Australia will introduce transfer pricing documentation requirements for multinationals, including country-by-country reporting, consistent with guidance developed under the OECD/G20 base erosion and profit shifting (BEPS) plan, the government announced in 2015 budget papers released May 12.
The government also released exposure drafts of legislation for a new targeted antiavoidance rule that is aimed at multinationals that artificially avoid taxable presence in Australia, as well as draft legislation that would extend the goods and services tax (GST) to cross-border supplies of digital products and services imported by consumers. Both measures were announced yesterday by Treasurer Joe Hockey.
Australia’s notice of its decision to adopt the OECD transfer pricing documentation requirements follows similar announcements made by the UK and Spain. Reporting under the new requirement would commence January 1, 2016.
An exposure draft provides that new antiavodance provisions would hit MNEs with global revenue of $1 billion or more when (1) the activities of an Australian company or other entity are integral to an Australian customer’s decision to enter into a contract, (2) the contract is formally entered into with a foreign related party to that entity, (3) the profit from the Australian sales is booked overseas and subject to no or low global tax, and (4) the arrangement is entered into for a principal purpose of avoiding tax, budget documents said.
Comments are requested on the exposure draft by June 9.
The government also released a draft of its proposal to extend the GST to cross-border supplies of digital products and services imported by consumers beginning July 1, 2017. Comments are requested by July 7.
Australia would be an early adopter of guidelines for business‑to‑consumer supplies of digital products and services being developed by the OECD under the BEPS plan, the government said.
The government also proposed to double the maximum administrative penalties that can be imposed on some large companies. The penalties would apply to companies with global revenue of $1 billion or more that enter into tax avoidance and profit shifting schemes and do not have a “reasonably arguable” tax position. The provision would apply to tax years that commence on or after July 1.
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