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The Australian Government has released draft legislation for the implementation of the proposed Diverted Profits Tax (DPT).
The policy was originally announced at the 2016-17 Budget. If passed, the legislation would impose a 40 percent penalty tax on profits that have been "artificially diverted" from Australia by multinationals.
The DPT is intended to target entities with annual global income of AUD1bn (USD748.5m) or more that shift profits to offshore associates where:
If the DPT applies to a scheme, the Commissioner of Taxation may issue a DPT assessment to the taxpayer in question. Once an assessment is issued, the taxpayer will have 21 days to pay the amount stipulated.
The taxpayer will be able to provide the Commissioner with further information disclosing reasons why the DPT assessment should be reduced during the period of review (generally 12 months after notice is given of the DPT assessment). If at the end of the review period the taxpayer is dissatisfied with the DPT assessment, or amended DPT assessment, they will have 30 days to appeal to the Federal Court of Australia.
The DPT will not apply if it is reasonable to conclude that one of the following tests applies to the relevant taxpayer:
The DPT will commence on July 1, 2017. The Government expects it to raise AUD200m over the next four years.
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