ATO Welcomes Comments on Diverted Profits Tax

; posted on
December 1st, 2016

On November 29, the Australian government released draft legislation for implementation of the Diverted Profits Tax, designed to identify large multinationals seeking to avoid tax by shifting profits and will impose a penalty tax rate of 40 percent.

Background: DPT

The DPT will provide the ATO with greater powers to deal with taxpayers who transfer profits, assets or risks to offshore related parties using artificial or contrived arrangements. ATO will be able to impose a penalty rate of tax, requiring the tax to be paid upfront and expanding the scope for identifying corporate tax avoidance. The Rule applies to the multinational’s with annual global income of AUS 1 billion (USD 739 million) that have Australian turnover of more than AUS 25 million (USD 18.5 million).

Challenging the Assessment

Following the notice of the DPT assessment, the taxpayer will be able to provide the Commissioner with further information disclosing reasons why the DPT assessment should be reduced during the period of review (generally 12 months). If dissatisfied, the taxpayer will have 30 days to challenge the assessment by making an appeal to the Federal Court of Australia however being able to use evidence that was provided to the Commissioner only before the end of the period of review.

The Consultation

Following from earlier public engagement in May, consultation on the Diverted Profits Tax draft legislation will give all interested parties an opportunity to comment on how the policy is drafted into law. The Diverted Profits Tax will commence on 1 July 2017 and "will reinforce Australia’s position as having amongst the toughest laws in the world to combat corporate tax avoidance," Treasurer Scott Morrison informed. Interested parties have until 23 December 2016 to provide submissions.

As MNEs are being challenged to apply the holistic view on their value chains, see TPA Global's VCA Survival Kit to gain more insights into the subject.

Sources: Treasurer - Press Release, Exposure Draft, Explanatory Memorandum

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