KPMG’s Week in Tax: 12 - 16 March 2018 | KPMG | GLOBAL

KPMG’s Week in Tax: 12 - 16 March 2018

KPMG’s Week in Tax: 12 - 16 March 2018

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

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Europe

  • Czech Republic: The Supreme Administrative Court addressed the tax administration’s burden of proof when it is asserted that a supply has been affected by value added tax (VAT) fraud.
  • Czech Republic: The Supreme Administrative Court held that an exemption from withholding tax on payments of interest and royalties may be applied retroactively for a period of up to two years.
  • Czech Republic: The Supreme Administrative Court specified the conditions when the recipient of a supply is liable for VAT that is not paid by the supplier.
  • UK: The Spring Statement, presented by the Chancellor of the Exchequer, did not introduce any new tax measures. A number of consultations, including one on taxation of the digital economy, were published.
  • EU: The list of “non-cooperative jurisdictions” (“blacklist”) has been updated to include the Bahamas, Saint Kitts and Nevis, and the U.S. Virgin Islands. Bahrain, the Marshall Islands, and Saint Lucia were removed from the blacklist. The EU’s blacklist is intended to address efforts to prevent tax avoidance and evasion.
  • EU: Tax intermediaries who provide their clients with complex cross-border financial schemes that could help avoid tax will be required to report these structures to their tax authorities. In turn, EU Member States will exchange this information with each other, further increasing scrutiny around the activities of tax planners and advisers.
  • EU: A letter of formal notice was sent to the United Kingdom with respect to the extended scope of a value added tax (VAT) derogation concerning “zero-rating transactions” carried out on 11 commodity markets in the UK.

Read TaxNewsFlash-Europe

Transfer Pricing and BEPS

  • OECD: Eight additional peer review reports pursuant to the base erosion and profit shifting (BEPS) Action 14 on standards for improving tax dispute resolution mechanisms were released.

Read TaxNewsFlash-Transfer Pricing

Americas

  • Brazil: The due dates and schedules were released for large companies to report labor and employment actions.
  • Brazil: The rate of the tax imposed on foreign exchange transactions (IOF) was increased to 1.10%, effective in March 2018. The IOF applies to the amount of a foreign exchange transaction—specifically remittances of funds by Brazilian residents to their foreign bank accounts.
  • Jamaica: The tax administration announced the deadline for filing income tax returns for the year of assessment 2017 and estimated income and asset tax returns for 2018 has been extended until 24 March 2018.
  • Canada: The federal budget proposes to shorten the deadline for companies to file form T1134, Information Return Relating To Controlled and Not-Controlled Foreign Affiliates, to six months after their year-end (from 15 months) for tax years beginning after 2019. 
  • Canada: The 2018 Manitoba budget did not propose changes to the corporate or personal (individual) tax rates. However, the budget proposed an increase to the small business income limit eligible for the small business deduction to $500,000 (from $450,000), announced details of the province's carbon tax regime, and adjusted certain corporate and individual tax credits, among other changes. ($ = Canadian dollar).
  • Dominican Republic: New rules concerning the issuance and use of the “tax receipt” (Numero de Contribuyente Fiscal—NCF) are effective 1 May 2018. 

Read TaxNewsFlash-Americas

Asia Pacific

  • China: An announcement provides guidance concerning application of certain articles or provisions of China’s income tax treaties to foreign partnerships and service permanent establishments (PEs). The effective date of the new guidance is 1 April 2018.
  • India: The Supreme Court held that the tax authority’s service of a notice to an authorised representative of the taxpayer was deemed to be service on the taxpayer. 
  • India: A tribunal held that a sale of shares of a subsidiary to second step-down 100% subsidiary (a “sub-subsidiary”) of the taxpayer was not regarded as a transfer under section 47(iv) of the Income-tax Act, 1961.
  • India: A tribunal held that the taxpayer was entitled to set off losses from its current year’s income. The tribunal noted that the taxpayer was not seeking to carry forward current year losses, but was seeking to offset brought-forward losses from earlier years to the current year.
  • India: A tribunal held that referral fees paid by an Indian group company of the taxpayer to a branch of a Swiss bank—fees paid for referring clients in India—were not in the nature of “fees for technical services.” The fees were in the nature of business income, and because the taxpayer’s permanent establishment (PE) in India had no role to play in the performance of such referral activities, the fees were not attributable to the PE in India. Therefore, payment for the referral services was not taxable in India under India-Switzerland income tax treaty.
  • India: The Employees’ Provident Fund Organisation issued guidance about provident fund and pension withdrawal claims.
  • India: A tribunal held that if the “place of effective management” of an enterprise is not located in one of the countries that signed the income tax treaty, the benefit of Article 8 (shipping and air transport) of the India-Mauritius income tax treaty was not available to the taxpayer. 

Read TaxNewsFlash-Asia Pacific

FATCA / IGA / CRS

  • United States: The IRS announced that the qualifying intermediaries / withholding foreign partnerships / withholding foreign trusts (QI/WP/WT) application and account management system will be available to accept QI/WP/WT certifications beginning early April 2018.
  • Indonesia: The due date for financial institutions to submit customers’ data for 2017 to the tax authority, for automatic exchange of information (AEOI) purposes, is at the end of April 2018.
  • Ireland: An updated version of the common reporting standard (CRS) “naming conventions” guidelines was issued that provides a new section on CRS XML forbidden and restricted characters.

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • EU: The European Commission released e-books as guidance on customs and taxation. 
  • United States: The U.S. International Trade Commission announced the launch of three “section 337 investigations” concerning certain multi-domain instruments, video equipment, and light engines.
  • EU: The European Commission released its 2017 report about dangerous products that shows that in 2017 toys, cars, and motorcycles topped the list of dangerous products detected and removed from the market.

Read TaxNewsFlash-Trade & Customs

United States

  • Rev. Proc. 2018-19 announced a reduction in the user fee paid in connection a determination letter request for a terminating plan submitted to the IRS on Form 5310.
  • The IRS released a set of “frequently asked questions” (FAQs) as guidance about return filing and tax payment obligations relating to the “transition tax” under new Code section 965.
  • The IRS announced that it was granting businesses affected by severe winter storms additional time to request a six-month extension to file their 2017 federal income tax returns.
  • The IRS announced the 2014 Offshore Voluntary Disclosure Program (OVDP)—for U.S. taxpayers to voluntarily report their previously undisclosed foreign financial assets—will close on 28 September 2018. 
  • The IRS Large Business and International (LB&I) division announced five new “compliance campaigns.” Three of these new campaigns concerned partnership tax issues, and with this release, the total number of compliance campaigns is 24.
  • Taxpayers are reminded of the filing deadline for the Report of Foreign Bank and Financial Accounts (FBAR), limited exceptions to the annual filing requirements, possible relief from penalties for previous failures to file, and proposed changes for future FBAR filings.
  • Representatives of the U.S. Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB) made comments about accounting for income taxes during a recent conference.
  • There are new and modified provisions under the recently enacted tax law for taxpayers engaged in research and development (R&D) activities to consider—whether or not the taxpayers claimed the R&D tax credit in the past.
  • Arkansas’ Supreme Court held that a fast-food retailer that provided free meals to its managers must pay an amount of use tax based on the retail value of the prepared meals (and not on the cost of the raw food ingredients). 
  • Georgia House Bill 918 includes federal tax conformity measures and also a reduction in the rate of corporate income tax from 6% to 5.75%, effective for tax years beginning on or after January 1, 2019.
  • The Indiana Department of State Revenue concluded that equipment purchased for use in constructing and operating a wind farm qualified for the state’s manufacturing tax exemption.
  • The Ohio Board of Tax Appeals concluded that for purposes of the “commercial activity tax,” receipts from sales of service contracts for security monitoring services by an entity having its principal place of business outside the state were sitused to Ohio.
  • Proposed regulations are intended to implement rules requiring the IRS to notify the U.S. State Department of “seriously delinquent tax debts” of taxpayers seeking passports (or passport renewals).

Read TaxNewsFlash-United States

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