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The ATO has issued a Decision Impact Statement in relation to the Full Federal Court decision in Citigroup Pty Ltd v FCT [2011] FCAFC 61; 2011 ATC 20-262; (2011) 83 ATR 305.

The decision concerned the application of Part IVA to foreign tax credits (FTC) arising from tax paid in Hong Kong on a bond transaction and whether the taxpayer was liable to pay general interest charge (GIC) on the disallowed FTC.

The Full Federal Court dismissed the taxpayer's appeal, confirming the decision of the primary judge that Part IVA applied to cancel the benefit of the FTC claimed by the taxpayer.

However, the Full Federal Court dismissed the Commissioner's appeal, confirming the decision of the primary judge that s 204(3) of ITAA 1936 did not impose the GIC in the facts of the case.

The Decision Impact Statement states that the FTC regime under Division 19 of Part III of ITAA 1936, including the procedure of making foreign tax credit determinations, has been repealed from 24 September 2007 (applying to income years commencing on or after 1 July 2008).

It has been replaced by the foreign income tax offset regime, under which a foreign income tax offset directly impacts the amount of income tax payable by an entity.

As such, the decision of the Full Federal Court has no ongoing impact in relation to the imposition of GIC for disallowed foreign income tax offsets.


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