All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

Australia: Corporate collective investment vehicles tax regime

intl-updates

The Australian government released exposure draft legislation on the tax treatment of corporate collective investment vehicles (CCIVs) on Wednesday, December 20 2017. The draft legislation is open to public consultation until February 2 2018 and will apply to income years commencing on or after July 1 2018.

A CCIV is a company that is registered under the Australian Corporations Act and will provide a new type of CIV which is internationally recognised and readily marketed to foreign investors, including through the Asia Region Funds Passport. A complying CCIV (or attribution corporate collective investment vehicle (ACCIV)) will have access to an attribution or 'character flow through' model of taxation, generally aligned with the attribution managed investment trust (AMIT) tax regime. Principally, this will include flow-through tax treatment, deemed capital account treatment (under an election), and certain eligible non-resident investors will be taxed at concessional rates (generally 15%) on attributed income, subject to Australia's withholding tax provisions.

These concessions are directed at, principally, passive type investments by a sufficiently widely held corporation.

A new concept of an attribution investment vehicle (AIV) has been introduced which includes both ACCIVs and AMITs.

The CCIV tax regime was released together with the exposure draft legislation for the Asia region funds passport and will be subject to close consultation and likely finalised and passed through the Australian Parliament in the coming months.

Cross-border related party financing arrangements

The Australian Taxation Office (ATO) released its final Practical Compliance Guideline, PCG 2017/4, on its compliance approach to cross-border related party financing arrangements and related transactions on December 18 2017. Essentially, the ATO has introduced a risk categorisation or framework for related party financing arrangements and strongly encouraged multinationals to self-assess their tax risk position.

As a part of this encouragement, the ATO is offering to remit penalties and interest for voluntary disclosures for both historical and prospective financing arrangements, where certain pre-conditions are met.

The ATO has outlined various tax risk indicators which relate to, among other things, third-party debt of the borrowing group, security/collateral arrangements, subordinated debt, exotic features and the currency of the debt.

All Australian and foreign-based multinationals with material cross-border financing arrangements should promptly review their existing and proposed related party financing contracts in the context of PCG 2017/4.

Diverted profits tax (DPT) update

The ATO on December 18 2017 released Law Administration Practice Statement PSLA 2017/2 on the proposed administrative process for making DPT assessments. Further, it released draft Law Companion Guideline LCG 2017/D7 on practical guidance for taxpayers on key aspects of the DPT, including the principal purpose test, sufficient foreign tax test, and the sufficient economic substance test.

McCormack

Jock McCormack

Jock McCormack (jock.mccormack@dlapiper.com)

DLA Piper Australia

Tel: +61 2 9286 8253

Fax: +61 2 9286 8007

Website: www.dlapiper.com

more across site & bottom lb ros

More from across our site

The UN may be set to assume a global role in tax policy that would rival the OECD, while automakers lobby the US to change its tax rules on Chinese materials.
Companies including Valentino and EveryMatrix say the early adoption of EU public CbCR rules could boost transparency of local and foreign MNEs, despite the short notice.
ITR invites tax firms, in-house teams, and tax professionals to make submissions for the 2023 ITR Tax Awards in Asia-Pacific, Europe Middle East & Africa, and the Americas.
Tax authorities and customs are failing multinationals by creating uncertainty with contradictory assessment and guidance, say in-house tax directors.
The CJEU said the General Court erred in law when it ruled that both companies benefitted from Italian state aid.
An OECD report reveals multinationals have continued to shift profits to low-tax jurisdictions, reinforcing the case for strong multilateral action in response.
The UK government announced plans to increase taxes on oil and gas profits, while the Irish government considers its next move on tax reform.
War and COVID have highlighted companies’ unpreparedness to deal with sudden geo-political changes, say TP specialists.
A source who has seen the draft law said it brings clarity on intangibles and other areas of TP including tax planning.
Tax consultants say companies must not ignore financial transactions in their TP policies as authorities, particularly in the UK, become more demanding.