Australia

Details

  • Service: Tax, Global Transfer Pricing Services, Topics, Base Erosion and Profit Shifting
  • Type: Regulatory update
  • Date: 16/12/2013

Tax Insights

KPMG's analysis of tax issues and developments.

Anthony Seve

Anthony Seve
Partner, Transfer Pricing

+61 2 9335 8728

aseve@kpmg.com.au

ISAPS: "Imagine there’s no countries, it isn’t hard to do" 

by Anthony Seve, Transfer Pricing Specialist

In line with current Base Erosion and Profit Shifting (BEPS) activity, the Australian Taxation Office (ATO) has recently commenced its international structuring and profit shifting (ISAPS) field review program which focuses on both corporate tax and transfer pricing aspects of complex and high value cross border transactions. This includes financing transactions, IP transactions and corporate restructure transactions.

The ATO is expecting to send 40 review notification letters to taxpayers prior to Christmas and a further 85 in the New Year, which will request significant, detailed international data and a presentation to the ATO. The reviews are expected to take 6 to 9 months, resulting in a risk rating or escalation to audit. This is a decentralised national program involving over 100 ATO officers and will follow a Client Risk Review and rating methodology approach.

 

A key controversial issue associated with these reviews is the ATO's desire to review information associated with the overseas aspects of taxpayers' global structures so that they can understand the broader context of transactions and operations. This includes details of global corporate value chains including sales, profits and tax paid for each jurisdiction in which the group operates, payments to and from low tax jurisdictions, e-commerce and tax risk governance.

 

Managing these ISAPS reviews can be complex given that many questions relate to factual information overseas. It is therefore essential to consider a number of issues at the outset of an ISAPS review, including:

 

  • confirming existence, location and ownership of relevant material
  • establishing a multi-function (tax law, corporate tax, transfer pricing, indirect tax) working group to deal with questions
  • considering reasonableness of ATO timeframes.

 

If you receive such a questionnaire, please contact me or your KPMG contact about managing your response.

 

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