Strategizing International Tax Best Practices – by Keith Brockman

Posts tagged ‘Australia’

Hybrid arrangements: ATO guidance

The Australian Tax Office (ATO) has published guidelines addressing general anti-avoidance rules (GAAR) for restructures of hybrid arrangements.

This guidance is a valuable reference for taxpayers not only operating in Australia, although having hybrid arrangements that may need restructuring.

Click to access 2018G_011633-18Gbl_Australia%20-%20Guidance%20on%20GAAR%20and%20hybrid%20mismatches.pdf

Australia’s DPT: License to tax

EY’s Global Tax Alert provides details on Australia’s new Diverted Profits Tax (DPT), effective in 2018 for calendar year taxpayers.

  • Penalty up to 40% can be assessed
  • Interaction with transfer pricing documentation and country-by-country (CbC) risk assessment
  • Diverted profits taxed at less than 24% are vulnerable
  • Proactive review of one’s documentation and risk assessment is recommended

Australia has patterned their DPT after the UK implemented a similar scheme, although posing some different characteristics.

As countries are reaching out to tax profits that are subject to a lower rate of tax elsewhere, this is providing a license to tax that cannot be ignored by multinationals with Australian operations.

Click to access 2017G_01485-171Gbl_Australia%20passes%20Diverted%20Profits%20Tax%20and%20Penalties%20law.pdf

BEPS update

EY’s Global Tax Alert provides recent developments for BEPS by Australia, Austria, Belgium, EU, Germany, Iceland, India, Niger, and Romania.

Click to access 2016G_01449-161Gbl_The%20Latest%20on%20BEPS%20-%206%20June%202016.pdf


  • Australia: Local File is OECD +, going beyond OECD’s recommendations, including transactional detail.  This development is proving that global consistency is a rapidly fading ideal, as countries legislate what they think benefits them the most.  Unfortunately, this adds to the cost, time and complexity of preparing global reports.
  • Austria: Transfer pricing documentation draft regulations follows the OECD.
  • Economic and Financial Affairs Council of the European Union (ECOFIN): EU Member States Finance Ministers, envision adopting the Anti-Tax Avoidance Directive on 17 June 2016, subject to amendments.  Legal agreement was also reached on adoption of the Directive on the exchange of non-public country-by-country tax information.  Conclusions were also adopted on the European Commission communication on an external tax strategy and tax treaty abuse measures.
  • Germany: Transfer pricing technical draft introducing transfer pricing documentation standards as recommended by the OECD.  Master File and Local File documentation requirements introduced.
  • India: A 6% Equalization Levy (EL) to apply on gross payments for certain digital services received by a nonresident.
  • Niger: Thin capitalisation rules introduced.
  • Romania: To become a BEPS Associate and participate in the OECD’s framework.

As the above developments note, BEPS guidelines and intent remains very strong in the global community, with many changes already made and many more to come.


Australia, UK DPT: Advancing beyond BEPS

The recent Guardian article highlights the danger that the UK Diverted Profits Tax (DPT) has incited.  Countries are acting unilaterally and/or in working groups (including the EU) to accomplish their fiscal objectives behind a thin veil of BEPS intentions.  Most importantly, such actions may never be unraveled after the final OECD BEPS Guidelines are published.

Accordingly, we will have overlapping  domestic and treaty provisions (including the arguable non-treaty DPT) for anti-avoidance rules, CFC rules, capturing low-taxed income from other jurisdictions in novel ways, non arms-length approaches, formulary calculations of the “right tax” and significant complexity for all.  To the extent public disclosure of tax related data becomes a reality by the OECD or EU, many questions will arise on a very complex topic for which most people will not comprehend.

It is hopeful that countries put a full stop on BEPS activities until the Guidelines are finalized, after which such Guidelines can be adopted in their final form for overall consistency.  Statements similar to the herein should be tempered by patience and a goal for global consistency.  Thus, working group meetings that are scheduled prior to that time will only exacerbate the tsunami of international tax guidance and documentation that will take place.

A link to the article is attached for reference:

Joe Hockey, treasurer, provided the following statement:

Hockey said that the joint working group would enable Australia to go “further and faster” than the framework for change offered through multilateral groups like the OECD and G20.

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