Does your foreign parent company documentation provide AU compliance?

31 Aug '15

Australia: Second Country to Incorporate into the legislation BEPS Action plan 13 on Transfer Pricing Documentation

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.

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24 Aug '15

Double Penalties for Tax Avoidance and Transfer Pricing Schemes

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.

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31 Jul '15

New Process for Obtaining Advanced Pricing Arrangements (APAs) in Australia

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:

1. Early Engagement
2. APA Application
3. Monitoring Compliance.

Key changes:

• A ‘Triage panel’ during the early engagement phase, a bit like ‘triage’ at the hospital! This panel will assess the taxpayer’ case in order to decide whether the APA application is accepted or not.
• Taxpayers will need to undertake a significant amount of technical work during the early engagement phase to present their case to the Triage panel
• Taxpayers will have to disclose more information, particularly in relation to taxpayers’ global value chain, during the early engagement phase before being accepted into the program
• The ATO will aim to determine up front any ‘tax complexities’ that may prevent the ATO from entering into the APA program with the taxpayer. These ‘tax complexities’ include presence of aggressive tax minimization structures in the multinational corporation global value chain, arrangements that appear to lack commerciality,  value of the cross-border dealing being not material or taxpayers that are not sufficiently cooperative with the ATO
• The timelines are expected to be longer than in previous process, stage 1 maximum of 6 months and stage 2 maximum of 18 months.

What do we recommend you do now?

If your company is interested in entering into an APA with the ATO, you should carefully assess your resources and effort required, particularly during stage 1, taking into account that there is no guarantee the ATO will accept you into the APA program.

It will be critical to engage specialist consultants from the beginning of the process to manage the relationship with the ATO and to assist with the technical documentation.

For more information please contact Transfer Pricing Solutions on 03 5911 7001 or email admin@transferpricingsolutions.com.au.

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