whether a rate of corporate ‘low income tax’ account of other taxes, such as mining royalties; when is an activity directly or ‘related, indirectly’ to the supply; what is economic activity’; ‘substantial and the timing and content of the information to be to the Commissioner under subsection 177DA(11). The purpose tests (paragraphs 177DA(1)(b) and (1)(c)) The purposes tests in paragraphs Submissions raised concerns about the 177DA(1)(b) and (c) were altered to ensure twotiered purpose test. Specifically: that there is only one test of purpose or the requirement for the taxpayer to intent with the other criteria being undertake the subsection 177D(2) objective. analysis once in making an This means that avoiding an Australian assessment about the design of the permanent establishment has been changed scheme and a second time in making from being a purpose of the scheme, to a an assessment about a person’s or means used in the scheme for the purpose persons’ purposes in entering into or of obtaining a tax benefit, through the carrying out schemes; and addition of further factors to consider under subsection 177DA(2). the need to satisfy the imprecise requirement of whether a corporate The examples provided in the EM have been structure is to avoid’ expanded in order to provide better ‘designed Australian tax. guidance and instruction on whether the purpose test would be satisfied. Additional factors to have regard to in determining whether purpose test is satisfied (subsection 177DA(2)) There was some concern that having regard The final Bill includes additional matters that to the relevant factors in subsection the Commission was have regard to. The 177D(2) would not be particularly helpful in additional matters are specific to the determining whether or not the purpose arrangements being targeted. test under paragraphs 177DA(1)(b) and (c) would be satisfied. Description of the scheme (paragraph 177DA(1)(a)) Submissions raised concerns the lack of Nonresident and Australian resident: The clarity around key terms/concepts. concepts of and ‘nonresident’ ‘Australian resident’ have been amended to ensure include partnerships, trusts and resident entities are covered. Makes a supply: The definition of supply has been modified to carve out the sale of shares, debt interests and other similar interests in order to give private equity
whether a ‘low rate of corporate income tax’ account of other taxes, such as mining royalties; when is an activity ‘related, directly or indirectly’ to the supply; what is ‘substantial economic activity’; and the timing and content of the information to be to the Commissioner under subsection 177DA(11). The purpose tests (paragraphs 177DA(1)(b) and (1)(c)) Submissions raised concerns about the twotiered purpose test. Specifically: the requirement for the taxpayer to undertake the subsection 177D(2) analysis once in making an assessment about the design of the scheme and a second time in making an assessment about a person’s or persons’ purposes in entering into or carrying out schemes; and the need to satisfy the imprecise requirement of whether a corporate structure is ‘designed to avoid’ Australian tax. The purposes tests in paragraphs 177DA(1)(b) and (c) were altered to ensure that there is only one test of purpose or intent with the other criteria being objective. This means that avoiding an Australian permanent establishment has been changed from being a purpose of the scheme, to a means used in the scheme for the purpose of obtaining a tax benefit, through the addition of further factors to consider under subsection 177DA(2). The examples provided in the EM have been expanded in order to provide better guidance and instruction on whether the purpose test would be satisfied. Additional factors to have regard to in determining whether purpose test is satisfied (subsection 177DA(2)) There was some concern that having regard to the relevant factors in subsection 177D(2) would not be particularly helpful in determining whether or not the purpose test under paragraphs 177DA(1)(b) and (c) would be satisfied. The final Bill includes additional matters that the Commission was have regard to. The additional matters are specific to the arrangements being targeted. Description of the scheme (paragraph 177DA(1)(a)) Submissions raised concerns the lack of clarity around key terms/concepts. Nonresident and Australian resident: The concepts of ‘nonresident’ and ‘Australian resident’ have been amended to ensure include partnerships, trusts and resident entities are covered. Makes a supply: The definition of supply has been modified to carve out the sale of shares, debt interests and other similar interests in order to give private equity
Combating-multinational-tax-avoidance-RIS.docx