Weekly Tax Matters KPMG LLP (UK) 9 January 2015 contents TAX POLICY • • • • • BEPS: Interest deductions and other financial payments BEPS: Revisions to Chapter I of the Transfer Pricing Guidelines BEPS: Making dispute resolution mechanisms more effective Tax enquires: closure rules Devolved taxation update CORPORATE TAX • • FII GLO High Court decision Project Blue – Upper Tribunal decision INDIRECT TAX • • Revenue and Customs Brief 49/14: VAT Prompt Payment Discounts Schoenimport "Italmoda" Mariano Previti (C-131/13) - CJEU Judgment EMPLOYMENT TAX • • • PAYE – Real Time Information Summary of responses published on draft PAYE legislation Expatriate employers: January 2015 composite payments © 2014 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. contents INTERNATIONAL STORIES • International round up OTHER NEWS IN BRIEF © 2014 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. TAX POLICY BEPS: INTEREST DEDUCTIONS AND OTHER FINANCIAL PAYMENTS The OECD has released a discussion draft on Action 4 (Interest deductions and other financial payments) of the BEPS Action Plan. Margaret Stephens +44 (0)20 7311 6693 [email protected] On 18 December 2014 the OECD released a discussion draft on Action 4 of the BEPS Action Plan which focusses on rules to prevent base erosion and profit shifting using interest and other financial payments economically equivalent to interest. The primary concern appears to be that multinational groups may be able to claim total interest deductions that significantly exceed their actual third-party interest expense – a concern that led to the introduction in the UK of the worldwide debt cap (WWDC) provisions. The OECD have suggested three alternative frameworks for a general limitation on the deductibility of interest expense: 1. A group allocation rule whereby an entity’s net interest expense would be limited by reference to its allocable share of the group’s net interest expense, either by allocating a worldwide group’s net third-party interest expense in accordance with a measure of economic activity (such as earnings or asset values), or based on a relevant financial ratio; 2. A fixed allocation rule whereby an entity would be entitled to deduct net interest expense up to a specified proportion of its earnings, assets or equity; or 3. A combination of the above. It is also suggested that targeted rules may be needed to address specific situations such as interest paid to connected parties, interest accrued on excessive debt push-downs and interest used to fund or acquire tax-exempt or tax-deferred income-yielding assets. Various other specific issues such as de minimis thresholds, issues for specific industries and the interaction with other BEPS action items are also discussed. The proposals under consideration could potentially impact on all groups which claim interest relief and, depending on how these are taken forward, could have some of the most far reaching implications of the BEPS project. Comments have been requested by 6 February 2015. We expect a considerable amount of input from UK businesses who already have processes in place to deal with the WWDC rules and will wish to minimise the administrative burden that could arise from the introduction of a completely different set of rules to achieve the same objective. The approach taken by the UK Government will be critical in this regard. © 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 1 BEPS: REVISIONS TO CHAPTER I OF THE TRANSFER PRICING GUIDELINES OECD draft guidance published which focuses on transfer pricing issues regarding risk, non-recognition of transactions and ‘special measures’. Komal Dhall On 19 December 2014, the OECD issued a public discussion draft for BEPS Actions 8, 9, and 10 (Assure that transfer pricing outcomes are in line with value creation). The draft develops key themes of other BEPS publications, including placing a much greater emphasis on allocating group profits to people functions. Several open questions remain where the OECD is seeking input from taxpayers on important issues. The changes will impact all sectors, but may have a disproportionate impact on some (such as financial services). Part I proposes revisions to Section D of Chapter I, with emphasis on contracts, allocation of risk, and guidance on recharacterisation of transactions. Part II outlines options for special measures for intangible assets, risk, and over-capitalisation. Part I: Revision to Chapter I of the OECD Guidelines There are broadly four key themes: [email protected] • Less emphasis on intra group agreements: Identifying the commercial or financial relations between parties is increasingly key. Contracts remain a starting point but Richard S Murray where contracts differ from the factual substance of the arrangement or transaction in place, the actual conduct of the parties will take primacy over the contractual +44 (0)20 7694 8132 terms. [email protected] • Risks should be allocated to jurisdictions based on control functions, not allocated contractually: The draft contains detailed new guidance on risk analysis in transfer pricing. Contractual allocation of risks is not likely to be seen as an arm’s length arrangement without the ability to control those risks. • Capital: As the location of equity capital is in the OECD’s view subject to manipulation by taxpayers intra group (unless subject to regulation), rewards to capital must be considered alongside broader risk considerations and the commercial and financial relations between the parties. • Non-recognition: The OECD’s guidance extends the previous scope of non-recognition, and introduces a concept of ‘fundamental economic attributes’, which provides more detail on how to apply in practice the previously existing ‘commercial rationality’ test. +44 (0)20 7694 4498 Part II: Proposed ‘special measures’ • Despite the guidance updates proposed in Part I, the OECD recognises that certain residual risks may remain. Part II of the draft broadly outlines five proposed ‘special measures’ to address specific BEPS risks related to hard-to-value intangibles and inappropriate returns for providing capital. Comments are requested by 6 February 2015. © 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 2 BEPS: MAKING DISPUTE RESOLUTION MECHANISMS MORE EFFECTIVE The OECD has published proposals under Action 14 of the BEPS project to make dispute resolution mechanisms more effective. Komal Dhall +44 (0)20 7694 4498 [email protected] Peter Steeds +44 (0)20 7311 3449 [email protected] On 18 December 2014, the OECD released a public discussion draft under BEPS Action Plan 14 that contains proposals to make dispute resolution mechanisms more effective. This draft sets out how the resolution of double tax disputes through the treaty based Mutual Agreement Procedure (MAP) can be improved to ensure that double taxation is relieved providing certainty and predictability for businesses. Recognising the increase in the number of disputes resulting from double taxation, the draft seeks to identify obstacles that prevent resolving such disputes and recommends measures to address these obstacles. It emphasises the need for political commitment to improve the MAP process through adoption of specific measures intended to address obstacles which currently inhibit access to the process and its effective operation. It also proposes establishing monitoring mechanisms to check implementation of the political commitment. The draft sets out four guiding principles to make MAP a more effective dispute resolution process: • • • • Ensuring that treaty obligations are implemented in good faith; Ensuring that administrative processes promote the prevention and resolution of treaty related disputes; Ensuring that taxpayers can access MAP when eligible; and Ensuring that cases are resolved once they are in MAP. In respect of each of these it considers the obstacles which currently impede its application and suggests measures to address them. The OECD recognises the need for further work in this area to provide practical and impactful solutions to improve the process and acknowledges that a universal consensus to adoption of mandatory binding arbitration is difficult to achieve. The draft is a useful first step towards achieving a minimum standard and a cohesive political commitment to ensuring an effective MAP process across jurisdictions. However it provides limited guidance on how the measures could be implemented in practice and how a political consensus can be achieved. Comments are invited from the public to suggest any additional obstacles faced in practice, specific issues identified in the draft and suggestions of making MAP work better. Such comments are to be provided by 16 January 2015. © 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 3 TAX ENQUIRIES: CLOSURE RULES A consultation document has been published which aims to give HMRC powers to seek early resolution of one or more aspects of an enquiry. Stephen Whitehead +44 (0)20 7311 2829 [email protected] Kevin Elliott +44 (0)20 7311 2487 [email protected] On 18 December 2014 a consultation document titled ‘Tax Enquiries: Closure Rules’ was published. This had been announced at the Autumn Statement and the stated aim is “to enable HM Revenue and Customs (HMRC) to refer matters to the Tribunal with a view to achieving early resolution of one or more aspects of an enquiry into a tax return”. The consultation document sets out a proposed new process for Income Tax (including Class 2 and 4 National Insurance Contributions in certain circumstances), Capital Gains Tax and Corporation Tax enquiries where a number of different issues are under enquiry. The intention is to enable HMRC to achieve early resolution and closure of one or more aspects of a tax enquiry, where it is not appropriate to close the whole tax enquiry. In summary, the self-assessment enquiry process would remain the same up to the point a joint referral of an issue to Tribunal could be considered. If a joint referral cannot be made then HMRC would have a new option of ‘sole referral to Tribunal’. If this option was followed then HMRC would issue a Tribunal referral notice which could be appealed. Once the appeal on that particular matter is determined (there would be other matters under enquiry that would continue) HMRC could issue a ‘Tribunal referral closure notice’, against which there would be no right of appeal, with tax due within 30 days. It is unfortunate that the proposals appear to be based on the assumption that delays to the resolution of enquiries are always caused by the taxpayer. A more equitable solution would be for a procedure to take individual issues to Tribunal which could be applied for by either party to the dispute. Comments have been requested by 12 March 2015 and readers are encouraged to consider the implications of these proposals and submit comments where appropriate. © 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 4 DEVOLVED TAXATION UPDATE A round up of recent news and publications on devolved taxation around the UK. Scott McCrorie +44 (0)131 527 6744 [email protected] Scotland HM Revenue & Customs (HMRC) have updated their technical note Clarifying the Scope of the Scottish Rate of Income Tax. In summary, the version of this note published in May 2012 proposed that Property Income Distributions from Real Estate Investment Trusts and Property Authorised Investment Funds; certain annual payments made subject to withholding at the basic rate of income tax; and relevant payments out of interest in possession trusts and deceased estates, should remain subject to the UK main rates of income tax in the hands of taxpayers who will be subject to the Scottish Main rates from 6 April 2016. However, due to complexities encountered when preparing to implement this policy, the UK Government now proposes that these forms of income should, where applicable, be subject to the Scottish main rates of income tax in recipients’ hands. The updated technical note also includes draft legislation making consequential amendments in anticipation of the introduction of the Scottish main rates on 6 April 2016, and requiring income tax paid at the Scottish main rates to be disclosed separately in the end of year form P60. HMRC will consult with employers and pension providers on these changes to the P60. Wales The Wales Bill has received Royal Assent as the Wales Act 2014. This Act provides for devolution to the National Assembly for Wales of power over the taxation of transactions in land in Wales and disposals to landfill in Wales. These powers are currently expected to be effective from 1 April 2018. The Wales Act 2014 also provides for the devolution of income tax rate setting power to the National Assembly for Wales subject to the outcome of a referendum. Northern Ireland The Corporation Tax (Northern Ireland) Bill 2014-15 was introduced to Parliament on 8 January 2015. The Bill makes provision for and in connection with the creation of a Northern Ireland rate of corporation tax. © 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 5 CORPORATE TAX FII GLO HIGH COURT DECISION A more detailed note has been prepared on this case which considers the legality of the pre July 2009 dividend taxation regime in the UK. Chris Morgan +44 (0)20 7694 1714 [email protected] Stephen Whitehead +44 (0)20 7311 2829 As mentioned in the last edition of Weekly Tax Matters, on 18 December 2014 the High Court published its decision in The Test Claimants in the FII Group Litigation v HM Revenue and Customs  EWHC 4302 (Ch). A more detailed note summarising the key points from this lengthy decision has now been produced. It is important to note that the final step – actual quantification of the test claims – has still to be taken by agreement between the parties or, if necessary, further submissions to the court. There will then almost certainly by an appeal by HMRC and possibly also cross-appeals by the claimants. It may therefore be some time before the final outcome of this case is known. However taxpayers who have claims in progress may wish to consider their position in the light of this latest judgment and, in particular, whether there is any further information they would need to obtain in order to defend and quantify their claims on the basis of the principles it applies. A hearing on consequential issues arising from the judgment including potentially permission to appeal is expected in the near future. [email protected] © 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 6 PROJECT BLUE – UPPER TRIBUNAL DECISION The Upper Tribunal has published an important decision on the application of the SDLT anti-avoidance rule in FA 2003 s75A. Sean Randall +44 (0)20 7694 4318 [email protected] Simon Yeo Readers involved in real estate transactions may be interested in the Upper Tribunal’s (UT’s) decision in Project Blue Ltd v Revenue And Customs  UKUT 564 (TCC), released in December 2014. The case concerns the application of the stamp duty land tax (SDLT) general anti-avoidance rule (FA 2003 s75A) and related provisions to the purchase of Chelsea Barracks in 2007. The decision was eagerly anticipated but those hoping that it would illuminate clearly the scope and application of s75A will be disappointed. To give effect to Shari’a-compliant financing, Project Blue Ltd (PBL) purchased the land for £959 million and immediately sub-sold it to a bank for £1.25 billion. PBL did not pay SDLT due to sub-sale relief and alternative property finance relief. HMRC argued that £50 million of tax was payable (4 percent of £1.25 billion) under s75A. The Firsttier Tribunal (FTT) dismissed PBL’s appeal. It held that s75A, whilst an anti-avoidance provision, contains no requirement that the taxpayer should have a tax avoidance motive; but account must be taken of its purpose when construing it. So read, the person liable under s75A must be a person who has avoided SDLT. +44 (0)20 7311 6581 [email protected] The UT dismissed PBL’s appeal. It held that s75A did apply but that the amount of the taxable consideration was £959 million, not £1.25 billion. The two judges disagreed on the last point and the presiding judge used his casting vote. Although unlikely to be the ultimate decision in the case, it is significant. Unlike the FTT, the UT clearly ruled out any motive test. One judge said that the provision is not capable of purposive interpretation. Another considered that the omission of a motive test was deliberate, as the provision itself defined ‘avoidance’. Both judges encountered difficulties applying the provision to the facts, finding that there were numerous alternative permutations, which produced different results as to who pays the tax and on what amount. They acknowledged this was unsatisfactory and criticised the drafting. This case clearly illustrates the need to take specialist advice. © 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 7 INDIRECT TAX REVENUE AND CUSTOMS BRIEF 49/14: VAT - PROMPT PAYMENT DISCOUNTS HMRC have released a Brief on the forthcoming changes to the VAT treatment and invoicing of Prompt Payment Discounts. HM Revenue & Customs (HMRC) have released the anticipated Brief on Prompt Payment Discounts (PPD), along with a sample invoice. As well as giving background information the Brief provides revised legislation in Section 4. Section 5 goes on to provide guidance for both suppliers and customers. For suppliers, the guidance states that taxpayers must choose whether they want to issue credit notes when a PPD is taken up. If not then they must issue invoices with the additional information: • Steve Powell +44 (0)20 7311 2746 [email protected] Karen Killington • the terms of the PPD (PPD terms must include, but need not be limited to, the time by which the discounted price must be made); and a statement that the customer can only recover as input tax the VAT paid to the supplier. +44 (0)20 7694 4685 [email protected] The Brief goes on to provide further guidance which also suggests that where suppliers elect not to issue credit notes, reference should be made along the lines of ‘no credit note will be issued’. For customers the Brief sets out how, if the invoice received sets out the PPD and states no credit note will be issued, they must adjust the VAT when payment is made. The Brief suggests that the customer should ‘retain a document that shows the date and amount of payment (e.g. a bank statement)’. If the supplier’s invoice does not make reference to the fact that a credit note will not be issued, then VAT must be adjusted when the credit note is received. The new rules apply from 1 April 2015. © 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 8 SCHOENIMPORT "ITALMODA" MARIANO PREVITI (C-131/13) - CJEU JUDGMENT The CJEU has released its Judgment in this case concerning the VAT treatment of intra community supply of goods involved in fraud. Steve Powell +44 (0)20 7311 2746 [email protected] Karen Killington +44 (0)20 7694 4685 [email protected] This Dutch reference involved three cases concerning the intra community supply of goods, where the goods were, or allegedly were, involved in fraud that the taxpayers knew or should have known about. The Court of Justice of the European Union (CJEU), however, agreed with the European Commission (EC) that the questions in relation to two of the cases were inadmissible. The CJEU reached this conclusion on the basis that the questions were premised on the basis that the goods had been involved in fraud. However, it was clear from the orders submitted that this had not been established and therefore the questions were hypothetical. The CJEU therefore did not answer the questions in Turbu.com (C-163/13) and Turbu.com Mobile Phones (C-164/13). The remaining case, Schoenimport "Italmoda" Mariano Previti (C-131/13) (Italmoda), traded in shoes but also traded in computer hardware. Purchases were made locally (and VAT deducted) and acquisitions were made from Germany. However, the goods acquired from Germany were not declared as either an intra-Community acquisition or as an intra-community supply when sold to customers in Italy. The CJEU noted that EU law cannot be relied upon for abusive and fraudulent ends and this also applies to the exemption for intra community supplies. This was contrary to the view of the EC that this exclusion cannot apply to a corrective mechanism designed to ensure the neutrality of VAT in the cases of intra-community supplies (para 47). In concluding (para 49), the CJEU responded that in respect of intra community supplies, where the person knew, or should have known about a supply being connected with fraud, the Sixth Directive must be interpreted as meaning that it is for the national authorities and courts to refuse a taxable person ‘rights to a deduction, to an exemption or to a VAT refund’. This applied regardless of whether the fraud took place in another Member State or the taxpayer met the deduction or exemption formalities laid down by a Member State. © 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 9 EMPLOYMENT TAX PAYE - REAL TIME INFORMATION Steve Wade discusses RTI following the announcement of a review at the Autumn Statement and the publication of a TIIN. Steve Wade +44 (0)20 7311 2220 [email protected] In a recent article in Tax Journal 1 Steve Wade, a director in KPMG in the UK’s Employment Taxes team, discusses the review of Real Time Information (RTI) announced in the Autumn Statement and suggests a number of improvements, including the harmonisation of a number of the current easements, changes to the Earlier Year Update process and a review of the on or before filing requirement. The article also requested that the review cover HM Revenue & Customs’ (HMRC) cost estimate of RTI. Subsequently a revised cost estimate has been published in a Tax and Information and Impact Note. (TIIN) which states: “Savings for the changes to the joiners and leavers processes (P45 and P46, though the P45 will still be provided to departing employees) and the end of year reconciliation process (P35, P14 and P38A, though employers will still need to provide a P60 to each employee) are estimated at approximately £322.5m per year”. The TIIN also states that “Secondary legislation will amend the PAYE Regulations referred to above, as from 6 March 2015, to remove the requirement for employers to complete the End of Year checklist when making their final Full Payment Submission (FPS) for the tax year from 2014-15 onwards.” Our view remains that HMRC have still overestimated the savings and underestimated the cost of RTI and that the potential benefits of RTI are not being achieved due to inefficiencies in HMRC’s back end systems and processes. The Administration Burdens Advisory Board (ABAB) has written to the Financial Secretary David Gauke MP to set out their concerns regarding RTI in more detail. The ABAB letter also endorses the OTS recommendation and the need to look at the on or before reporting requirement. 1 First published in Tax Journal on 19 December 2014. Reproduced with permission. © 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 10 SUMMARY OF RESPONSES PUBLISHED ON DRAFT PAYE LEGISLATION HMRC have published the summary of responses on draft PAYE legislation around maintaining customer service levels in peak periods. Steve Wade +44 (0)20 7311 2220 [email protected] In draft PAYE legislation, published last July, HM Revenue & Customs (HMRC) proposed the option of not informing the employee at the time when a revised PAYE coding notice is issued to the employer, but to allow a period of up to 30 days in which to inform the employee. As discussed in Weekly Tax Matters last year this could increase payroll department workloads and increase the volume of calls to HMRC as both employees and payroll departments contact them around unexplained changes in net pay. In the responses, others have raised similar points on the increased burden on employers. HMRC have listened to the representations and confirmed that they are now postponing plans for a 30 day delay before issuing a revised coding notice to an employee. Further to the consultation, secondary legislation has been introduced removing the need for a coding notice to be issued where the employee has no tax to pay in respect of any PAYE income. Currently when HMRC notifies an employer of a new tax code, the employee will also be notified in writing. Receipt of these notices, particularly in circumstances where the employee has no tax liability, can cause concern for employees. HMRC hope that the removal of the requirement to issue these notices will both reduce uncertainty for employees and the number of calls to HMRC where employees are contacting them for clarification on the meaning of the notices. However HMRC may not always correctly identify taxpayers who have no liability for example when the taxpayer has sources of income outside the scope of PAYE. Additionally HMRC are not utilising RTI earnings data efficiently. Under the existing legislation the notices are currently required to be issued in writing. The new measures, which come into force on 29 January 2014, also provide for a tax coding notice to be issued electronically. © 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 11 EXPATRIATE EMPLOYERS: JANUARY 2015 COMPOSITE PAYMENTS HMRC have confirmed the arrangements for employers due to make payments under composite payment arrangements. Steve Wade +44 (0)20 7311 2220 [email protected] Composite payment arrangements allow those employers paying tax on behalf of expatriate employees to make a single payment, rather than a separate payment for each employee. Employers due to make a payment this month under a composite payment arrangement should note the following key points: • • • Payments are due by 31 January; The composite payments spreadsheet (detailing how the payment should be allocated) should be sent to HM Revenue & Customs (HMRC) at least five days before making payment; There has been no change to the spreadsheets and references used for the January 2014 payments: employers should, therefore, use the same templates and references they used to make last year’s payment. If these are not available, employers are advised to contact the relevant Accounts Office ([email protected] for payments to Accounts Office Cumbernauld, or [email protected] where payments are due to be made to Accounts Office Shipley). If you have any questions relating to your composite payment arrangement (or do not currently have an arrangement in place but would like to consider one), please get in touch with your usual Tax & Pensions contact. © 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 12 INTERNATIONAL STORIES INTERNATIONAL ROUND UP This week: Canadian tax changes for 2014 financial statements; Columbian tax reform; changes to favourable tax regime rules in Brazil; Japanese tax reform; Indian tax case on service permanent establishments; new rules for foreign nationals on short term work assignments in China; Luxembourg 2015 budget and ATA guidance; Portuguese FATCA update; Netherlands issues policy statement on fiscal unity; Companies Act 2014 enters into law in Ireland; and new transfer pricing guidelines in Singapore and Australia. Every week, KPMG member firms around the world publish updates on developments in their country. In Weekly Tax Matters we’ll highlight a selection that may be of interest to our readers. Americas Canada – Those involved in preparing financial reports for corporations or other organisations should consider certain 2014 income tax changes for year-end financial statements. Columbia – Recent tax reform measures include a new wealth tax. Brazil – The tax rules surrounding ‘favourable tax regimes’ have been amended. More TaxNewsFlash – Americas can be found here. Asia Pacific Japan – The ruling coalition government has agreed the outline of a package of tax reform measures for 2015. India – A tax court has ruled that employees of a US company assigned to an Indian company to provide support services constitutes a service permanent establishment. China – New rules are in place for foreign nationals in China for short term work assignments. More TaxNewsFlash – Asia Pacific can be found here. © 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 13 Europe Luxembourg – The 2015 budget was passed on 18 December 2014 and guidance on the advance tax agreement (ATA) procedure was published on 29 December 2014. Portugal – The 2015 budget contains a number of measures on the US Foreign Account Tax Compliance Act (FATCA). The Netherlands - A new policy statement has been announced on fiscal unity. Ireland - The Companies Act 2014 has been signed into law, consolidating primary and secondary corporate legislation. More TaxNewsFlash – Europe can be found here. Transfer Pricing Singapore – The tax authorities have released new transfer pricing guidelines. Australia – Administrative guidance on transfer pricing documentation and record keeping has been published. More TaxNewsFlash – Transfer Pricing can be found here. © 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 14 OTHER NEWS IN BRIEF OTHER NEWS IN BRIEF This week: PAC announces enquiry into tax reliefs; NICs Bill completes Report Stage in House of Lords; UKCanada double tax convention update; half a million businesses sign up for HMRC online tax account; FA2009 provisions for SDRT penalty regime reform now operative; worst excuses for late tax returns published by HMRC; January’s edition of the Weekly Tax Matters consultation tracker; 2015’s expected developments in employment taxes; business traveller compliance web seminar; and slow retail sales growth predicted by the KPMG/Ipsos Retail Think Tank. The Public Accounts Committee has announced an enquiry into the effective management of tax reliefs. The National Insurance Contributions Bill 2014/15 has completed its Report Stage in the House of Lords. It is scheduled for Third reading on 21 January. The Protocol and Interpretative Protocol to the 1978 Double Tax Convention between the UK and Canada, signed in London on 21 July 2014, entered into force on 18 December 2014. More than half a million businesses have signed up for HM Revenue & Customs’ (HMRC’s) new online tax account ‘Your Tax Account’. The provisions in the Finance Act 2009 for the reform of the SDRT penalty regime are now operative with effect from 1 January 2015. This relates to penalties for failures to make returns and to make payments on time and also to late payment and repayment interest. HMRC’s Compliance Handbook has been amended to reflect the updated position. HMRC have published a list of this year’s worst excuses for late filing of Self Assessment tax returns. January’s edition of the Weekly Tax Matters consultation tracker can be found here. KPMG in the UK’s Employers' Club have highlighted a number of items which are likely to remain high on the Employment Tax agenda in the UK over the coming 12 months. © 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 15 Next week, Stephen Curtis and Neil Taylor from KPMG in the UK’s Employment Taxes team will be hosting a web seminar on business traveller compliance. This will include a demo of KPMG's business traveller compliance tool – KPMG LINK Business Traveller. Click here to register – please note that the seminar is on Tuesday 13 January at 10am and advance registration is recommended. Retail sales are predicted to grow by two percent at most in 2015 as consumer confidence remains fragile, warns the KPMG in the UK/Ipsos Retail Think Tank. © 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 16 www.kpmg.co.uk © 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. 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