Australia: BEPS implications for multinational enterprises

BEPS implications for multinational enterprises

There are implications for multinational enterprises in Australia with this week’s release by the Organisation for Economic Cooperation and Development (OECD) of final recommendations for substantial international tax reform under the base erosion profit shifting (BEPS) project.

Related content

Overview

The final BEPS package follows on from, and is largely consistent with, various discussion drafts on recommended BEPS actions issued over the last two years. The OECD along with the G20 seems to have reached consensus with their members that substantial reform is required in relation to many aspects of the international tax regimes of member countries to stem widespread public and government concerns that multinational enterprises (MNEs) are engaged in significant base erosion and profit shifting.

Australian implications

A number of the recommended measures, if implemented, would have substantial implications for Australian multinational enterprises (MNEs) and foreign MNEs with operations in Australia. 

Recommended changes in the following BEPS actions, if implemented, could result in very significant increases in Australian tax paid by MNEs:

  • Action 2 - Neutralising the Effects of Hybrid Mismatch Arrangements
  • Action 4 - Limiting Base Erosion involving Interest Deductions and Other Financial Payments
  • Action 7 - Prevent Artificial Avoidance of Permanent Establishment Status
  • Action 8-10 - Assure that Transfer Pricing outcomes are in Line with Value Creation 

Similar outcomes are likely in relation to tax levied on business operations conducted in other OECD and G20 jurisdictions.

KPMG observation

The Australian government has actively participated in the formulation of this package and has shown an eagerness to be an early adopter of recommended changes—for example, country-by-country reporting measures. It is expected that the Australian government may give early consideration to the recommended measures and introduce legislation to implement these measures if required.

 

Read an October 2015 report prepared by the KPMG member firm in Australia.

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Request for proposal

 

Submit

KPMG's new digital platform

KPMG's new digital platform