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International Tax

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This e-newsletter gives you an overview of international tax developments being reported globally by KPMG firms in the Asia Pacific & MESA regions between 1 June and 30 June 2014.

Asia Pacific Cyprus Japan Pakistan
Australia Hong Kong Korea Singapore
Cambodia India Malaysia Turkey
China Indonesia New Zealand Vietnam

For a full summary of global tax developments, visit kpmg.com/TaxNewsFlash.

To contact the International Tax Team email internationaltax@kpmg.com.

To register for the International Tax webcasts, click here.

  Tax area concerned Relevant
date/case reference
Description of measures and publication link
(Considerations in italic where necessary)
Asia Pacific
KPMG publications Tax developments for financial institutions June 2014 KPMG’s report of tax developments in the Asia Pacific region for financial institutions includes descriptions of recent legislative, regulatory, and judicial developments.
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Australia
Tax legislation adopted and regulatory update Various tax areas June 2014 KPMG in Australia prepared reports on the following developments:
Design R&D expenditure
Fixed trust for tax purposes
Foreign Investment Review Board’s tax focus
Debt-equity classification
Joint venture arrangements
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KPMG in Australia prepared reports on the following developments:
The fate of bank deposit levy
Contemporaneous documentation and the tax dispute lifecycle
Growth and infrastructure
New South Wales budget 2014-15
MIT and foreign pension funds
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    KPMG in Australia prepared reports on the following developments:
Hybrid CIVs and the need for tax reform
Tax Counsel appointments
Proposed repeal of immediate deduction for mining rights
Employment tax
Value chain management in the digital economy
ATO’s view on TOFA-compliant financial reports
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KPMG in Australia prepared reports on the following developments:
Streamlined tax disclosures
Indexation of fuel excise tax rate
Grant funding as part of your investment strategy
Farewell to the MRRT
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Insurance duty June 2014 The rules for Australian stamp “duty” law differ from the rules for Australian income tax.  Concerning “insurance duty,” there are different rates depending on “classes” of insurance, and the liability for the stamp duty can switch between the insurer and the insured, depending on the facts.
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Proposed legislation FATCA 19 June 2014 The Australian Department of the Treasury released a discussion paper on 19 June 2014 that appears to propose what would be an Australian version of the U.S. FATCA law.
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Cambodia
Tax legislation adopted and regulatory update VAT 19 March 2014 Guidance issued by Cambodia’s Ministry of Economy and Finance concerns the VAT rules for those industries or contractors that supply goods or services to certain export industries in the apparel sector—i.e., with respect to the production and export of garments, textiles, shoes, bags and wallets, and hats.
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China
Tax legislation adopted and regulatory update Shanghai pilot free trade zone program June 2014 The Shanghai head office of the People’s Bank of China recently issued guidance for implementing account-based settlement and risk management under the Shanghai pilot free trade zone program.
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Foreign currency management June 2014 China’s State Administration of Foreign Exchange issued guidance concerning a centralized foreign currency management for multinational corporations.
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KPMG publications Financial services sector First quarter of 2014 KPMG in China has prepared a 71-page report that covers current developments affecting the financial services sector for the first quarter of 2014.
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Cyprus
Treaties DTT 1 January 2015/ 1 January 2014 The network of income tax treaties in Cyprus includes two new agreements. the income tax treaty between Cyprus and Spain has an entry into force date of 1 January 2015. The income tax treaty between Cyprus and the UAE was effective 1 January 2014.
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KPMG publications Holding companies 2014 The Cyprus holding company regime is intended to provide tax advantages for those incorporating a Cyprus holding company.
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Hong Kong
Tax legislation adopted and regulatory update Source of profits relating to branch transactions June 2014 Hong Kong’s Inland Revenue Department issued an “advance ruling” that addresses the locality of profits for Hong Kong tax purposes.
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India
Tax legislation adopted and regulatory update Employees’ Funds Scheme June 2014 The Employees’ Provident Funds Scheme requires employees and employers to make a contribution to the Indian Provident Fund (PF). Recent circulars address compliance in respect of establishments permitted to run in-house PF trusts.
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Proposed legislation Budget 2014-2015 The new government in India, elected following the general election of April/May 2014, will present its budget for 2014-15 on 10 July 2014.
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Maharashtra budget 2014-2015 The Finance Minister of Maharashtra presented the state budget for 2014-15 on 5 June 2014 in the State assembly, and includes indirect tax proposals and changes.
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Administrative and case law Various tax areas June 2014 Case law has been published in India with respect to the following subjects:
Indian subsidiary found to be PE of U.S. company
Self-employed person allowed 182 days for determining residential status
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Case law has been published in India with respect to the following subjects:
Payment for pay-channel charges taxable as royalty
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Case law has been published in India with respect to the following subjects:
TDS credit cannot be denied because of mismatch of TDS amount with the details shown in Form 26AS
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Case law has been published in India with respect to the following subjects:
Lump-sum contribution to defined benefit superannuation plan not taxable to employees
Fees paid to Sri Lankan executive for promoting sales and brand name not “fees for technical services” or taxable under “independent personal services” article of income tax treaty
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Transfer pricing Marubeni Corp., Japan (ITA No: 5397/Del/2012) The Delhi Bench of the Income-tax Appellate Tribunal set aside a transfer pricing adjustment with respect to a taxpayer involved in performing what were found to be low-end mediation services in India for its foreign related parties.
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Tecumseh Products India P. Ltd. v. ACIT (ITA No.2228/Hyd/2011) The Hyderabad Bench of the Income-tax Appellate Tribunal accepted, as valid, an amended return and transfer pricing documentation filed by the taxpayer and reporting a transfer pricing adjustment. The tax authorities could not ignore the amended return filed with the missing transfer pricing information, the tribunal concluded.
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CIT v. Cushman and Wakefield (India) Pvt. Ltd. (ITA 475/2012/Del) The Delhi High Court rejected a taxpayer’s contention that since a related party had charged only for cost incurred, without any mark-up, further transfer pricing benchmarking was not required.
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Indonesia
Tax legislation adopted and regulatory update Export requirements 1 March 2014 Indonesia’s Minister of Finance issue guidance concerning the required use of “cost, insurance and freight” as customs values in export notification documents.
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Japan
Proposed legislation Corporate tax system 2014 The Cabinet of the Japanese government on 24 June 2014 approved a legislative package (known in English as: “Basic Policies for the Economic and Fiscal Management and Reform 2014”) that includes a proposal for reform of the corporate tax system.
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Korea
Treaties IGA (FATCA) April 2014 Representatives of the governments of South Korea and the United States in early April 2014 reached an intergovernmental agreement (IGA) “in substance” under the FATCA regime.
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Malaysia
Tax legislation adopted and regulatory update Transfer pricing June 2014 The Malaysian tax authority is now handing out a ”Transfer Pricing Awareness Survey” form at the commencement of a transfer pricing audit. The objective of the survey is to gauge the transfer pricing awareness of the taxpayer’s local management in order to facilitate the transfer pricing audit.
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New Zealand
Tax legislation adopted and regulatory update Business transformation project June 2014 The Inland Revenue’s “business transformation” project focuses on tax administration items.
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Proposed legislation Tax avoidance June 2014 Debt capitalisation and look-through company elections by liquidating companies are addressed in a recent draft “questions we’ve been asked” item by the Inland Revenue Department.
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GST 6 June 2014 Reports from New Zealand reveal that the government has proposed to change the GST treatment of “bodies corporate” in New Zealand, and remove them from the GST rules.
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The Inland Revenue Department has released guidance addressing how it will approach to the government’s announcement that the law will be amended retroactively from 6 June 2014 to remove GST registered bodies corporate from the GST rules.
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Treaties IGA (FATCA) 12 June 2014 Representatives of the governments of New Zealand and the United States signed an Intergovernmental Agreement (IGA) to implement the FATCA.
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Pakistan
Proposed legislation Sales tax June 2014 Changes have been proposed to the sales tax laws for services within the provinces of Sindh and Punjab.
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Finance Bill 2014 Tax provisions in Pakistan’s Finance Bill 2014 are generally expected to be effective 1 July 2014.
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Singapore
Tax legislation adopted and regulatory update Taxation of trusts 21 February 2014 The Monetary Authority of Singapore issued guidance concerning the tax changes affecting the “designated unit trust scheme” and that introduces new sunset clauses for the tax exemption provisions applicable for trusts.
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Tax incentives May 2014 Singapore’s budget for 2014 included a proposal for the extension and enhancement of a tax incentive program for qualifying funds. The Monetary Authority of Singapore in late May 2014 issued guidance for implementing these expanded and enhanced incentives.
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Taxation of dividend income May 2014 The Inland Revenue Authority of Singapore in late May 2014 released the second version of guidance concerning an exemption from income tax. The guidance (known as an “e-Tax Guide”) expands the scope of the tax exemption to include foreign-sourced dividend interest income that originates from income from a qualifying offshore infrastructure project or asset.
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Hybrid instruments May 2014 The Inland Revenue Authority of Singapore in May 2014 issued a guide concerning the income tax treatment of hybrid instruments.
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Turkey
Tax legislation adopted and regulatory update VAT 1 May 2014 All VAT general communiqués previously issued by the tax administration in Turkey have been repealed and replaced by a single communiqué.
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Vietnam
Tax legislation adopted and regulatory update Various tax areas June 2014 Guidance from the tax authorities in Vietnam concerns:
VAT on imported animal feed and with respect to unprocessed or semi-processed food products
Invoice compliance for export invoices
Foreign contractor tax and application of rules under the income tax treaty between Vietnam and Thailand on design services
Corporate income tax implications of interest income during the construction-in-progress period
Effect of airfare costs for rotational shifting of expatriate workers and individual income tax implications
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Tax relief for companies affected by demonstrations May 2014 Guidance providing relief to companies affected by May 2014 demonstrations in Vietnam was issued by the Ministry of Finance.
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