Nick Kallinikios examines some unexpected interactions between MAAL and indirect tax compliance, and what the Australian Tax Office (ATO) intends to do about them.
Some taxpayers have restructured their arrangements to simplify compliance in the post Multinational Anti-Avoidance Law (MAAL) environment. These restructures have surfaced potentially unintended consequences in relation to the application of Australian goods and services tax (GST). In response, the Commissioner of Taxation yesterday issued Taxpayer Alert 2016/8 and an Addendum to GSTR 2000/31.
The subject of the Commissioner’s attention is the argument that for GST purposes certain supplies are not connected with the ‘indirect tax zone’ (i.e. Australia). In particular the Commissioner is concerned with situations where there is an asymmetry between the income tax and GST consequences. For example, an arrangement that produces taxable income on the one hand and on the other hand purported to be a supply not connected with Australia, therefore not subject to GST.
Arrangements which are likely to attract close scrutiny include the use of ‘overseas agents’ by entities that have a physical presence in Australia to distribute the principal’s products in the Australian market place. The Commissioner has also taken this opportunity to clarify the ‘branch’ demarcation of when supplies are being made by the entity through an Australian enterprise (branch/permanent establishment in Australia) or its foreign branch.
The Addendum asserts that a single supply can be connected with Australia “even if the supply can also be said to be connected with a place of business in another country”. This poses a threat of ‘double taxation’ without the benefit of Double Tax Agreements to provide relief.
The Commissioner asserts that the Addendum confirms existing views, however it will only have application from yesterday (10 August 2016). Taxpayers that have relied on GSTR 2000/31 should have the protection afforded by public rulings.
It would be prudent to review arrangements that have any of the above features in light of the Taxpayer Alert and Addendum. It would also behove taxpayers to establish and document their reliance on GSTR 2000/31.
We have participated in recent industry consultation with the Commissioner on these developments. We are working through the issues and plan to engage in further consultation with the Commissioner. Accordingly, if you have any specific issues or concerns that require clarification, advise your KPMG contact or notify me.