• Service: Tax, Global Transfer Pricing Services, International Tax
  • Type: Regulatory update
  • Date: 2/10/2014

Australia - Effects of documentation, country-by-country reporting for Australian taxpayers 

February 10:  Australian taxpayers are already subject to extensive transfer pricing recordkeeping rules, following last year’s passage of Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Act 2013, and also may be subject to significant disclosure requirements such as the International Dealings Schedule.

Against this background, the OECD’s discussion draft on transfer pricing documentation and country-by-country reporting (released 30 January 2014) contains recommendations on the issue of materiality affecting the compliance obligations of taxpayers, yet also contemplates much more detailed disclosures of a taxpayer’s international structure and business affairs.

A key compliance-related issue is how documentation-related penalties would be imposed when a multinational company does not complete a country-by-country reporting template. It could be inferred that such penalties would be imposed, given the country-by-country reporting template forms part of the master file.

Also, on the compliance front, the Australian Taxation Office (ATO) has already begun asking taxpayers to provide it with much of the information that would be included in the country-by-country reporting template. For example, in late 2013, the ATO 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, intangible property transactions, and corporate restructuring transactions.

The ATO is expected to send review notification letters to approximately 125 taxpayers, requesting detailed international data and as well as a presentation to be made to the ATO. The reviews are expected to take six to nine months, resulting in a risk rating or escalation to audit.

A key issue associated with these taxpayer reviews is the ATO’s desire to review information associated with the overseas aspects of taxpayers’ global structures, so that the ATO can understand the broader context of taxpayer transactions and operations. This review would concern 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.

Read a February 2014 report [PDF 127 KB] prepared by the KPMG member firm in Australia: Transfer Pricing Update: OECD Discussion Draft

Contact a tax professional with KPMG's Global Transfer Pricing Services.

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