KPMG’s Week in Tax: 4 - 8 June 2018 | KPMG | GLOBAL
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KPMG’s Week in Tax: 4 - 8 June 2018

KPMG’s Week in Tax: 4 - 8 June 2018

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

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BEPS and Transfer Pricing

  • New Zealand: A bill concerning base erosion and profit shifting (BEPS) is expected to be enacted by 30 June 2018. Proposed changes to the transfer pricing and thin capitalisation rules, limitations on setting related-party debt interest rates, and introduction of new deemed permanent establishment and hybrid rules are included.
  • United Nations: A model double tax agreement has been updated to curtail entities from attempting base erosion and profit shifting.
  • Canada: The OECD released its first peer review of its country-by-country (CbC) reporting initiative. Along with 94 other countries, the report examines Canada’s domestic legal and administrative framework around CbC reporting and also looks at its exchange-of-information framework. 
  • Canada: The Finance Department indicated that Canada will adopt additional provisions to apply to the multilateral instrument (MLI) and thus will modify a significant portion of Canada's international tax treaties. 

Read TaxNewsFlash

Trade & Customs

  • Mexico: In response to tariffs imposed by the United States on Mexican steel and aluminum, the Mexican government has identified a list of products from the United States that will have their NAFTA preferential treatment suspended when imported into Mexico.
  • EU: The European Commission announced support for imposing additional customs duties on the full list of U.S. products as part of the EU's response to the U.S. tariffs on steel and aluminum products. The additional duties on selected imports from the United States would apply in July 2018.
  • United States: Two presidential proclamations were published to provide that: (1) imports of steel from Argentina, Australia, and Brazil will not be subject to the tariff of 25%; and (2) imports of aluminum from Argentina and Australia will not be subject to the tariff of 10%. 

Read TaxNewsFlash-Trade & Customs

Europe

  • Netherlands: A bill was presented to parliament in response to a February 2016 judgment of the Court of Justice of the European Union on the “per element” approach in the context of the Dutch fiscal unity regime for corporate income tax purposes. The bill would apply retroactively from October 2017, and would affect provisions under both the corporate income tax law and dividend withholding tax law as if there were no fiscal unity regime.
  • EU: New mandatory disclosure requirements for intermediaries and relevant taxpayers will enter into force on 25 June 2018, under the directive on administrative cooperation in the field of taxation (DAC 6) that must be implemented by the EU Member States before 31 December 2019, and will be effective from 1 July 2020.
  • Ireland: A KPMG report contains value added tax (VAT) guidance principally relevant to the financial services sector.

Read TaxNewsFlash-Europe

Americas

  • Canada: The 2018 budgets were tabled for Yukon, the Northwest Territories, and Nunavut and included tax provisions.
  • Canada: The 2018 Saskatchewan budget bill received Royal Assent and includes two tax credits—the “Saskatchewan technology start-up incentive” and the “Saskatchewan value-added agriculture incentive.”

Read TaxNewsFlash-Americas

Asia Pacific

  • India: The Authority for Advance Rulings (AAR) determined that payments a foreign company (incorporated in Luxembourg) received from an Indian hotel for providing global reservation services were subject to tax in India as business income. 
  • India: A tribunal held that the issuance of “fresh” equity shares was not a transfer of capital asset, but was a capital receipt and therefore was not taxable. 
  • India: The AAR determined that membership fees and contribution received by a non-profit organisation from its members for certain services rendered were not taxable as business income in India because the receipts were not in the nature of business income.
  • Australia: A bill has been introduced to provide a 12-month amnesty for employers who make voluntary superannuation guarantee charge disclosures. If enacted, the amnesty would begin 24 May 2018 and would be available until 23 May 2019.
  • Pakistan: Amendments proposed by the 2018 finance bill have been enacted and include tax provisions.
  • India: The AAR found that payments received by the taxpayer from an Indian company under the “services reseller agreement” for content delivery solutions (for accelerating content and business online processes) were not in the nature of “fees for technical services” or royalties under the Income-tax Act, 1961 or under provisions of the India-United States income tax treaty. Therefore, the transaction did not give rise to a permanent establishment in India. 
  • India: The AAR found that a “front-end fee" received for the appraisal of a loan application was not taxable as interest under the India-France income tax treaty. However, the front-end fee (other than appraisal fee), commitment fee, cancellation fee, monitoring fee, and amendment fee were taxable as interest under the tax treaty. 
  • India: A tribunal held that payments to a foreign company for marketing a taxpayer’s business process outsourcing services in foreign countries were not taxable in India because the foreign marketing companies were engaged only for promoting and marketing of the taxpayer’s business process-outsourcing service in the United States. 
  • India: A tribunal addressed the method of valuation to determine value of shares transferred and the tax treatment of the transfer taxability.

Read TaxNewsFlash-Asia Pacific

FATCA / IGA / CRS

  • China: For common reporting standard (CRS) purposes, the reporting deadline for FY 2017 has been extended to 30 June 2018 (from 31 May 2018).
  • France: A provision in parliament addresses the treatment of “Accidental Americans” (persons born in the United States but who have never effectively been to or lived in the United States since birth).  
  • France: A ministerial order reflects changes to the threshold for CRS returns filed for 2018 and subsequent years, and contains lists of CRS participating and reportable jurisdictions.
  • Germany: The central tax office (BZSt) provided financial institutions and foreign service providers with information about current developments with regards to the FATCA rules in Germany.
  • Germany: BZSt issued an updated version of the “schema dataset” concerning the structure of the data to be reported according to IRS FATCA Schema v2.0.
  • Australia: Guidance updates the formatting requirements for the DocRefID data element related to the reporting of U.S. FATCA returns to reflect changes made by the IRS.
  • Australia: The Australian Taxation Office issued CRS guidance about the obligations of tax agents and their clients under the automatic exchange of information (AEOI) laws.
  • United Kingdom: HM Revenue & Customs updated an AEOI user guide under the FATCA and CRS regimes.

Read TaxNewsFlash-FATCA / IGA / CRS

United States

  • Final regulations that affect partnerships and their partners include guidance: (1) preventing a corporate partner from avoiding corporate-level gain through transactions with a partnership involving equity interests of the corporate partner or certain related entities; (2) allowing consolidated group members that are partners in the same partnership to aggregate their bases in stock distributed by the partnership for the purpose of limiting the application of rules that might otherwise cause basis reduction or gain recognition; and (3) requiring certain corporations that engage in gain elimination transactions to reduce the basis of corporate assets or to recognize gain.
  • The IRS updated a list of “frequently asked questions” (FAQs) regarding the opportunity zone benefits under the new tax law.
  • Two KPMG reports address under the new tax law: (1) why mineral royalties held for investment are not likely to qualify for the section 199A deduction; and (2) certain changes that affect natural resource publicly traded partnerships, issues surrounding implementation of the new rules for these partnerships, and issues for which further guidance may be necessary.
  • The IRS updated a list of FAQs about return filing and tax payment obligations relating to the “transition tax” under new Code section 965, and that provide penalty relief in certain instances.
  • In Puerto Rico, guidance concerns the “back to school” tax holiday for fiscal year 2018-2019.
  • A decision of the U.S. Tax Court that because the taxpayer had not transferred “all substantial rights” to certain pharmaceutical technology, the royalties received by the taxpayer constituted ordinary income was affirmed by the Third Circuit appeals court.
  • New law in Missouri includes a corporate tax rate reduction, mandatory single-sales factor apportionment, and market-based sourcing rules (among other legislative changes).
  • The Missouri Department of Revenue issued a letter ruling that optional lease add-ons (including warranties) with respect to vehicle leases are subject to sales tax; accordingly, the vehicle lessor must collect and remit state and local sales tax on these voluntary packages purchased as part of the motor vehicle lease. 
  • A New Jersey superior court, appellate division, affirmed a decision of the state tax court holding that a taxpayer did not qualify for the “unreasonable exception” to the state’s related-party addback rules (that is, the exception when the taxpayer “establishes by clear and convincing evidence” that the disallowance of an interest deduction is unreasonable).
  • An ordinance in Seattle, Washington, imposes an “employee hours” tax on every person (employee) engaged in business activities within the city, and will be effective January 1, 2019.

Read TaxNewsFlash-United States

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