The Tax Specialist

Articles from the current issue:

• Transfer pricing and intangibles – part 2: analysing intangibles under the 2017 OECD Transfer pricing guidelines

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  Subdivision 815-B of the Income Tax Assessment Act 1997 (Cth) (Subdiv 815-B) was drafted with the intention of being aligned with the international standard, the arm’s length principle, as set out in the 2010 OECD Transfer pricing guidelines for multinational enterprises and tax administrations (2010 OECD Transfer pricing guidelines). Notwithstanding this, the 2017 OECD Transfer pricing guidelines significantly modified the 2010 OECD Transfer pricing guidelines, particularly in relation to the analysis of intangibles. These modifications were made following the issue of the report Aligning transfer pricing outcomes with value creation, actions 8-10 – 2015 final reports, OECD/G20 Base Erosion and Profit Shifting Project. Part 2 of this article considers the analysis of intangibles under the 2017 OECD Transfer pricing guidelines with the aim of identifying potentially significant differences with respect to the analysis of intangibles under the 2017 OECD Transfer pricing guidelines compared with Subdiv 815-B (discussed in a general sense in part 1). A number of case studies are included based on examples
  contained in chapter I and in the Annex to chapter VI of the 2017 OECD Transfer pricing guidelines to facilitate that purpose.

• The taxation of investors with “equity-equivalents” in ASX-listed entities

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  Australian investors who have exposures to ASX-listed entities may not always consider equivalent
  investments. This article considers an equivalent (like-for-like) investment in two particular instruments:

  • low exercise price options (LEPOs); and
  • call/put parity positions (via the use of exchange traded options).

  Both LEPOs and exchange-traded options are traded on the Australian Securities Exchange. Where an investor considers establishing a position in a LEPO or a call/put parity position, what are the Australian tax implications for the investor who resides in Australia and establishes these positions on capital account? This article addresses this question.

• Situs of value creation in digital business models: a critical analysis

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  The current international taxation regime caters only to traditional business models. In doing that, it falls short of being accurate and efficient in taxing digital businesses. The Organisation for Economic Co-operation and Development has been working on a solution to modify the international rules to rectify this. Meanwhile, eighteen countries have implemented a digital services tax. Analysing the rationale relied on by these countries, is it fair to say that value creation happens where the user is located? To answer this, it is pivotal to understand what role user data and participation play in value creation. Digital companies such as social media platforms, online marketplaces and search engines are based on the value network model where user data plays a central role in value creation. However, this does not discount the crucial importance of the value cycle that such data undergoes in order to generate revenue for these companies. Often, the user data in itself has little value without conversion into marketable information. Therefore, it is difficult to pinpoint where the value is actually created. Therefore, a solution which aims to allocate profit among jurisdictions is necessary to meet legal and equitable ends.