Doing something overseas – Have you understood the practical Australian taxation consequences correctly?

The tax strategies and structures adopted by multinational organisations are currently under enormous (and very public) scrutiny from global tax authorities and the media.

In Australia alone, hardly a week goes by without a newspaper article commenting on the tax profile of a corporate entity or the “big end of town” as a concept.

Consistent with the Organisation for Economic Cooperation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) project initiative, the Australian Government has introduced a number of new legislative measures designed to reflect BEPS and the concerns raised around international tax avoidance for large multinationals.

At the 51st Western Australia State Convention in August, Mathew Chamberlain, CTA, (EY) will take a closer look at the issues in his session ‘Doing something overseas – Have you understood the practical Australian taxation consequences correctly?’

Here we speak to Mathew and preview the paper to be presented in Perth.

As Mathew’s paper notes, ‘The Australian Taxation Office (ATO) has been empowered not only by the raft of recent and proposed legislative changes. It has also been provided with substantial resourcing to review multinationals affairs, and has had a number of recent high profile ‘wins’ both in the courts and as settlements with taxpayers. For most Australian companies operating globally it is no longer a question of if but when the ATO will come knocking at their door’.

“In my session in Perth, I’ll be looking at some of the practical do’s and don’ts and the commercial pressure points for Australian companies expanding and operating overseas – less on the technical and more on the material and practical! There’s also quite a bit of case law and legislation to address, including the definition of residence for a company, various ATO rulings and determinations on residency, branches and CFCs plus case law on tax residence.”

His paper notes that ‘Australian businesses looking to invest or operate overseas need to ensure they implement structures that are commercially viable, and are compliant with Australian and foreign tax legislation. Australia’s tax system contains complex rules for Australian businesses expanding offshore. These rules can often present difficulties for tax advisers, particularly where they involve overlaying Australian tax concepts on an international structure.’

Mathew said “Advisers in this space sometimes have too overt a focus on the technical outcomes and issues and an inability to distinguish between these technical issues and what actually really matters. Just because you have a technical issue, doesn’t mean you necessarily have a practical issue or an issue that can’t be managed relatively simply.”

Generally, Australian taxpayers establishing activities overseas do so in one of two ways – either a local company or a branch of an Australian or interposed company (i.e. a permanent establishment (PE)). The focus of Mathew’s session and the paper he will present is to provide an overview of the key Australian tax issues and current developments for each of these options, and highlight issues which may be relevant to a potential outbound investment by Australian businesses.

This session will focus on the key tax issues associated with both structures. Mathew will cover some core issues and concepts around foreign subsidiaries and tax residency, including tax residency and implications of Australian tax residency, recent developments in cases and current ATO review, as well as the impact of tax treaties.

He will then look at foreign branches and PE under Australian tax law, tax treaties and OECD principles, the impact of the OECD BEPS project, including the proposed multilateral instrument.

Finally, he will look at the issues in choosing which of the two options to use.

Mathew’s session is one of seven in the Convention’s dedicated corporate stream, with the session
‘The Post-BEPS World – Lessons Learned’ by Mathew Popham, CTA, (KPMG) also taking place on day one of the two-day program.

Other sessions look at the R&D tax incentive, capital management and restructuring, tax issues for start-ups raising funds, and related party financing.

This year’s Convention Keynote Address comes from The Hon. Justice Davies (Federal Court), and the program opens with an interview-style session with the Second Commissioner, Neil Olesen (ATO).

Join us at Crown Perth, 16–17 August 2018 for 51st Western Australia State Convention. Find out more on our website.

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