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04 May 12 NTLG International Sub-Committee

?On 16 April 2012, Jane Michie FTIA (Macquarie Group) represented The Tax Institute at a meeting of the NTLG International Sub-Committee. At that meeting participants discussed a range of issues, including:

  • Whether, there is an additional requirement that the taxpayer be carrying on a business for section 23AH purposes where a deemed permanent establishment exists. Members considered that this question was relevant only in those contexts where there is no express deeming of a business being carried on in the relevant double tax agreement, or in a non-treaty context. The ATO is currently considering its view on this issue and is expected go issue a draft ruling or determination In the following months.
  • The ATO's view on whether section 820-39 (re the special purpose entities thin cap exemption) can apply to flow-through entities such as syndicated lending arrangements (where the special purpose entity borrows from the market and on-lends to an associate which holds assets eg. infrastructure project) or whether the section can only apply to bona fide securitisation entities. The Professional Bodies provided a submission to the ATO on this issue in September 2011. The ATO has agreed to discuss a preliminary view of this subject at the next meeting of this Sub-committee and will in due course issue a draft tax ruling or determination setting out the view.
  • Treasury noted that the CFC/FAF reform project was still on the Government's radar but had been held up due to resources constraints. A further update will be provided in due course.
  •  The ATO will be setting up a separate Working Group to consider implementation issues arising out of the transfer pricing reforms, as well as a number of implementation aspects in respect of the MRRT.

In addition, the ATO provided an update on the conclusion of its section 25-90/section 23AJ review. Its findings broadly are as follows:

  • On the whole, there is compliance with the provisions across the board;
  • There are a relatively small number of aggressive arrangements (some of which have been referred to Part IVA panel);
  • Aggressive arrangements were concentrated in certain sectors or were the result of restructures; and
  • The ATO plans to issue a draft taxation determination on aggressive arrangements.

Members who seek further information in relation to the above are encouraged to contact us at Tax Policy.

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