KPMG - cutting through complexity

This e-newsletter gives you an overview of international corporate tax developments being reported globally by KPMG ASPAC firms between 1 August and 31 August 2013.

Australia Cyprus New Zealand
Cambodia India Saudi Arabia
China Indonesia Singapore


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

To contact the Global International Corporate Tax Group email go-fmglobalict@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 GST 2013-2014 A focus of the 2013-2014 Australian Taxation Office compliance program for GST will be on the integrity of business systems and processes—particularly for taxpayers in the mining, wholesale trade, manufacturing, financial and insurance services, government, and retail sectors.
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Corporate income tax/ tax consolidation 2013 Australia's "tax consolidation regime" includes an asset cost-setting process, generally reflecting that a purchaser would be indifferent―from an income tax perspective―as to buying the shares in a company versus purchasing the assets of that company.
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Corporate income tax/
anti-avoidance
2013 Taxpayers in Australia generally need to avoid assumptions that tax will follow the legal form of a transaction. Unless a transaction (or return item) is completely straightforward, it may be useful to consider how the transaction might otherwise be treated on the basis of what is really happening economically—and not just its legal form.
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Anti-avoidance 2013 Recently enacted tax law amendments have caused tax professionals to question whether the general anti-avoidance rule now, more than ever, has broader application.
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Transfer pricing 1 July 2013 New transfer pricing rules in Australia are effective for tax years starting on or after 1 July 2013, and apply to the transactions of all multinational entities operating in Australia.
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Corporate income tax/ tax compliance 2013 Taxpayers need to be thoroughly prepared for an Australian Taxation Office review, particularly if the taxpayers have been parties to complex transactions, merger and acquisition activity, or other similar transactions or activities.
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Fuel tax 2013 Taxpayers need to determine that their systems have been changed to reflect the new fuel tax credit rates. With limited exceptions, the new rates are lower than the pre-June 2013 rates because of increases in the road user charge and carbon price.
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Tax compliance 2013 With the approaching due date for returns, taxpayers will consider any application of the non-resident insurance provisions of Division 15 of Part III of the Income Tax Assessment Act 1936. These provisions may apply to deny deductions if arrangements to pay non-resident insurer tax are not in place.
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Transfer pricing 2013 With changes to Australia's thin capitalisation rules, multinationals need to determine how their liabilities are classified and how that classification will affect transfer pricing.
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Proposed legislation Employment-related tax benefits 2013 Australia’s government has indicated that it intends to limit certain broadly used employment-related tax benefits—including recent fringe benefits tax reform provisions.
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Cambodia
Tax legislation adopted and regulatory update Corporate income tax 2013 The government of Cambodia in June 2013 indicated that it would increase its focus on tax revenue collection.
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China
Tax legislation adopted and regulatory update Bonded zones 8 July 2013 China’s General Administration of Customs issued guidance clarifying the requirements and procedures for grants of preferential treatment of goods imported through special customs supervision areas and bonded supervision entities (i.e. “bonded zones”).
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Tax incentives 25 July 2013 China’s State Administration of Taxation issued guidance to clarify the rules concerning software enterprises that are eligible for certain corporate income tax incentives.
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Treaties FTA 6 July 2013 Representatives of the governments of China and Switzerland signed a free trade agreement—making Switzerland the first country in continental Europe to enter in such an agreement with China.
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KPMG publications Labor and business considerations 2013 A KPMG report examines China’s current demographic shift as well as the potential effect on people and businesses operating in China, and highlights possible solutions to mitigate the impact of the demographic changes that will take place in China.
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FATCA/ tax compliance 2013 The KPMG member firm in China has provided updated reports concerning FATCA compliance by entities in the investment management, banking, and insurance sectors.
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Cyprus
Tax legislation adopted and regulatory update Corporate income tax 2013 The tax authority of Cyprus issued guidance with respect to the tax treatment of a loan write-off by a financial institution, for the benefit of the borrower.
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Investment funds 2013 Cyprus has taken steps to secure its position as a credible alternative investment fund jurisdiction by providing reasonable cost servicing structures and tax-effective systems for both funds and managers.
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India
Tax legislation adopted and regulatory update Telecom sector 1 August 2013 India’s Cabinet Committee on Economic Affairs formally ratified a decision to rationalize sectoral caps and conditions in various sectors, and specifically the telecom sector.
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Tax compliance 1 April 2013 India’s Central Board of Direct Taxes issued guidance amending the Income-tax Rules, 1962, and prescribing additional information that non-residents are to provide along with their tax residency certificates.
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1 October 2013 India’s Central Board of Direct Taxes issued guidance (Notification No 58/2013) revising the manner and forms to be used in providing information electronically for payments and remittances made outside India to non-residents.
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SEZ 12 August 2013 Concerning the SEZ regime, guidance was issued on 12 August 2013.
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Trusts 31 March 2014 India’s government allows employers to establish and manage their own private PF trusts, subject to certain conditions. Private PF trusts generally promise quicker settlement of employee claims and greater transparency of PF accumulations.
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Foreign direct investment 16 July 2013 A committee appointed by India’s government to re-examine the foreign direct investment policy made recommendations that were followed up by the Minister of Commerce & Industry.
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Proposed legislation Transfer pricing 26 August 2013 India’s Central Board of Direct Taxes issued a statement, along with draft rules, with respect to a “safe harbour” under which the tax authorities would accept transfer prices as declared for international transactions.
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Administrative and case law Transfer pricing Maruti Suzuki India Ltd. v. ACIT (ITA No. 5237/Del/2011 The Delhi Bench of the Income Tax Appellate Tribunal rejected the Transfer Pricing Officer’s attempts to divide the taxpayer’s royalty payment made to a Japanese company under a license agreement between the use of technology and the use of a trademark. The tribunal found the license agreement was “single and indivisible.
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Micro Inks Ltd. v. ACIT (2013) The Ahmedabad Bench of the Income Tax Appellate Tribunal rejected and deleted transfer pricing adjustments proposed with respect to a taxpayer’s interest-free advances made to its related party (a U.S. subsidiary) on a finding that the taxpayer had valid business and commercial reasons for these advances.
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Ariston Thermo
India Ltd. v. DCIT (2013) [TS-221-ITAT-2013(PUN)-TP]
The Pune Bench of the Income-tax Appellate Tribunal, in a case concerning economic adjustments computed on the taxpayer’s margins, held that such adjustments for under-utilization of the taxpayer’s capacity during its start-up phase was in consonance with Rule 10B(1)(e) of India’s income tax rules.
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BMW India Private Ltd. v. ACIT (ITA No. 5354/Del/2012) The Delhi Bench of the Income-tax Appellate Tribunal held that the “premium profit” earned by the Indian taxpayer compensated for “excessive” advertising, marketing, and sales promotion expenditure in relation to motor vehicles and parts imported from foreign related parties.  
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Various taxes August 2013 Case law has been published in India with respect to the following subjects:
Disallowance of claimed deduction for withholding tax related to payments
Capital gains taxation triggered in the year in which joint development agreement is entered
Expatriate employees on various tax issues
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Case law has been published with respect to the following subjects:
Funds held in escrow not subject to tax levy by tax authorities
Proportionate taxation of stock options of expatriate employee
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Case law has been published in India with respect to the following subjects:
Section 80-IB(10) deduction is available for “housing project” even when commercial building is constructed as a separate project on same plot of land
Decisions of non-jurisdictional high court not binding on other high courts or tribunals
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Tax treaties/ service tax August 2013 Case law has been published in India with respect to the following subjects:
Purchases by Indian company of advertising space from foreign company on foreign websites did not create PE under the India-United States tax treaty
No withholding tax required on amounts of service tax that is imposed on fees for technical/professional services
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Indonesia
Tax legislation adopted and regulatory update VAT 2013 Indonesian tax authorities issued regulations concerning the following VAT and other tax provisions:
VAT on freight forwarding services
Requirements for withholding or collecting income tax for production sharing contracts, contracts of work, and mining business cooperation agreements
Imported goods exempt from import duty and VAT
Procedures for PPh Article 22
New format, content, and procedures for VAT return completion and submission
New format, content, and procedures for completing and submitting withholding tax under article 21/26 returns
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New Zealand
Proposed legislation R&D 2013 The government earlier this year proposed allowing tax losses arising from R&D expenditures to be refunded (i.e. “cashed out”) up to a certain limit. The “R&D tax loss refund” proposal was aimed at R&D-intensive start-ups.
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Saudi Arabia
Tax legislation adopted and regulatory update Tax compliance 2013 The Saudi Arabia tax authorities issued guidance concerning how to claim reduced withholding tax rates under the income tax treaties to which Saudi Arabia is a treaty partner.
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Singapore
Tax legislation adopted and regulatory update Tax incentives 28 June 2013 The Monetary Authority of Singapore published guidance concerning tax changes to certain financial sector regimes (or “schemes”)—the financial sector inventive, the qualifying debt securities (QDS), and QDS Plus schemes.
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GST 2013 The Inland Revenue Authority of Singapore issued guidance for the GST treatment with respect to the reimbursement and disbursement of expenses.
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