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Australia Announces Upcoming Guidance On Int'l Tax Matters

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

28 February 2018


The Australian Tax Office has updated and added to its list of the guidance on international tax matters it intends to release this year.

This month, the ATO intends to release a guide on corporate residency – central management and control in Australia [reference code 3838], to provide the ATO's view on "central management and control in Australia" for the purposes of paragraph (b) of the definition of "resident" or "resident of Australia" in subsection 6(1) of the Income Tax Assessment Act 1936, which includes the tests to determine whether a company or individual is resident in Australia.

At the end of the month the ATO expects to release guidance on transfer pricing rules and debt/equity tests [3765], which will provide the Commissioner's view on whether Division 974 (the debt and equity rules) can limit the operation of Subdivision 815-B (Australia's transfer pricing rules).

The ATO anticipates that it will release three guidance notes in April, on April 30. These are on:

  • [3907] Thin capitalization: mining rights recognition and revaluation, which will set out the ATO view relating to the classification and revaluation of a mining right in accordance with accounting standards when applying the thin capitalization rules contained within Division 820 of the ITAA 1997.
  • [3908] Thin capitalization: bifurcation of financial instruments, which will set out the ATO view relating to the valuation of a taxpayer's debt capital in accordance with accounting standards when applying the thin capitalization rules;
  • [3865] MAAL – on the meaning of "directly in connection with supply" in sub-paragraph 177DA(1)(a)(ii) of the Income Tax Assessment Act 1936, discussing when activities undertaken in Australia will be directly in connection with a supply by a foreign entity under the Multinational Anti-Avoidance Law.

It intends to release one guide on May 31, 2018, on related-party financing and specifically interest-free loans [3901], which will set out the principles for determining whether interest-free loans made between related parties should be characterized as either debt or equity in identifying the arm's length conditions.

In June, five guidance notes are scheduled to be released. These are:

  • [3902] Offshore hubs – non-core procurement, due for release on June 7, which will set out the ATO's risk assessment framework, including the low risk benchmark for offshore procurement hubs that supply "indirect" or "non-core" goods or services;
  • [3906] Thin capitalization: compliance approach, due for release on June 29, which will set out the ATO compliance approach in respect of the taxation outcomes associated with thin capitalization arrangements. This will include a schedule outlining risk indicators for arrangements associated with recognition and revaluation of mining rights;
  • [3910] Thin capitalization: arm's length debt test, also due on June 29, which will set out the ATO view on the application of the thin capitalization arm's length debt test;
  • [3909] Thin capitalization: internally generated intangibles, which will set out the ATO view relating to the recognition and revaluation of internally generated intangible assets in accordance with accounting standards when applying the thin capitalization rules; and
  • [3900] Related party financing derivatives, also due June 29, 2018, which will explain the risk indicators associated with a financing arrangement, related transaction, or contract entered into with cross-border related parties involving "derivatives."

Finally, the ATO expects to complete additional guidance on the diverted profits tax on June 30, 2018. This guidance will set out the Commissioner's view on some of the new concepts that have been introduced in the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Act 2017.

TAGS: compliance | Offshore | tax | mining | interest | law | accounting | Australia | offshore | transfer pricing | standards | services | Tax | BEPS

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