KPMG’s Week in Tax: 2 - 6 April 2018 | KPMG | GLOBAL

KPMG’s Week in Tax: 2 - 6 April 2018

KPMG’s Week in Tax: 2 - 6 April 2018

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

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U.S. Tax Reform

  • Notice 2018-28 states that the U.S. Treasury Department and IRS will issue proposed regulations as guidance to assist taxpayers in complying with the business expense deduction limitation under section 163(j) as amended by the new tax law. The notice describes the rules that the future proposed regulations will include, and provides interim guidance until more comprehensive guidance is developed. Read KPMG’s initial impressions
  • Notice 2018-26 addresses future guidance that will be issued concerning the “transition tax” on untaxed foreign earnings of foreign subsidiaries of U.S. companies by deeming those earnings to be repatriated, and enacted as section 965 by the new tax law. The notice describes new rules and procedures relating to the computation of certain items relevant to the transition tax, anti-abuse rules, certain special elections under or relevant to section 965, and the mechanics for how taxpayers report and pay the transition tax. Read KPMG’s initial impressions
  • Notice 2018-29 provides interim guidance regarding withholding of U.S. tax related to transfers of interests in non-publicly traded partnerships under Code section 1446(f), as enacted by the new tax law. The notice confirms that section 1446(f)(1) withholding on dispositions of non-publicly traded partnership interests is effective as of 1 January 2018, but waives penalties and interest if all forms and payments due on or before 31 May 2018 are filed with and paid over to IRS on or before 31 May 2018. Read KPMG’s initial impressions

BEPS

  • United States: Notice 2018-31 modifies the country-by-country (CbC) reporting requirement for “specified national security contractors” and states that the IRS and Treasury intend to modify the CbC regulations to reflect the modified guidance. A KPMG report offers some observations and potential actions for taxpayers to consider.
  • Luxembourg: The multilateral instrument is expected to be ratified by July 2018 and thus could affect Luxembourg tax treaties.

Read TaxNewsFlash-BEPS

Transfer Pricing

  • Singapore: The tax authority clarified the scope of the “cost plus mark-up” basis of assessment for service companies, and provided rules for companies transitioning from the cost plus mark-up to the “normal trading company” basis of assessment.

 

Read TaxNewsFlash-Transfer Pricing

Trade & Customs

  • United States and China: The Office of the U.S. Trade Representative (USTR) released a proposed list of products imported from China that could be subject to additional tariffs. The list is part of the U.S. response to China’s trade practices related to transfers of U.S. technology and intellectual property. Authorities in China responded by proposing new tariffs on imports from the United States.
  • United States: The U.S. Court of Appeals for the Federal Circuit concluded that the trade court had correctly determined that imports of dinnerware decorated with “festive motifs” and intended for use during the Thanksgiving or Christmas dinner did not qualify for duty-free treatment as articles for use in specific religious or cultural ritual celebrations.
  • United States: The USTR released a notice announcing that petitions to modify the Generalized System of Preferences (GSP) status of GSP beneficiary countries or products are being accepted through 16 April 2018.
  • China: Tariffs are being proposed for certain products imported from the United States, in response to the U.S. section 232 tariffs on steel and aluminum products imported into the United States. An unofficial document (English translation) prepared by KPMG, identifies products by name, the applicable customs codes, and tariff rates.

Read TaxNewsFlash-Trade & Customs

Americas

  • Canada: The federal budget bill—that includes a small business tax rate reduction and tax on split income—received a first reading.
  • Canada: The Ontario tax bill, that includes corporate income tax measures, received a first reading.

Read TaxNewsFlash-Americas

Asia Pacific

  • Thailand: New rules apply on residential lease contracts, for properties of five units or more.
  • Thailand: The Thai Revenue Department responded to comments received with respect to proposals for the taxation of e-commerce transactions.
  • India: A tribunal held that services provided by seconded employees of a foreign company to a subsidiary in India did not result in a permanent establishment in India.
  • India: To encourage employment, India’s government makes employer contributions to employees' pension plans (scheme) in respect of certain new employees. The government announced enhancements to this program. 
  • India: India’s government announced an enhancement to the maximum amount of workers covered under the gratuity law measures. 

Read TaxNewsFlash-Asia Pacific

Europe

  • UK: Representatives of the UK and the European Union released an updated draft withdrawal agreement (a draft “Brexit agreement”) that sets out progress on outstanding issues including trade, customs, and tax.

Read TaxNewsFlash-Europe

FATCA / IGA / CRS

  • OECD: A new set of bilateral exchange relationships under the common reporting standard (CRS) multilateral competent authority agreement (MCAA) includes activations by Panama. The OECD also released a second edition of the CRS implementation handbook.
  • Australia: Offshore financial account information from 77 jurisdictions will need to be reported to the Australian Taxation Office this year.
  • UK: An updated version of the UK’s automatic exchange of information (AEOI) submission user guide has been issued.
  • Brazil: An updated version of a manual with respect to the FATCA and CRS regimes has been approved.
  • Liechtenstein: The tax authority issued an updated version of CRS reporting instructions to assist financial institutions.
  • Netherlands: An updated version of the CRS / FATCA “questions and answers” replaces the previous version from September 2016 and clarifies certain specific CRS / FATCA-related situations.

 Read TaxNewsFlash-FATCA / IGA / CRS

United States

  • Notice 2018-24 requests comments concerning possible expansion of the scope of the determination letter program for individually designed retirement plans during the 2019 calendar year (i.e., beyond the determination letters provided for initial qualification and qualification upon plan termination).
  • The New York state legislature passed two “budget bills” that include measures to provide relief to New York residents in light of the federal tax law repeal of the uncapped state and local tax (SALT) deduction. The New York legislation also includes provisions that: (1) address the treatment of mandatory repatriation, global intangible low-taxed income, and foreign-derived intangible income; (2) provide a new optional payroll tax; and (3) provide charitable contributions provisions.
  • Federal tax conformity legislation was enacted in Florida and in Georgia.
  • Newly enacted legislation in Indiana, effective 1 July 2018, exempts “software as a service” (SaaS) from Indiana sales tax.
  • A Louisiana state court held that an online retailer that sold both its own products and products of third-party retailers on an online marketplace was required to collect and remit local (parish) sales and use taxes on sales made to parish residents by the third-parties through the online marketplace.
  • The Massachusetts Department of Revenue concluded that the sale of an S corporation’s stock in a transaction treated as an asset purchase under IRC section 338(h)(10) was to be treated as a disposition of the assets held by the target for purposes of Massachusetts tax credits. Tax credits previously taken by the target corporation with respect to the assets were subject to recapture provisions. 
  • Legislation in Utah has been enacted that: (1) reduces the state’s corporate income tax rate from 5% to 4.95% for tax years beginning on or after 1 January 2018; and (2) revises the apportionment rules and allows certain additional companies the ability to use the phased-in single sales factor apportionment.
  • A KPMG report examines alternative ways to calculate the amount of a loss incurred on personal real property and belongings, following the 2017 hurricanes and tropical storms in the United States.

Read TaxNewsFlash-United States

Cooperatives

  • A draft version of instructions for Form 1120-C, U.S. Income Tax Return for Cooperative Associations, reflects changes from the new tax law measures.

Read TaxNewsFlash-Cooperatives

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