Chevron Australia has withdrawn an appeal to Australia’s High Court challenging a key transfer pricing decision concerning the appropriate arm’s length interest rate for a Chevron intercompany loan.
As such, the April 21 decision of Australia’s Full Federal Court in Chevron will stand, leaving in place a significant win for the Australian Taxation Office (ATO).
While the case is important to Chevron as it means that the ATO can move forward with its assessment of $340 million in tax and penalties, it has wider implications, affecting multinationals operating in Australia that make interest payments to related offshore entities.
Kelly O’Dwyer, Australia’s Minister for Revenue and Financial Services, said the ATO estimates that the decision will bring in more than AUS $10 billion dollars of additional tax revenue over the next ten years in relation to transfer pricing of related party financing.
“The resolution of this matter clearly demonstrates the government is taking strong action to ensure multinational companies pay their fair share of tax,” O’Dwyer said in an August 18 statement.
The OECD is currently preparing transfer pricing guidelines on related-party financial transactions which may include guidance on simple loans between cross-border affiliates, similar to the loan in question in the Chevron case, an OECD official said recently.
The OECD guidance is expected to be released in draft form this summer and finalized by year-end.
