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  • Taxpayer Alert – Mischaracterisation of activities or payments in connection with intangible assets

    We have released Taxpayer Alert TA 2018/2 - Mischaracterisation of activities or payments in connection with intangible assetsExternal Link.

    This Alert informs the community of our concerns with international arrangements that mischaracterise activities or payments in connection with intangible assets.

    We are concerned with taxpayers that engage in operations that require the use or enjoyment of intangible assets developed, maintained, protected or owned in a foreign jurisdiction but fail to pay, or recognise payment of, an amount in the nature of a royalty for the purposes of Australia’s tax treaties and laws. In these circumstances, there is typically a significant mismatch between the substance of the relevant parties' operations and the form of their legal agreements, as well as a mischaracterisation of the relevant assets and activities performed in connection with such assets.

    We have consulted with external advisors prior to releasing the Alert, ensuring that the purpose and scope of the Alert is clear and that all key issues relating to these arrangements are addressed.

    We are currently reviewing these arrangements and engaging with taxpayers who have entered into, or are considering entering into, these arrangements. Compliance activity and engagement will continue as we develop our technical positions.

    If you have entered into, or are contemplating entering into, an arrangement of this type we encourage you to discuss your situation with us by emailing us.

    Last modified: 22 Nov 2018QC 57428