ATO Publishes TP Guidelines for Offshore Hubs

ATO published Practical Compliance Guideline PCG 2017/1 that addresses transfer pricing issues related to centralized operating models involving procurement, marketing, sales and distribution functions.

Centralized Operating Models

The type of activities that are commonly centralized include marketing, sales and distribution functions although centralized operating models are not necessarily limited to these functions. These centralized operating models are referred to as 'hubs' and are defined as multi-faceted arrangements.

Use of Guidelines

The framework set out in the Guideline can be used to:

  • assess the compliance risk of the transfer pricing outcomes of your hubs in accordance with the ATO's risk framework;
  • understand the compliance approach that the ATO will likely adopt having regard to the risk profile of your hub;
  • work with the ATO to mitigate the transfer pricing risk in relation to your hub and be confident you have reduced your risk exposure; and
  • understand the type of analysis and evidence the ATO would require when testing the outcomes of your hub.

The Guideline provides a self-assessment risk framework that allows companies to assess their transfer pricing outcomes using the ATO's risk framework. Companies may be asked to inform ATO whether they have self-assessed their rating and if so, what the risk rating is. 

Sources: ATO - TP Guidelines

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