Australia: tax guidance on cross-border related party financing released

The Australian Taxation Office on May 16 issued draft guidelines on cross-border related party financing arrangements.

In the draft guidance, (PCG 2017/D4), the ATO sets out the features and attributes of related party financing arrangements that the ATO will use to place taxpayers into risk categories, ranging from a low-risk green zone to a very high-risk red zone, and the consequences of such placement.

ATO said it intends to concentrate its enforcement efforts on international related party dealings that pose the highest risk of not complying with Australia’s transfer pricing rules or other relevant provisions.

The ATO also states that while it will generally apply only limited resources to related party financing arrangements in the green zone, the guidelines defining low risk arrangements are not meant to be a safe harbor.

Feedback on the guidelines is requested by June 30.

UPDATE 5/29/2017: MNE Tax has published an in-depth report on this guidance.

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