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12 Dec 13 Section 23AH; PE and substantial equipment - TR 2013/D8

On 11 December 2013, the ATO released for public comment by 14 February 2014 draft Taxation Ruling TR 2013/D8 entitled "Income tax: satisfying the 'carrying on a business at or through a permanent establishment' requirement in section 23AH where a company is taken to have a permanent establishment (PE) in relation to substantial equipment".

The draft Ruling considers the application of the requirement in s 23AH that a company 'carry on business at or through a permanent establishment (PE)', in circumstances where a company is taken to have a PE:

(i) in relation to substantial equipment under para (b) of the definition of PE in s 6(1) of ITAA 1936, or
(ii) under an Article in one of Australia's tax treaties that deems an enterprise to have a PE if it has substantial equipment in a contracting State.

In particular, the draft Ruling considers whether a company that has a PE because it satisfies para (b) of the definition in s 6(1) or, in the case where a tax treaty applies, because it has substantial equipment, automatically satisfies the 'carrying on a business' requirement in s 23AH.

Further, the draft Ruling considers whether a company that is taken (under an applicable tax treaty) to carry on business through the PE thereby satisfies the 'carrying on a business' requirement in s 23AH.

On the same day, the ATO withdrew ATO ID 2011/34 (Income Tax: Application of s 23AH(2): deemed permanent establishment (PE) and carrying on of business - Article 5.4 of the 1995 New Zealand Agreement) as it is no longer current.


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