asia pacific tax weekly - assets.kpmg
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Asia Pacific Tax Weekly
KPMG Asia Pacific Tax Centre | Content to 21 December 2017
Asia Pacific Tax Developments
Australia: Diverted Profits Tax – An Early Christmas Present? KPMG Australia discusses the latest guidance on the Diverted Profits Tax. These includes two greatly anticipated gifts i.e. a draft Law Companion Guideline (LCG) and a final Practice Statement Law Administration (PSLA). Once finalised, the LCG will apply the law as described in it, and it will constitute a public ruling. The PSLA provides internal instructions to Australian Taxation Office staff only.
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Australia: Eat, Drink and be Merry
KPMG Australia discusses some additional fringe benefits tax pointers for consideration during this Christmas season.
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Australia: No MYEFO FOMO for tax folks The federal government has released its Mid-Year Economic and Fiscal Outlook (MYEFO) for 2017/18. At a time of year when many are gripped by the “fear of missing out” (FOMO), MYEFO contained little that would be of concern for those involved in tax.
The government projects that the underlying cash balance will return to surplus in 2020/21, and notes an increase in expected receipts up to that point, relative to the projections in the 2017/18 budget, driven by company tax and superannuation fund taxes.
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India: Corporate/bank guarantee fees received by a foreign holding company cannot be treated as interest in view of ‘Other Income’ article under the India-U.K. tax treaty and it is taxable under the Income-tax Act The Delhi Bench of the Income-tax Appellate Tribunal held that the payment received by a foreign holding company from an Indian subsidiary on account of corporate/bank guarantee was accrued and received by the taxpayer in India and hence such a receipt is taxable in India. Such fees do not fall within the expression ‘interest’ in view of ‘other income’ article under the India-U.K. tax treaty. In the absence of any specific provision dealing with corporate/bank guarantee fees, the same has to be taxed in India as per the provisions of the Income-tax Act, 1961.
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India: Subsidy in the form of concession of entertainment tax to new multiplex complexes is capital in nature The Supreme Court held that subsidy in the form of the concession of entertainment tax to new multiplex complexes is capital in nature. The Supreme Court observed that the receipt of subsidy is capital or revenue will have to be determined by having regard to the purpose for which the subsidy is given.
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Japan: Economic partnership agreement negotiations with EU finalized Officials with the EU and Japan has announced the successful conclusion of negotiations regarding an economic partnership agreement—one of the largest bilateral trade agreement negotiated by the EU.
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Japan: Outline of the 2018 Tax Reform Proposals The ruling coalition (the Liberal Democratic Party and New Komeito) agreed on the ‘Outline of the 2018 Tax Reform Proposals’ on 14 December 2017. KPMG in Japan has provided a brief summary of the main points of the Proposal.
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Singapore: EU publishes list of non-cooperative tax jurisdictions (otherwise referred to as “the Blacklist”) The long-awaited EU list of non-cooperative tax jurisdictions (otherwise referred to as 'the Blacklist") has been issued.
Perhaps your first reaction might be to ignore the Blacklist on the basis that Singapore is not blacklisted and it is an EU related-matter.
But that is a mistake for several reasons.
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Significant International Tax Developments
OECD: 2017 update to the “Model Tax Convention” addresses BEPS The Organisation for Economic Cooperation and Development (OECD) released the latest edition of the OECD “Model Tax Convention”. This 2017 update to the Model Tax Convention incorporates significant changes developed through the OECD/G20 project to address base erosion and profit shifting (BEPS).
The 2017 update mainly reflects a consolidation of the treaty-related measures resulting from the work on:
• BEPS Action 2 (Neutralizing the effects of hybrid mismatch arrangements)
• BEPS Action 6 (Preventing the granting of treaty benefits in inappropriate circumstances)
• BEPS Action 7 (Preventing the Artificial avoidance of permanent establishment status)
• BEPS Action 14 (Making dispute resolution more effective)
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Thought Leadership
Tax: Driving a pathway to the future The KPMG Asia Pacific Tax Centre has released a publication containing the key reflections arising from the plenary sessions of the 2017 KPMG Asia Pacific Tax Summit in Hong Kong. The document highlights 10 themes on each of the following topics:-
• Geopolitical setting and its impact on business;
• Macro-trends in taxation;
• Future of capital taxation;
• Technology megatrends and solutions;
• Future of revenue administration; and
• Future of the tax function
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Calendar of Events
Date Event Location
11 January 2018 Employer’s Tax Obligations Workshop (Fundamental) (Re-Run) Contact person: Lam Pei Ming More details
One World Hotel, Petaling Jaya Malaysia
Beyond Asia Pacific
Netherlands: EC state-aid investigations, whether tax rulings provide “unfair advantage The European Commission today announced it has opened an in-depth investigation concerning two Dutch tax rulings and whether they may have allowed a company to pay less tax and provided an “unfair advantage” over other companies; in breach of EU state aid rules.
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United States: Senate passes tax reform conference agreement, with revisions The U.S. Senate and House of Representatives have passed the revised version of the tax reform bill.
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TaxNewsFlash by Region
For the latest tax developments from other regions see the following links:
Africa Americas Europe United States
KPMG Asia Pacific Tax Centre Contacts
Asia Pacific Regional Leader, Tax
Khoon Ming Ho
Head of Tax, KPMG Asia Pacific
T : +8610 8508 7082
Asia Pacific Tax Centre Leader, Regional Tax Partner
Brahma Sharma – KPMG Asia Pacific Limited
Asia Pacific Tax Centre Leader, Regional Tax Partner
T : +65 8186 7369
Service Line Specialists
Transfer Pricing Services Financial Services Transfer Pricing
Tony Gorgas – KPMG Australia
Asia Pacific Regional Leader,
Transfer Pricing Services
T: +61 2 9335 8851
John Kondos – KPMG China
Asia Pacific Regional Leader,
Transfer Pricing Services in the Financial Services Sector
T : +852 2685 7457
Indirect Tax Services Research & Development (R&D) Tax Incentives
Lachlan Wolfers – KPMG China
Asia Pacific Regional Leader,
Indirect Tax Services
T : +852 2685 7791
E : lachlan.w [email protected]
Alan Garcia – KPMG Australia
Asia Pacific Regional Leader,
R&D Tax Incentives
T : +61 3 9288 6094
Global Compliance Management Services Global Mobility Services
Oi Leng Mak – KPMG in Singapore
Asia Pacific Regional Leader,
Global Compliance Management Services
T : +65 6213 7319
Ben Travers – KPMG Australia
Asia Pacific Regional Leader,
Global Mobility Services
T: +61 3 9288 5279
International Tax
Deal Advisory M&A Tax
Christopher Xing – KPMG China
Asia Pacific Regional Leader,
International Tax
T : +8610 8508 7072
Angus Wilson – KPMG Australia
Asia Pacific Regional Leader,
Deal Advisory M&A Tax
T: +61 2 9335 8288
E: arw [email protected]
Dispute Resolution and Controversy
Legal Services
Angela Wood – KPMG Australia
Asia Pacific Regional Leader,
Dispute Resolution and Controversy
T: +61 3 9288 6408
E: angelaw [email protected]
David Morris – KPMG Australia
Asia Pacific Regional Leader,
Legal Services
T: +61 2 9455 9999
Market Sector Specialists
Financial Services Alternative Investments & Private Equity
Christopher Abbiss – KPMG China
Asia Pacific Regional Tax Leader,
Financial Services and Banking Sector
T: +852 2826 7226
Simon Clark – KPMG in Singapore
Asia Pacific Regional Tax Leader, Alternative Investments and Private Equity sector
T : +65 6213 2152 E : [email protected]
Sovereign Wealth and Pension Funds
Energy & Natural Resources
Angus Wilson – KPMG Australia
Asia Pacific Regional Leader,
Sovereign Wealth and Pension Funds Sector
T: +61 2 9335 8288
E: arw [email protected]
Carlo Franchina – KPMG in Australia
Asia Pacific Regional Tax Leader,
Energy & Natural Resources Sector
T: +61 8 9263 7239
Insurance
John Salvaris – KPMG Australia
Asia Pacific Regional Leader,
Insurance Sector
T : +61 3 9288 5744
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The inf ormation contained herein is of a general nature and is not intended to address the circumstances of any particular indiv idual or entity . Although we endeav our to prov ide accurate and timely inf ormation, there can be no guarantee that such inf ormation is accurate as of the date it is receiv ed or that it will continue to be accurate in the f uture. No one should act upon such inf ormation without appropriate prof essional adv ice af ter a thorough examination of the particular situation. © 2017 KPMG International Cooperativ e (“KPMG International”), a Swiss entity . Member f irms of the KPMG network of independent f irms are af f iliated with KPMG International. KPMG International prov ides no client serv ices. No member f irm has any authority to obligate or bind KPMG International or any other member f irm v is-à-v is third parties, nor does KPMG International hav e any such authority to obligate or bind any member f irm. All rights reserv ed. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Tax: driving a pathway to the future 2017 KPMG Asia Pacific Tax Summit
Key reflections
KPMG International
KPMG Asia Pacific Tax Centre
kpmg.com/asiapacifictaxcentre
Tax: driving a pathway to the future In the midst of geopolitical unrest, technological disruption and economic uncertainty, those managing the taxation of major businesses find themselves needing to think deeply about the additional complexities faced by the modern tax department in its quest to deliver value inside and outside the organization.
A diverse group of tax leaders gathered in Hong Kong for the 2017 KPMG Asia Pacific Tax Summit to explore the present context and consider the path to the future. The Summit was a chance to network, share ideas and gain meaningful insights for tackling the issues of today and preparing for those that will need to be addressed in the years ahead, as the tax function continues to evolve and reinvent itself.
Some of the many notable speakers who took to the stage in Hong Kong included: Edward Troup, Executive Chair – Her Majesty’s Revenue & Customs; Michael Andrew, Chairman of the Board of Taxation – Australia; David Gordon, Senior Adviser – Eurasia Group; Maryanne Mrakovcic, Deputy Secretary – Australian Treasury; Jefferson VanderWolk, Division Head – OECD.
This document offers some reflections on the key discussion points that arose during the Summit Plenary sessions. Thank you to all who attended!
Khoon Ming Ho Regional Leader, KPMG Asia Pacific Tax
Grant Wardell-Johnson Leader, KPMG Australia Economics & Tax Centre
Brahma D Sharma Global Head of Markets Tax & Regional Partner, KPMG Asia Pacific Tax Centre
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2 Tax: driving a pathway to the future
10 key points on geopolitical setting
Like Robert Kennedy's era, the current times contain high uncertainty and danger, but also the potential for unleashing great productivity.
There are very significant global political shifts that are irreversible and will give rise to very far-reaching and deep-seated changes.
The US is developing a new relationship with its allies, which the US believes ought to play a greater role in paying for global security.
There is a strong commitment to increased military power, but also a greater skepticism of military engagement, at least with ground forces.
There is a strong current US focus on North Korea, potentially to the detriment of a broader US engagement with Asia.
China is taking an increasing role in global leadership including the One Belt One Road Initiative, but the limits of that role are currently uncertain.
The implications of Brexit are very difficult to postulate and may be very far reaching. It is too early to tell.
There is a sense that US businesses are becoming increasingly frustrated with regulation and control in the Chinese economy.
Ultimately, there is a sense that future US and Chinese cooperation is critical to the success of both economies.
The future rise of India will see that country play a strong role in the Indian ocean, whereas China's focus will be on the Pacific.
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10 key macro-trends in taxation
Tax landscape was transformed by the GFC after which governments became significantly more proactive in tax collection in the face of austerity.
Future landscape strongly influenced by community attitudes, reputational risk, transparency and whistle-blowers.
There is a changing attitude to black letter law where businesses do not come to courts with clean hands.
The future will see businesses needing to focus on the ethical tax position of others in the supply chain.
A good tax record will become important in winning procurement contracts from the government.
There will be a move to a cashless economy with real-time settlement of transactions and a digital trail.
USTax Reform could be a game-changer for the international corporate tax environment.
Effectively dealing with the rise of multinational criminal organizations with high levels of sophistication will become increasingly critical
Governments will use data better in the future to uncover tax fraud including internet scraping and better sharing of data.
Public companies are playing a decreasingly important role in the economy given the rise of private equity, sovereign wealth funds and others.
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10 observations on the future of capital taxation
Inequality is becoming an increasing area of focus globally. It is highly complex and not amenable to simple analysis.
The OECD is now looking at capital taxation not with a view to raise the overall level of tax but reduce distortions and improve efficiency.
In the developed world, additional inequality in recent years has mostly been due to increased disparity in labor income rather than capital income.
Emerging economies initially see greater labor income disparity and then greater wealth disparity in the strong growth phase.
New technology-based business models may have a strong impact on the concentration of wealth. The extent of this is uncertain.
Most commentators saw company taxation stabilizing in the future in a band between 17 percent and 25 percent for most countries. US reform may help drive this.
In the current environment, there is a superabundance of capital without an investment home.
Companies have generally not lowered hurdle rates for investment projects notwithstanding the substantially lower cost of capital compared with the 1980s and 90s.
Future expansion of revenue bases may include user charges, environmental taxation and consumption taxation. Financial transactions taxes are also possible.
Taxation of robotics seems to be unlikely.
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10 insights into technology megatrends and solutions
Technology is the key input on whether a tax function is defensive, keeping pace or building a proud tax narrative.
There is a change in tax policy away from complex corporate taxation to easier to collect taxes. Corporate tax rates have previously reached their high-water mark.
Data explosion and digital transformation is the key future megatrend that will impact virtually all aspects of the practice of taxation.
New productivity metrics will substitute existing metrics on what the future ‘good’ looks like.
The future will bring about a convergence of specializations for taxation in addition to many other areas.
KPMG is developing multiple technology solutions. Four of these were discussed in TED-style talks. This was followed by hands-on demonstrations for participants.
Tax Intelligence Solutions for Indirect Tax provides quantitative insights and visibility over customer, vendor and product master data and the accuracy of indirect tax processes and filings.
Tax Intelligence Solutions forTransfer Pricing assists with preparation of TP documentation, provides valuable data and analytics insights into global supply chain and operational margin analytics.
Tax Control Room enables organizations to assess, benchmark and demonstrate tax performance, supporting management of risks and controls, and generating highly-visual reports.
R&D Edge is a cross-functional workflow management system for R&D processes.This was particularly timely as the government in Hong Kong recently announced a new R&D program.
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10 themes on the future of revenue administration
Drive to digital services for the Revenue Authority ‘customer’ base.
Movement from random audit activity to risk- based activity.
Movement to real-time data collection (see, for example, Chinese and Russian VAT collections).
Movement from focus on upfront inputs rather than outputs.
Direct linkage of business accounting systems to tax administrations.
Strong future collaboration and sharing of information among revenue authorities.
New economy intermediaries (such as Airbnb) will play a critical collection and information role in the future.
Wide divergence of revenue administration culture on what is acceptable, avoidance or fraudulent.
Revenue administrations need to provide greater certainty to business and faster.
Revenue administrations of the future need to request information in a similar format.
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10 key points on the future of the tax function
Changing technology and the potential for automation is the key challenge facing the future tax function.
Professional skills required will be different going forward. Technological skills and data scientists will be sought after.
Dealing with reputational risk, transparency, building a narrative and dealing with a wider group of stakeholders will continue to grow in importance.
The geopolitical environment in which tax policy is being formulated is currently under transformation, which will have a profound impact on the future tax function.
Given the additional data held by the tax function, the potential for value add to the business is significantly greater than in the past.
Greater focus will be on optimizing the position of supply chains, not simply through a tax lens but through multiple business lenses.
Tax functions are going to need to deal with a multiplicity of questions from revenue authorities, particularly from emerging countries.
Cost control is a major issue and will both drive the need for greater automation and put limits on the speed with which that occurs.
Tax functions will need to be mindful of potential cybercrime.
Advisors will be able to assist in ‘what good looks like’ in the end-to-end process for tax. Commonly, there is not the skill set within the tax function to do that.
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Resources and further reading
Tax in the region
BEPS: Taking the pulse in the Asia Pacific region
Asia PacificTax Centre 2017 Asia Pacific Indirect Tax Country Guide
Resources for tax leaders
ChiefTax Officer Outlook (Global Edition)
OnlineTax RatesTool GlobalTax News Flash
GlobalTax Department Benchmarking
10 Tax: driving a pathway to the future
Contact us
Tax Centre leaders
Brahma D Sharma Global Head of MarketsTax & Regional Partner, KPMG Asia PacificTax Centre T: +65 8186 7369 E: [email protected]
Grant Wardell-Johnson KPMG Australia Economics & Tax Centre T: +61 2 9335 7128 E: [email protected]
KPMG Asia Pacific Heads of Tax
Asia Pacific Khoon Ming Ho T: +86 10 8508 7082 E: [email protected]
Australia David Linke T: +61 2 9335 7695 E: [email protected]
China Lewis Lu T: +86 21 2212 3421 E: [email protected]
India Girish Vanvari T: +9 122 3090 1910 E: [email protected]
Indonesia Abraham Pierre T: +62 215 704 888 E: [email protected]
Japan Yuichi Komakine T: +81 3 6229 8190 E: [email protected]
Korea Choi Jeong Wook T: +82 221 120 990 E: [email protected]
Malaysia LaikokTai T: +60 377 213 388 E: [email protected]
Myanmar Thomas Chan T: +95 1860 3363 Ext 204 E: [email protected]
New Zealand Ross McKinley T: +64 9367 5904 E: [email protected]
Philippines Maria Carmela Peralta
T: +66 2677 2426 E: [email protected]
Singapore Wu Hong Chiu
T: +65 6213 2569 E: [email protected]
Taiwan Stephen Hsu T: +88 62 8101 6666 E: [email protected]
Thailand Benjamas Kullakattimas T: +66 2677 2426 E: [email protected]
Vietnam and Cambodia Warrick Cleine T: +84 8 3821 9266 E: [email protected]
11 Tax: driving a pathway to the future
KPMG Asia Pacific Regional Service Line leaders
Transfer Pricing Services Tony Gorgas KPMG in Australia T: +61 2 9335 8851 E: [email protected]
Global Mobility Services BenTravers KPMG in Australia T: +61 3 9288 5279 E: [email protected]
International Tax Christopher Xing KPMG in China T: +852 2978 8965 E: [email protected]
Indirect Tax Services Lachlan Wolfers KPMG in China T: +8522 685 7791 E: [email protected]
Global Compliance Management Services Oi Leng Mak KPMG in Singapore T: +65 6213 7319 E: [email protected]
Deal Advisory, M&A Tax Angus Wilson KPMG in Australia T: +61 2 9335 8288 E: [email protected]
Legal Services David Morris KPMG in Australia T: +61 2 9455 9999 E: [email protected]
Dispute Resolution and Controversy Angela Wood KPMG in Australia T: +61 3 9288 6408 E: [email protected]
Research and Development (R&D)Tax Incentives Alan Garcia KPMG in Australia T: +61 3 9288 6094 E: [email protected]
KPMG Asia Pacific Regional Sector leaders
Financial Services Christopher Abbiss KPMG in China T: +852 2826 7226 E: [email protected]
Alternative Investments and Private Equity Simon Clark KPMG in Singapore T: +65 6213 2152 E: [email protected]
Sovereign Wealth and Pension Funds Angus Wilson KPMG in Australia T: +61 2 9335 8288 E: [email protected]
Energy and Natural Resources Carlo Franchina KPMG in Australia T: +61 8 9263 7239 E: [email protected]
Insurance John Salvaris KPMG in Australia T: +61 3 9288 5744 E: [email protected]
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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 endeavor 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. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
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Publication name: Tax: driving a pathway to the future
Publication number: 135046-G
Publication date: December 2017