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International Tax

Newsletter

 

This e-newsletter gives you an overview of international tax developments being reported globally by KPMG firms in the Asia Pacific region between 1 December and 31 December 2013.

Australia India New Zealand
China Japan Sri Lanka
Hong Kong Kazakhstan Vietnam


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

To contact the International Tax Group, email internationaltax@kpmg.com.

  Tax area concerned Relevant date/case reference Description of measures and publication link
(Considerations in italic where necessary)
Australia
Tax legislation adopted and regulatory update Anti-avoidance legislation/ GST December 2013 The KPMG member firm in Australia prepared reports on the following developments:
Exemption from thin capitalisation for “insolvency remote” entities
GST - The business case for Data Analytics.
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Profit shifting/ Corporate income tax/ Transfer pricing December 2013 The Australian Taxation Office in line with current BEPS activities—launched an “international structuring and profit shifting” field review program. The program focuses on both corporate tax and transfer pricing aspects of complex and high value cross-border transactions—including financing transactions, intellectual property transactions, and corporate restructure transactions.
Read more
Tax compliance December 2013 The approaching tax year-end for companies with substituted accounting periods and half-year tax calculations may need to:
consider tax implications of major transactions throughout the year, or any still on the 'to-do list' for the year that need to be closed out
attend to the usual shopping list of timing items (such as definitively committing to bonuses, paying out superannuation accruals and the like).
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Transfer pricing December 2013 Australia’s tax authorities continue to focus on related-party financing arrangements. Given the possibility of contention, taxpayers proposing to refinance existing related-party borrowings—or to implement new arrangements—may want to consider an APA.
Read more
BEPS December 2013 The OECD BEPS action plan reflects what would be important changes to international tax rules. There are twin drivers of change: (1) that governments and the OECD will be working together on tax systems, and how profits and value are created in individual countries; and (2) that businesses are becoming increasingly international, with more complex regional and sometimes global supply chains.
Read more
Proposed legislation GST December 2013 The KPMG member firm in Australia prepared reports on the following developments:
What if the “going concern” goes?
Don’t forget the 10 percent.
Read more
Superannuation entities 1 July 2014 A draft Taxation Ruling addresses the apportionment of expenses incurred by superannuation entities partly in gaining or producing assessable income and partly in gaining or producing non-assessable income.
Read more
Tax consolidation 14 May 2013 To protect the corporate tax base from erosion and loopholes, changes to the Australian income tax consolidation regime are to proceed as announced from 14 May 2013.
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Administrative and case law R&D Vision Intelligence Pty. Ltd. v. Commissioner of Taxation [2013] AATA 527 In a case concerning a refund for contracted R&D expenditure, the Administrative Appeals Tribunal of Australia disallowed the R&D claim and also imposed a 25 percent penalty for failure by the taxpayer to take reasonable care.
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China
Tax legislation adopted and regulatory update Pension plans December 2013 The recent circular generally promotes the establishment of approved pension plans and broadens the national retirement savings base by:
deferring the point of taxation for voluntary employer contributions to retirement age
allowing a tax deduction for voluntary employee contributions to approved retirement plans.
Read more
Free trade zone December 2013 The People’s Bank of China, on 2 December 2013, issued opinions on providing financial support for the development of China (Shanghai) pilot free trade zone.
Read more
VAT 2014 China’s Ministry of Finance and the State Administration of Taxation jointly issued guidance to expand the VAT pilot program to apply to the railway sector, the postal delivery services sector, and the telecommunications sector.
Read more
Tax treatment of financial commodities 1 December 2014 China’s State Administration of Taxation issued guidance modifying the business tax treatment on the transfer of financial commodities.
Read more
Proposed legislation VAT 2014 The financial services sector in China will need to consider certain issues in the transition to a VAT system.
Read more
Free trade zone 2014 Since the Shanghai municipal government and other relevant authorities released the first batch of policies governing the pilot free trade zone program for Shanghai in late September 2013, the authorities have subsequently issued further specific notices in order to promote the six major sectors.
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KPMG Publications Urbanization and development December 2014 An essential ingredient in China’s growth and development over the past 30 years has been its ongoing process of urbanization.
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Hong Kong
Tax legislation adopted and regulatory update Exchange of information November 2013 The Global Forum, at its meeting in Jakarta in November 2013, announced findings of its review of Hong Kong’s compliance with the international standard on exchange of information for tax purposes.
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Administrative and case law Corporate income tax/ Tax accounting Nice Cheer Investment Ltd. v. CIR, FACV 23/2012 Hong Kong’s Court of Final Appeal concluded that unrealized gains recognized at year-end are not taxable. The appellate court rejected the Inland Revenue’s position that unrealized profits are not chargeable to tax, notwithstanding that the gains were recognized in the taxpayer’s financial statements in accordance with international accounting standards.
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India
Tax legislation adopted and regulatory update Excise tax December 2013 India’s Central Board of Excise and Customs issued a notice amending the Valuation Rules, 2000, concerning when goods are sold in part to unrelated buyers and in part to related buyers and also when goods are sold related persons, in addition to use of such goods partly for one’s “own consumption.”
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Administrative and case law Income tax Mitsubishi Corporation India’s Authority for Advance Ruling (AAR) ruled that a taxpayer’s application filed with the AAR, after the taxpayer filed the income tax return but before the date when a notice for assessment was issued, cannot be considered as pending for adjudication before the income tax authorities, and as such, the AAR application is to be admitted.
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Transfer pricing Li & Fung (India) Private Ltd. v. CIT (ITA No. 306 of 2012) The Delhi High Court held that the Transfer Pricing Officer’s determination of an arm’s length price based on a 5 percent markup of the “free on board” value of goods sourced for a related party’s contract with third parties was contrary to the transfer pricing rules under India’s income tax law and regulations.
Read more
Glenmark Pharmaceuticals Ltd. v. ACIT (ITA No.5031/M/2012) The Mumbai Bench of the Income-tax Appellate Tribunal held that bank guarantee rates cannot be mechanically applied in determining the arm’s length price.
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VIHI LLC v. ADIT (ITA No. 17 (Mds.)/2012) The Chennai Bench of the Income-tax Appellate Tribunal held that the “discounted cash flow” method was preferable over the “yield” method or “net asset value” method for purposes of determining the arm’s length price of shares transferred to related parties.
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Corporate income tax December 2013 Case law has been published in India with respect to the following subjects:
interest on tax refund, effectively connected with a permanent establishment in India, does not invoke provisions of India-France income tax treaty
money paid to retiring partners not taxable as capital gains to the firm.
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Case law has been published in India with respect to the following subjects:
export commission paid to non-resident director is taxable under both income tax law and India-Switzerland income tax treaty
loss on derivative transactions incurred by FII is capital loss, not business loss
non-compete fee is payment to strengthen acquired intangibles and, therefore, eligible for depreciation.
Read more
Case law has been published in India with respect to the following subjects:
financial aid from parent company for recouping subsidiary’s losses is taxable revenue
specific provisions are required for denying exemption pursuant to restructuring
loss carry forward denied; argument of “beneficial ownership” for intra-group share transfers rejected
payments for bandwidth / telecom services are royalty income
not royalty for transfer of software (a “copyrighted article” and not a “copyright right”).
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Japan
Tax legislation adopted and regulatory update Special reconstruction corporation tax December 2013 The Japanese government announced an economic stimulus package that included a statement that special reconstruction corporation tax (i.e., a 10 percent additional tax imposed on corporation tax liability) would be repealed a year earlier than as originally schedule.
Read more
Proposed legislation Various taxes 2014 The Japanese government’s ruling coalition agreed on 12 December 2013 to an “outline” of tax reform proposals for 2014.
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Treaties DTT 17 December 2013 Representatives of the governments of Japan and the United Kingdom on 17 December 2013 signed a Protocol amending the current income tax treaty between the two countries.
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Kazakhstan
Treaties Mutual administrative assistance 23 December 2013 The OECD announced that Kazakhstan on 23 December 2013 signed an international convention on mutual administrative assistance in tax matters.
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New Zealand
Tax legislation adopted and regulatory update Tax & policy developments 2013-4 Among the 2013 tax and policy developments in New Zealand were:
introduction of legislation containing changes to the tax treatment of employee allowances, foreign superannuation plans, and the thin capitalisation rules
release of the OECD tax “action plan” in response to concerns around profit shifting by multinationals
launch of Inland Revenue’s business transformation project.
Read more
Superannuation tax December 2013 A superannuation tax bill in New Zealand includes earthquake-related measures, including changes to the depreciation rules.
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Sri Lanka
Proposed legislation Budget/ Various taxes 2014 The government of Sri Lanka presented on 21 November 2013 the 2014 budget to parliament. The budget included both tax and fiscal proposals.
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Vietnam
Tax legislation adopted and regulatory update Transfer pricing December 2013 Vietnam’s General Department of Taxation initiated transfer pricing audits throughout a number of provinces, and selected 42 textile, garment, and footwear companies based on transfer pricing risk assessment profiles.
Read more
DTT December 2013 Vietnam provided guidance on certain tax provisions under the Vietnam-France income tax treaty.
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