Compliance program 2011-12

Non-resident withholding tax

Risk to the Australian tax base arises when there is a failure to withhold, report or remit non-resident withholding tax on payments of interest, dividends and royalties to non-residents.

In circumstances where the withholding tax is payable, there may be other international tax risks associated with these transactions, such as transfer pricing.

Our compliance focus is on several specific areas and types of transactions including:

• transfers of Australian intellectual property (such as copyright) to non-residents where royalties are payable. Where these transfers involve related parties, transfer pricing issues may also arise
• mis-characterisation of payments properly subject to withholding tax - such as the characterisation of the payment as a service fee when a royalty is the correct characterisation
• circumstances where there has been a failure to identify a liability in the case of a bundled payment (where correct characterisation of parts of the payment would reveal a non-residents withholding tax liability)
• structured arrangements designed to, or claiming to have the effect of, avoiding withholding tax - such as hybrid financing where the return is claimed as a price differential and not 'interest' or a 'dividend' as defined in the withholding tax legislation.

Sections within Large businesses

• Good tax corporate governance
• Working together
• Obtaining certainty
• Cooperative compliance
• Corporate restructures mergers and acquisitions
• Foreign residents
• Inappropriate outcomes involving consolidation
• Profit shifting
• Private equity - exiting Australia
• GST and international and cross-border transactions
• Non-resident withholding tax
• Stapled group financing
• Taxation of financial arrangements (TOFA)
• Financial supplies and GST
• Foreign partnerships
• Black-hole expenditure
• Exploration expenditure
• Tax and capital losses
• Research and development claims
• Property transactions and GST
• Superannuation funds
• Alternative fuels