Australia: Proposal for diverted profits tax

Australia: Proposal for diverted profits tax

Australia’s government announced as part of the 2016 federal budget an intention to introduce a diverted profits tax (DPT) with effect for income years beginning from 1 July 2017. No grandfathering of existing arrangements is proposed. The DPT would target multinational entities.

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The DPT is modelled on the “second limb” of the United Kingdom’s DPT. The first limb was introduced as Australia’s multinational anti-avoidance law (MAAL). 

Broadly, the DPT targets arrangements with “insufficient economic substance” between an Australian entity and an overseas related party that is taxed at a rate less than 80% of the applicable Australian tax rate. Due to the “application rules,” the objective of the DPT would be to change the balance of negotiating power between the Australian Taxation Office (ATO) and large business on transfer pricing and structuring issues. Submissions to Treasury on the proposed DTP are due by 17 June 2016.

 

Read a May 2016 report prepared by the KPMG member firm in Australia: Proposed key features of a diverted profits tax

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