Australia To Tackle Hybrid Mismatch Arrangements

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

07 March 2018

The Australian Government is to introduce legislation to prevent multinationals from taking advantage of hybrid mismatch arrangements.

The Government has released for consultation legislation to implement the recommendations of the OECD's reports "Neutralizing the Effects of Hybrid Mismatch Arrangements" and "Neutralizing the Effects of Branch Mismatch Arrangements."

The proposed new rules are aimed at eliminating double non-taxation benefits arising from hybrid mismatch arrangements which exploit differences in the tax treatment of an entity or instrument under the laws of two or more tax jurisdictions.

Under the legislation, a hybrid mismatch will be deemed to arise if: an entity enters into a scheme that gives rise to a payment and the payment gives rise to either a deduction/non-inclusion mismatch or a deduction/deduction mismatch.

A mismatch will be covered by the rules if it is: a hybrid financial instrument mismatch; a hybrid payer mismatch; a reverse hybrid mismatch; a branch hybrid mismatch; a deducting hybrid mismatch; or an imported hybrid mismatch.

If a mismatch arises, it will be neutralized by disallowing a deduction or including an amount in assessable income.

The Government will also introduce a targeted integrity rule to prevent multinational groups from being able to enter into arrangements designed to circumvent the hybrid mismatch rules.

The consultation will close on April 4.

TAGS: compliance | tax | tax compliance | tax avoidance | law | Organisation for Economic Co-operation and Development (OECD) | Australia | multinationals | legislation | transfer pricing | BEPS