The Australian Taxation Office describes how it assesses tax compliance risk in connection with imported hybrid mismatch rules in a practical compliance guideline issued December 16.
The imported hybrid mismatch rules disallow deductions for certain payments if the income from the payments is directly or indirectly set off against a deduction arising under a hybrid mismatch arrangement in an offshore jurisdiction. The rule aims to “maintain the integrity of the other hybrid mismatch rules by removing any incentive for multinational groups to enter into hybrid mismatch arrangements.”
When the imported hybrid mismatch rule applies, it creates compliance obligations for taxpayers.
The guideline explains the Australian Taxation Office’s approach to reviewing whether a taxpayer has undertaken reasonable inquiries in relation to the rules for non-structured arrangements, including the level of supporting information required to demonstrate compliance with non-structured arrangements. It also provides clarifications regarding direct and indirect payments to offshore deducting entities.
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