Wednesday, 16 September 2015

Country by Country reporting introduced in Australia.


 Australian multinational anti-avoidance law, country by country reporting and increased penalties

 
 
On 16 September 2015 the Australian Treasurer introduced a Bill to implement the following rules for multinational groups with global income of over AUD$1 billion, which are covered in this EY Tax Alert:
 
·         Multinational anti-avoidance law (MAAL) to apply to foreign multinationals generating certain profits earned in Australia without Australian permanent establishments. The MAAL is to apply on or after 1 January 2016, to target multinationals that implement arrangements to avoid having a taxable presence in Australia.
·         Country by country (CbC) reporting to the Australian Taxation Office (ATO), implementing additional CbC requirements arising from the global OECD BEPS initiative, with local file, master file and CBC reporting, for income years commencing on or after 1 January 2016; and
·         Doubling of penalties for certain large company transactions for tax avoidance schemes including certain transfer pricing benefits obtained on or after 1 July 2015.
 
The MAAL’s wide-ranging impact requires risk assessment for foreign businesses. As the Treasurer’s Second Reading Speech states, the Bill “further strengthens the draft legislation that was announced in the 2015 Budget … by removing the condition for multinationals to operate in a ‘no or low’ tax jurisdiction … All significant global entities with revenues over $1 billion who book their revenue offshore will need to consider these rules and may need to review their structures. With over 1,000 multinational entities operating in Australia with revenues greater than $1 billion, this means these rules will have far reaching effect...”
 
The doubling of tax avoidance scheme penalties for significant global entities increases the importance for companies to have documented reasonably arguable positions.
 
Large multinational groups need to evaluate the implications of the new transfer pricing documentation and reporting requirements and implement the required changes to documentation, policies, and systems in advance of the 1 January 2016 start date. A CbC readiness review and pilot can assist in identifying and heading off risks, and evaluate and address any gaps in information or potential for misinterpretation in advance.
 


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