Australian draft guidance clarifies tax compliance for intangibles arrangements

By Doug Connolly, MNE Tax

The Australian Taxation Office set out its compliance approach to various international arrangements relating to intangible assets and the associated tax compliance risks in a draft practical compliance guideline on intangible arrangements published on May 19. 

The guideline focuses on tax risks in connection with intangibles arrangements under transfer pricing provisions, as well as other tax provisions, including withholding tax, capital gains tax, capital allowances, the general anti-avoidance rule, and the diverted profits tax.

The Australian Taxation Office encourages taxpayers to use the guideline to better understand the compliance risks that may be present in their intangible arrangements and how it evaluates those risks. The guideline also explains the documents and evidence taxpayers are expected to maintain to substantiate their intangibles arrangements and the taxpayer’s role in the compliance engagement process. 

“It is intended that this Guideline will serve as a point of reference and assist you to understand arrangements which we see as representing a higher risk from a compliance perspective,” the Australian Taxation Office said in the guidance. 

The types of international arrangements at issue include the “development, enhancement, maintenance, protection and exploitation” of intangible assets, as well as the “migration” of intangible assets. Migration refers to allowing on offshore party “to access, hold, use, transfer, or obtain benefits in connection with” intangible assets. 

The guideline is currently for consultation only. However, once finalized, it is proposed to apply both before and after its date of issue. Comments are due by June 18, 2021.