the international tax framework.
  • OECD: A comment letter with respect to BEPS Action 1 (Addressing the tax challenges of the digital economy) was sent in response to OECD discussion drafts.
  • Poland: The Ministry of Finance announced that a final version of a template of an electronic form that multinational corporations are to use in filing a country-by-country (CbC) report is available in Polish, and an electronic system—effective 19 October 2017—would allow for the filing and receipt of the CbC reporting form.

Read TaxNewsFlash-BEPS

Asia Pacific

  • Japan: A new income tax treaty signed with Denmark generally follows the OECD Model Tax Convention and the Multilateral Instrument (MLI).
  • Hong Kong: Advocates for a regional headquarter tax incentive believe that it could contribute to the growth and development of Hong Kong’s economy, in part, due to the resulting increased demand for goods and services and employment of local personnel.
  • India: A tribunal held that only “solar days” are to be considered (and not “man days”) in determining a service permanent establishment under the India-Saudi Arabia income tax treaty.
  • India: The Employees’ Provident Fund Organisation issued: (1) frequently asked questions (FAQs) on its inspection policy to simplify business regulations; and (2) guidelines with regard to monitoring the management of employees’ provident fund trusts of exempted establishments.
  • India: The Department of Scientific and Industrial Research amended the guidelines for approving in-house research and development (R&D) centres and submitting a prescribed report.
  • India: The Supreme Court of India held that in computing a deduction under chapter VI-A, it is mandatory for the taxpayer to claim depreciation under section 32 of the Income-tax Act, 1961. The taxpayer cannot claim a 100% deduction under section 80-IA of the Income-tax Act, 1961 without taking into consideration depreciation. Further, the taxpayer cannot use the depreciation claim in subsequent years.
  • India: A tribunal held that an exemption under section 54 of the Income-tax Act, 1961 is allowed to taxpayers for their investments made in new residential property up to the date of filing the income tax return.
  • Singapore: The High Court of Singapore issued a decision affirming that for interest deductibility purposes, there must be a direct link between the money borrowed and the income produced. The case concerns the deductibility of interest expenses incurred by the taxpayer on certain fixed-rate subordinated bonds related to a capital restructuring exercise.

Read TaxNewsFlash-Asia Pacific

Europe

  • Hungary: The Court of Justice of the European Union released a judgment, holding that a Hungarian motor vehicle tax constitutes a charge equivalent to a customs duty that is prohibited under an agreement between the European Economic Community (ECC) and Turkey.
  • Serbia: Changes to excise tax (duty) “rulebooks” (as the provisions are referred to in Serbia) concern recordkeeping and how to calculate the taxes (duties).
  • Italy: A law decree (no. 148/2017) concerns value added tax (VAT) measures, including provisions for extending the split-payment regime and relating to changes to the rate of VAT.
  • Romania: An order (No. 2482) changes the process for authorizing goods and products subject to “harmonized” excise (customs) duties.
  • Luxembourg: Measures in the budget bill 2018, effective 1 January 2018 once enacted, includes individual and corporate tax changes.
  • Luxembourg: A provision of 2017 tax reform in Luxembourg requires double-entry bookkeeping accounting for “liberal” professionals with annual net profits over €100,000 beginning 1 January 2017.
  • Czech Republic: An amendment to the VAT law states that within VAT ledger statements, the Czech tax administration generally may not request data not stipulated under the law. 
  • Czech Republic: The General Financial Directorate set 1 January 2015 as the cut-off date for awarding interest on “long-retained deductions” (overpayments).
  • Czech Republic: A distribution of shares of profit disproportionate to the relevant share percentage of ownership in the registered capital of a corporation is subject to the standard tax regime and, thus, to withholding tax at a rate of 15%, according to a discussion paper authored in part by the tax administration.

Read TaxNewsFlash-Europe

Americas

  • Canada: A program in British Columbia to allow refunds of provincial corporate income tax was eliminated, effective 12 September 2017. Transitional measures have been announced for affected corporations and employees of corporations.
  • Canada: The Finance Minister—as part of new changes to the private company tax proposals—announced that there would be no tax increase on passive investment income below a $50,000* annual threshold.
  • Canada: Nova Scotia’s budget bill—that includes most of the tax measures from the province's September 2017 budget—received its “first reading.” It includes a proposal to increase the small business income threshold to $500,000* (from $350,000), effective 1 January 2017.
  • Canada: New changes under the private company tax proposals would decrease the small business tax rate to 9% (from 10.5%) by 2019. The small business tax rate reduction would be phased in—reduced to 10% effective 1 January 2018 and to 9% effective 1 January 2019.
  • Dominican Republic: Tax implications of the multilateral instrument to prevent base erosion and profit shifting (BEPS) may need to be considered even though the Dominican Republic has not, as of this date, expressed a commitment for approving the multilateral instrument.

Read TaxNewsFlash-Americas

 

*$ = Canadian dollar

FATCA / IGA / CRS

  • Hong Kong: Representatives from the governments of Hong Kong and Switzerland have signed an agreement for conducting the automatic exchange of financial account information in tax matters (AEOI).
  • United States: There is a 17 November 2017 deadline for filing applications for: (1) qualified intermediary (QI), including qualified derivatives dealer (QDD) status; (2) withholding foreign partnership (WP) status; and (3) withholding foreign trust (WT) status.
  • Netherlands: The Dutch tax administration announced the release of the latest version of the reporting application (IBB 2017.1) for bank and investment products along with an updated version of the instruction manual that describes how to use the new reporting application.

Read TaxNewsFlash-FATCA / IGA / CRS

United States

  • Two packages of proposed regulations have been withdrawn pursuant to an executive order and Treasury report to mitigate the burden imposed by regulations previously identified as either imposing an undue financial burden on taxpayers, or adding excessive complexity to the tax system:
    • Proposed regulations under section 2704 concerning the valuation of interests in corporations, partnership, and other entities for purposes of the estate, gift, and generation-skipping transfer taxes
    • Proposed regulations under section 103 concerning the definition of “political subdivision” for purposes of issuing tax-exempt municipal bonds
  • The IRS released guidance providing the annual inflation adjustments for more than 50 tax provisions, including the tax rate schedules and other tax amounts for 2018 (and thus generally will be used by individuals on their 2019 returns) as adjusted for inflation and the cost-of-living adjustments with respect to pension plans.
  • Final regulations under section 597 serve as guidance for banks and building and loan associations (and related parties) that receive federal financial assistance (FFA) from an “agency”—generally defined as the Resolution Trust Corporation, the FDIC, or a similar instrumentality of the U.S. government.
  • The IRS released three “practice units” that set out guidance concerning land development, check-the-box, and USRPHC status.
  • The IRS added two new counties—Orange and Solano—to a list of California counties where tax relief is being provided with respect to taxpayers affected by the California wildfires beginning on 8 October 2017.
  • Taxpayers may need to consider possible tax implications of the ongoing re-negotiations of the North American Free Trade Agreement (NAFTA).
  • The Pennsylvania Supreme Court affirmed a commonwealth court decision holding that the flat-dollar net loss (NOL) deduction limitation in effect for the tax year at issue violated the “uniformity clause” of the Pennsylvania Constitution as applied to a particular taxpayer. However, the high court reversed the lower court’s holding that the appropriate remedy was to allow the taxpayer to apply an uncapped net loss deduction and to refund the tax paid as a result of the unconstitutional cap. Instead, in the high court’s view, the appropriate remedy was to sever the flat-dollar cap deduction limitation.
  • The District of Columbia Office of Tax and Revenue provided guidance on the taxation of certain digital goods. 
  • New Jersey’s tax court held that a foreign corporate limited partner had nexus for corporation business tax purposes, by virtue of owning limited partnership interests in two partnerships operating in New Jersey.
  • In the City of Portland, Oregon, guidance was issued on how to apply the city’s business license tax “pay-ratio” surtax. Under the pay-ratio measures, compensation paid the company’s CEO is compared to the pay of the “median employee,” with the rate of the surtax based on the company’s reported ratio.
  • The Multistate Tax Commission extended the deadline for entering into a limited-time voluntary disclosure initiative.
  • A KPMG report examines that there is a possibility that the affordable housing industry could be affected by a change in federal tax law.

Read TaxNewsFlash-United States

Trade & Customs

  • The U.S. Court of International Trade granted summary judgment for the government in a “test case” concerning the proper customs tariff classification of three types of fiber optic telecommunications network equipment—categorized as splitter modules, monitor modules, and wavelength division multiplexer modules—imported from Mexico in 2012.

Read TaxNewsFlash-Trade & Customs

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