Multinational Tax Avoidance

Posted on October 10, 2015 by ATB Chartered Accountants

Exposure draft legislation to impose stronger penalties to combat tax avoidance and profit shifting have been released.

These amendments double the maximum administrative penalties for large companies that are found to have entered tax avoidance or profit shifting schemes. These increased penalties only apply to companies with annual global revenue exceeding $1b and that do not adopt a tax position that is reasonably arguable. This measure was first announced in the 2015/16 Federal Budget.

The global revenue of an entity is determined in accordance with the proposed s 177DA of ITAA 1936 (see para 1.30 to 1.37 of the Explanatory Materials to the Exposure Draft of the Tax Integrity: Multinational Anti-Avoidance Law).

This measure is proposed to apply to scheme benefits obtained, or that would be obtained, on or after 1 July 2015 (regardless when the scheme was entered into or carried out).

The closing date for submission of comments is Wednesday, 2 September 2015.

Source: Treasury website, 6 August 2015.

TRANSFER PRICING DOCUMENTATION

Exposure draft legislation to introduce the new OECD standards on transfer pricing documentation and Country-by-Country reporting has been released.

The amendments seek to implement Action 13 of the G20 and Organisation for Economic Co-operation and Development’s Action Plan on Base Erosion and Profit Shifting into Australian law. In particular, Action 13 has developed new standards for transfer pricing documentation and Country-by-Country reporting. These amendments require entities with annual global revenue of $1b or more to provide a statement to the Commissioner with relevant and reliable information to assist the Commissioner to carry out transfer pricing risk assessments.

The proposed Subdiv 815-E of ITAA 1997 requires Australian residents or foreign residents with an Australian permanent establishment that have annual global revenue of $1b or more to provide a statement to the Commissioner. This statement could include the Country-by-Country report, master file and local file. This documentation will provide the Commissioner with relevant and reliable information to carry out a transfer pricing risk assessment.

The measure applies to both Australian headquartered multinational enterprises and Australian subsidiaries of multinational enterprises headquartered outside of Australia with annual global revenue above the $1b.

An entity that fails to provide a Subdiv 815-E statement on time, or in the approved form, may be liable under s 286-80(2) of Schedule 1 to the Taxation Administration Act 1953 (TAA) to a base administrative penalty of five penalty units for each period of up to 28 days from when the document was due to a maximum of five periods. Failure to comply with Subdiv 815-E may also result in the application of penalties under Part III Division 2 of TAA which outlines criminal offences relating to failure to comply with taxation requirements.

Failure to provide this information, however, will not prevent an entity from having a reasonably arguable position if documentation is still maintained in accordance with existing requirements.

This measure is proposed to apply in relation to income years commencing on or after 1 January 2016.

The closing date for submission of comments is Wednesday, 2 September 2015.

Source: Treasury website, 6 August 2015.

This article is provided as general information only and does not consider your specific situation, objectives or needs. It does not represent accounting advice upon which any person may act. Implementation and suitability requires a detailed analysis of your specific circumstances.