Australian Firms Hit By US Taxes On Repatriated Income

by Mary Swire, Tax-News.com, Hong Kong

11 February 2004

Local media reports have indicated that tax advisors are becoming increasingly concerned over the effects of an IRS ruling last year that will take a larger chunk of tax from income repatriated from the US back to Australia.

Although the ruling became apparent some six months ago, the Sydney Morning Herald has reported that tax advisors are only now beginning to see an increasing number of firms hit by the new interpretation of the rules.

"I would have expected the Australian Taxation Office to have challenged the interpretation of the US tax authorities with more vigour," remarked Paul Riley, a partner for accounting firm Deloitte, who has dealt with a number of cases where the US authorities have sought to tax Australian firms repatriating income.

"Once they give in it sets a precedent," he added.

The Australian Tax Office meanwhile, has stated that it is happy with the current interpretation of the US/Australian tax treaty: "The nature of double taxation agreements means that every provision is not explicitly defined and consequently there may be issues surrounding interpretation," an ATO official commented according to the SMH.

The official added that the ATO “is satisfied that the US has correctly applied the double taxation agreement.”

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