Does your foreign parent company documentation provide AU compliance?
Learning Centre • Videos & Webinars • Does your foreign parent company documentation provide AU compliance?
Learning Centre • Videos & Webinars • Does your foreign parent company documentation provide AU compliance?
A US multinational company with subsidiaries around the world, including Australia, recently prepared new US transfer pricing documentation.
The company applies their transfer pricing policies on a global basis. The US tax director instructs the Australian tax director to use this documentation to support the prices charged by the US Company to the Australian subsidiary.
Is the US documentation acceptable in Australia?
The ATO is currently focusing on reviewing arrangements involving the use of offshore procurement hubs that source goods on behalf of Australian resident multinational enterprises (MNEs).
In the most recent Tax Payer Alert TA 2015/5, the ATO announced that is focusing on structures where the procurement hub offshore is sourcing goods on behalf of the Australian MNE and is also receiving services from another related party entity located offshore (Service hub).
On 3 December the federal government passed the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. The Bill implements the recent guidance set by the OECD as part of its Base Erosion and Profit Shifting (BEPS) initiative with respect to Action Plan 13 by introducing a new transfer pricing standard.
On 26 November the ATO provided further guidance on the application of the STPR options in the form of Frequently Asked Questions (FAQ). In the document, the ATO emphasises on the importance of demonstrating compliance with Australia’s transfer pricing rules, even when applying the STPR options.
We are hearing a lot are having trouble understanding what contemporaneous documentation really means and what are the practical implications. Read our case study as we summarise our experience with the most common misunderstandings.
As published in The Age on 23rd November 2015, the ATO is quoted to take a tighter approach to deal with multinationals on future taxes, meaning agreeing up front in the form of an Advance Pricing Arrangements. The ATO is becoming more ‘picky’ about entering into agreements and has delayed some renewals with major multinationals.
The Chevron case is a big win for the Commissioner and will definitely give confidence to the Australian Tax Office to pursue more transfer pricing cases, although it is expected that with a potential $322 million tax bill, Chevron will appeal.
With conflicting requirements, Year End Financial Statement auditors are in many cases declining to sign off on audits where there is no ‘evidence’, a company has satisfied the new transfer pricing requirements. The quandary for many companies is how to achieve this when transfer pricing documentation is not required to be prepared until approximately 6 months after year end, whilst the auditors come in 2 months after year end.
On September 16 the OECD released guidance on transfer pricing topics as part of the Base Erosion and Profit Shifting (BEPS) Action Plan announced in July 2013. These topics include guidance on Action 13 on transfer pricing documentation and country-by-country reporting.
Intercompany loans continue to be a hot topic and focus point for the Tax Authorities around the world as this type of transactions are considered high risk from a transfer pricing prospective. If your company has entered into intercompany loans it is critical to assess any transfer pricing risk related with the transaction and to have evidence of compliance with the arm’s length principle.
The Australian Treasury has released exposure draft legislation (Subdivision 815-E) to implement new OECD standards on transfer pricing documentation (Master File and Local File) and Country-by-Country (CbC) reporting. The new draft legislation makes Australia the second country (after Spain) to release legislation on this issue as a direct result of the recent guidance set by the OECD as part of its base erosion and profit shifting (BEPS) initiative with respect to Action Plan 13: Guidance on the Implementation of Transfer Pricing Documentation and Country-by-Country Reporting.
The Australian Treasury released an exposure draft bill to impose stronger penalties to combat tax avoidance and profit shifting. The draft legislation will apply to companies with annual global revenue exceeding AU$1 billion that are obliged to comply with the Country by Country (CbC) reporting.
The Australian Taxation Office (ATO) has released a new process for advance pricing arrangement (APA) negotiations (Practice Statement, PS LA 2015/4). The new process will apply to all ongoing APA negotiations and future APA requests (both new APAs and renewals). The APA program has been updated to ensure it reflects changes in global economy and the ATO’s anti-profit shifting work.
The new process includes three key steps as follows:
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