Transfer pricing Bill awaits Assent
The Tax Laws Amendment (Cross-Border Transfer Pricing) Bill (No 1) 2012 has passed all stages without amendment and awaits Royal Assent. The Bill makes retrospective amendments with effect from 1 July 2004 to confirm that transfer pricing rules contained in Australia's tax treaties and incorporated into domestic law provide assessment authority in treaty cases. Strong criticisms of the amendments were made at the hearings into the Bill held by the Senate Economics Legislation Committee, but the Committee nonetheless recommended the Bill be passed.
The Bill will:
- amend the ITAA 1997 by inserting a new Subdiv 815-A to provide an express liability provision to ensure the transfer pricing articles contained in Australia's tax treaties are able to be applied and provide assessment authority independent of Div 13. Subdivision 815-A will only apply in treaty cases. Consequential amendments are also made to the ITAA 1936. Subdivision 815-A is only intended to apply where profits have not accrued to an entity because of non-arm's length conditions and the entity's Australian tax position is negatively affected from the perspective of the revenue as a result. The Government's view is that the application of the law, as amended by proposed new Subdiv 815-A, is consistent with Parliament's view that treaties provided a separate basis for making transfer pricing adjustments;
- require that the transfer pricing rules in the Bill are interpreted as consistently as possible with the relevant OECD guidance;
- clarify the interaction between transfer pricing and the thin capitalisation rules.
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