On November 29, 2016 the Australian Government released exposure draft legislation for a Diverted Profits Tax (DPT) for consultation. The Australian Government invites all interested parties to make a submission. The closing date for submissions is December 23, 2016.
In the 2016-17 Budget, the Government announced that it would implement a Diverted Profits Tax (DPT) to impose a 40 per cent penalty tax on profits that have been artificially diverted from Australia by multinationals.
The exposure draft Bill and associated explanatory material as released on November 29, 2016 would strengthen the anti-avoidance rules in Part IVA of the Income Tax Assessment Act 1936 and amend the Tax Administration Act 1953 and associated Acts to give effect to the decision.
The measure is intended to target entities with annual global income of $1 billion or more that shift profits to offshore associates where:
· the resulting increase in the foreign tax liability is less than 80 per cent of the corresponding decrease in the Australian tax liability;
· there is insufficient economic substance; and
· one of the principal purposes is to obtain a tax benefit.
The Government invites all interested parties to make a submission.
The Explanatory Memorandum discusses a.o. the following subjects:
· Context of amendments
· Summary of new law
· Comparison of key features of new law and current law
· Detailed explanation of new law
o Circumstances in which the DPT will apply
o The purpose test
o The relevant taxpayer must be a significant global entity
o A foreign entity must be an associate and involved in the scheme
o The relevant taxpayer must obtain a tax benefit in connection with the scheme
o Circumstances in which the DPT will not apply
o The $25 million turnover test
o The sufficient foreign tax test
o The sufficient economic substance tes
· Consequences that arise if the DPT applies
· The DPT assessment and review process
o DPT assessments
o Payment of DPT liability amount
o Period of review of DPT assessments
o Review of DPT assessments
· Consequential amendments
· Application and transitional provisions
Click here to be forwarded to the EXPOSURE DRAFT - Inserts for Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017: Diverted profits tax as released by the Australian Government on November 29, 2016.
Click here to be forwarded to the EXPLANATORY MEMORANDUM - TAX LAWS AMENDMENT (COMBATING MULTINATIONAL TAX AVOIDANCE) BILL 2016: DIVERTED PROFITS TAX as released by the Australian Government on November 29, 2016.
Further information on how to make a submission can be found here on the website of the Australian Treasury.
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