Strategizing Multinational Tax Risks

The Australian Treasury announced its draft law encompassing country-by-country reporting (CBCR) and transfer pricing documentation.

EY’s tax publication provides relevant details in the referenced Global Tax Alert:

Click to access 2015G_CM5672_Australia%20releases%20draft%20law%20implementing%20CbC%20reporting%20and%20increasing%20penalties%20for%20TA%20and%20TP.pdf

Key observations:

• Conforms to OECD’s recommended 3-tier transfer pricing approach, CBCR, master file and local file.  The master file and local file will need to provided, whereas the CBCR may not be necessary if the group’s parent entity jurisdiction has an information sharing agreement.
• It is expected the Australian Taxation Office (ATO) will release additional guidance for the CBCR, hopefully by year-end 2015.
• Increases penalties for tax avoidance and transfer pricing where there is not a reasonably arguable position by the taxpayer.

Australia has been a leader in following the BEPS Actions and putting such intent into their domestic legislation.  As Australia continues to take this lead position, it is expected many other countries will follow similarly.  All multinationals should continue to monitor these developments, while accelerating planning and execution for the new CBCR and transfer pricing documentation regime.