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  • IRPD use rights

    Table 10: IRPD use rights

    Code

    Description of transaction category

    RUIP

    Rights to use IP

    Any IRPDs for the use or right to use intellectual property of a revenue (non-capital) nature.

    Intellectual property includes:

    • trademarks
    • patents
    • registered designs
    • copyright
    • other intellectual property or similar property or rights including rights granted or protected under foreign law
    • interests in or rights granted in respect of any of the above, for example, a license to use a copyright.

     

    ORSR

    Other rights to use, supply or receive where consideration is royalty under section 6(1)

    Any IRPDs for the use or supply, or rights to use, supply or receive, where the consideration for such use, supply or rights is a royalty under section 6(1) of the ITAA 1936.

    Where there is a conflict between the definition of royalty in subsection 6(1) and the definition in an applicable double tax agreement, use the definition in the double tax agreement (see section 4(2) of the International Tax Agreements Act 1953).

    This can include IRPD arrangements involving:

    • the use or right to use industrial, commercial or scientific equipment
    • the supply of scientific, technical, industrial or commercial knowledge or information
    • the supply of any services or assistance ancillary and subsidiary to, and furnished as a means of enabling application or enjoyment of the use of intellectual property or of the above kinds of equipment, knowledge or information.

     

    LF

    Licence fees

    Any IRPDs involving grant or use of a licence, excluding transactions covered by Rights to use IP (RUIP) or Other Rights where consideration is a Royalty under section 6(1) (ORSR).

    The term ‘licence’ has its ordinary meaning.

    RRP

    Rent of real property

    Any IRPDs for the rent or lease of, or in the nature of renting or leasing, real property including land and buildings.

    The term ‘rent’ has its ordinary meaning.

    HLPE

    Hire or lease of plant or equipment

    Any IRPDs for the hire or lease of, or in the nature of hiring and leasing, plant or equipment.

    The terms ‘lease’ or ‘leasing’ and ‘hire’ or ‘hiring’ have their ordinary meaning.

    LHORP

    Lease or hire of other property or rights

    Any IRPDs for the hire or lease of, or in the nature of hiring and leasing, property or rights other than:

    • real property including land and buildings
    • plant or equipment.

    The terms ‘lease’ or ‘leasing’ and ‘hire’ or ‘hiring’ have their ordinary meaning.

    1. Transaction Identifier

    Show the Transaction ID for the transaction being reported.

    (LCMSF31)

    1. Related Transaction Identifier(s)

    Show all Transaction IDs that are directly connected to the transaction being reported.

    (LCMSF206)

    1. What is the transaction category?

    Select the transaction category for the IRPD transaction.

    (LCMSF32)

    1. Is this transaction part of a RAS?

    If this transaction is covered by an IRPD agreement in a RAS, indicate True.

    Otherwise indicate False.

    (LCMSF33)

    1. How many transactions are part of the RAS?

    If the transaction is part of a RAS, indicate the applicable range for the number of the transactions in the same RAS that were current during the income year:

    • Low (1–5)
    • Moderate (6–50)
    • High (51 or more)

    (LCMSF35)

    1. Australian counterparty name

    Show the full name of the Australian counterparty (which may be the reporting entity itself) to this transaction/RAS.

    (LCMSF207)

    1. ABN or TFN of the Australian counterparty to the transaction/RAS

    Show the ABN or TFN of the Australian counterparty (which may be the reporting entity itself) to the transaction/RAS.

    (LCMSF83 and LCMSF84)

    1. Name of the non-resident IRP counterparty to the transaction/RAS

    Show the full name of the IRP non-resident counterparty to this transaction/RAS.

    The full name to be shown is the complete name of the IRP non-resident counterparty entity. While this would be expected to usually correspond with the name of the relevant party in any associated written agreement documentation, the full correct name of the entity should be shown at Part A even if this is not exactly the same as the name used in any associated written agreement documentation.

    (LCMSF37)

    1. Tax residency of the non-resident counterparty to the transaction/RAS

    Show the country codeExternal Link for the country of tax residence of the IRP non-resident counterparty to this transaction/RAS.

    (LCMSF38)

    1. Was the transaction/ RAS entered into by the non-resident counterparty in the course of its business operations carried on through a permanent establishment in a different country to its country of tax residence?

    Indicate True if the transaction/RAS was entered into by the non-resident counterparty in the course of its business operations carried on through a PE in a different country to its country of tax residence.

    Otherwise indicate False.

    (LCMSF208)

    1. Country of permanent establishment of non-resident counterparty

    This question applies only if you answer True to Question 10.

    Show the country codeExternal Link of the PE.

    (LCMSF209)

    1. Amount of consideration paid (of a capital nature for income tax purposes) for the transaction/RAS

    If an amount of a capital nature was paid by the reporting entity in connection with this transaction/RAS during the income year, show this amount based on the reporting entity’s accounting records.

    If no amount of a capital nature was received by the reporting entity in connection with this transaction/RAS during the income year, show zero.

    (LCMSF39)

    1. Amount of consideration received (of a capital nature for income tax purposes) for the transaction/RAS

    If an amount of a capital nature was received by the reporting entity in connection with this transaction/RAS during the income year, show this amount based on the reporting entity’s accounting records.

    If no amount of a capital nature was received by the reporting entity in connection with this transaction/RAS during the income year, show zero.

    (LCMSF40)

    1. Was non-monetary consideration provided (of a capital nature for income tax purposes) for the transaction/RAS?

    If non-monetary consideration of a capital nature was provided by the reporting entity in connection with this transaction/RAS during the income year, indicate True.

    Otherwise indicate False.

    (LCMSF85)

    1. Was non-monetary consideration obtained (of a capital nature for income tax purposes) for the transaction/RAS?

    If non-monetary consideration of a capital nature was obtained by the reporting entity in connection with this transaction/RAS during the income year, indicate True.

    Otherwise indicate False.

    (LCMSF86)

    1. Amount of expenditure (not of a capital nature for income tax purposes) for the transaction/RAS

    (LCMSF41)

    Rights to use IP / other rights to use, supply or receive where consideration is a royalty under section 6(1) / licence fees

    Show the amount the reporting entity deducted for income tax purposes for royalties or other losses or outgoings in connection with this transaction/RAS during the income year based on the reporting entity’s income tax records, including any fees or consideration payable for:

    • a licence or other use or right to use intellectual property such as trademarks or patents
    • the use or right to use industrial, commercial or scientific equipment
    • the supply of scientific, technical, industrial or commercial knowledge or information
    • the supply of any services or assistance ancillary and subsidiary to, and furnished as a means of enabling application or enjoyment of the use of intellectual property or of the above kinds of equipment, knowledge or information.

    If the reporting entity deducted no amount for royalties or other losses or outgoings in connection with this transaction/RAS during the income year, show zero.

    Rent of real property / hire or lease of plant or equipment / lease or hire of other property or rights

    Show the amount of expenditure not of a capital nature for income tax purposes in connection with this transaction/RAS during the income year based on the reporting entity’s accounting records, including any rent or hire fees.

    If there was no amount of expenditure not of a capital nature in connection with this transaction/RAS during the income year, show zero.

    1. Amount of revenue (not of a capital nature for income tax purposes) for the transaction/RAS

    Rights to use IP / other rights to use, supply or receive where consideration is a royalty under section 6(1) / licence Fees

    Show the amount the reporting entity returned as assessable royalties or other income in connection with this transaction/RAS during the income year based on the reporting entity’s income tax records, including any fees or consideration receivable for:

    • a licence or other use or right to use intellectual property such as trademarks or patents
    • the use or right to use industrial, commercial or scientific equipment
    • the supply of scientific, technical, industrial or commercial knowledge or information
    • the supply of any services or assistance ancillary and subsidiary to, and furnished as a means of enabling application or enjoyment of the use of intellectual property or of the above kinds of equipment, knowledge or information.

    If the reporting entity returned no assessable royalties or other income in connection with this transaction/RAS during the income year, show zero.

    Rent of real property / hire or lease of plant or equipment / lease or hire of other property or rights

    Show the amount of revenue not of a capital nature for income tax purposes in connection with this transaction/RAS during the income year based on the reporting entity’s accounting records, including any rent or hire fees.

    If there was no amount of revenue not of a capital nature in connection with this transaction/RAS during the income year, show zero.

    (LCMSF42)

    1. Average balance of debt interests

    Not applicable.

    (LCMSF210)

    1. Capitalised interest deducted

    Not applicable.

    (LCMSF211)

    1. Average balance of debt interests

    Not applicable.

    (LCMSF212)

    1. Capitalised interest returned

    Not applicable.

    (LCMSF213)

    1. Book values

    Not applicable.

    (LCMSF214)

    1. Was non-monetary consideration provided (not of a capital nature for income tax purposes) for the transaction/RAS?

    If non-monetary consideration not of a capital nature for income tax purposes was provided by the reporting entity in connection with this transaction/RAS during the income year, indicate True.

    Otherwise indicate False.

    (LCMSF44)

    1. Was non-monetary consideration obtained (not of a capital nature for income tax purposes) for the transaction/RAS?

    If non-monetary consideration not of a capital nature was obtained by the reporting entity in connection with this transaction/RAS during the income year, indicate True.

    Otherwise indicate False.

    (LCMSF45)

    1. Did you enter into a deferred foreign currency payment arrangement in relation to this transaction

    You can only indicate True or False if the transaction category is RRP or HLPE.

    Indicate True if you have entered into a deferred foreign currency payment arrangement in relation to a RRP or HLPE transaction, otherwise indicate False.

    If the transaction category is not RRP or HLPE, leave the question blank.

    (LCMSF215)

    1. Foreign Currency Reporting Type

    This question applies only if you answer True to Question 25.

    Please indicate the type of foreign currency deferred payment arrangement entered into:

    1 = Regular / short term foreign currency deferred payment arrangements

    2 = Irregular or longer term foreign currency deferred payment arrangements

    If you have indicated 1, then you will need to only provide the Foreign Currency CodeExternal Link at Question 27.

    If you have indicated 2, then you will need to show your foreign exchange gains / losses at the relevant IRPD foreign currency deferred payment arrangement transaction category.

    (LCMSF216)

    1. Foreign Currency Code

    This question applies only if you answer True to Question 25 and indicate that you entered into a Regular / short term foreign currency deferred payment arrangement at Question 26.

    Show the Foreign Currency CodeExternal Link applicable to the foreign currency deferred payment arrangement.

    (LCMSF217)

    1. Amount of foreign exchange losses deducted for the transaction/RAS

    This question applies only if you answer False to Question 25.

    Show the amount of foreign exchange losses deducted for income tax purposes by the reporting entity in connection with this transaction/RAS under Division 775 of the ITAA 1997 or, if applicable, the taxation of financial arrangements (TOFA) provisions in Division 230 of the ITAA 1997 for the income year.

    For more information about the circumstances in which foreign exchange gains are assessable and foreign exchange losses are deductible for Australian income tax purposes, refer to Appendix 6.

    If there was no foreign exchange loss deducted for income tax purposes in connection with this transaction/RAS for the income year, show zero.

    (LCMSF87)

    1. Foreign Currency Code

    This question applies only if you answer False to Question 25.

    Show the Foreign Currency CodeExternal Link in relation to foreign exchange losses deducted for the transaction/RAS.

    (LCMSF219)

    1. Amount of foreign exchange gains returned for the transaction/RAS

    This question applies only if you answer False to Question 25.

    Show the amount of foreign exchange gains assessable for income tax purposes in connection with this transaction/RAS under Division 775 of the ITAA 1997 or, if applicable, the TOFA provisions in Division 230 of the ITAA 1997 for the income year.

    For more information about the circumstances in which foreign exchange gains are assessable and foreign exchange losses are deductible for Australian income tax purposes, refer to Appendix 6.

    If there was no foreign exchange gain assessable for income tax purposes in connection with this transaction/RAS, show zero for the income year.

    (LCMSF43)

    1. Foreign Currency Code

    This question applies only if you answer False to Question 25.

    Show the Foreign Currency CodeExternal Link in relation to foreign exchange gains returned for the transaction/RAS

    (LCMSF221)

    1. What transfer pricing / capital asset pricing methodology has been applied to this transaction/RAS?

    If the reporting entity does not know which transfer pricing methodology has been applied to this transaction/RAS, select the code UNKT (Unknown TP Method).

    If the reporting entity does not know which capital asset pricing methodology has been applied to this transaction/RAS, select the code UNKC (Unknown CAP Method).

    (LCMSF46)

    1. What level of transfer pricing documentation has been prepared for this transaction/RAS?

    The level of transfer pricing documentation refers to the aggregate dollar amount of this transaction/RAS for which the reporting entity has prepared relevant transfer pricing documentation, expressed as a percentage of total dollar value of this transaction/RAS.

    1 = 0%

    2 = 1% to less than 25%

    3 = 25% to less than 50%

    4 = 50% to less than 75%

    5 = 75% to less than 100%

    6 = 100%

    If this transaction/RAS meets the conditions for one of the following Simplified Transfer Pricing Record Keeping (STPRK) options, outlined in PCG 2017/2 Simplified Transfer Pricing Record Keeping Options, show the codes for the STPRK option applied to the transaction/RAS:

    7 = STPRK (Materiality)

    8 = STPRK (Small Business)

    9 = STPRK (Distributors)

    (LCMSF47)

    1. If the reporting entity is a bank and this transaction is in a RAS, has the special short term tenor rule for ordinary borrowings and ordinary loans been applied to this RAS?

    Always indicate False if the transaction category is not ordinary borrowings or ordinary loans.

    (LCMSF88)

    1. If the reporting entity is a bank and this transaction is in a RAS, has the special short term tenor rule for short term derivatives been applied to this RAS?

    Always indicate False if the transaction category is not derivatives.

    (LCMSF128)

    1. If the reporting entity is a bank and this transaction is in a RAS, has the special rule for FX derivatives been applied to this RAS?

    Always indicate False if the transaction category is not derivatives.

    (LCMSF129)

    1. If the reporting entity is an OBU, is this transaction/RAS an OB activity?

    If the reporting entity is an OBU and this transaction/RAS is an OB activity under sections 121D and 121EAA of the ITAA 1936, indicate True.

    Otherwise indicate False.

    (LCMSF63)

    1. Is this transaction/RAS covered by a category on the Exclusions List?

    Indicate False, since none of the categories on the exclusions list can apply to these IRPD Use Rights.

    (LCMSF48)

    1. What category of the Exclusions List applies to this transaction/RAS?

    Not applicable.

    (LCMSF49)

    1. Transaction Comments

    Provide any relevant comments in respect of the transaction/RAS.

    (LCMSF222)

    Reporting example: IRPD use rights

    Example 6: Licence of patents and trademarks with Swiss and Irish IRPs

    The facts are the same as the facts in Example 5.

    The agreement for the licence to use the patents is not with the same IRP as the agreement for the right to use the trademarks. Even if the agreements were with the same IRP they would not be in the same RAS because they grant rights to different intellectual property and are not on the same terms except for date, volume, price and delivery. For more information about the RAS rules refer to Appendix 8.

    The amounts payable by Aus Co and the amounts deducted for income tax purposes by Aus Co for the income year are shown in the table below. 

    Table 11: Aus Co income tax amounts payable and amounts deducted

    Nature of amount payable by Aus Co

    Amounts payable

    Amounts deducted

    Whether amount is of a capital or revenue nature for income tax purposes

    Amount payable up front for 10 year patent licence from Swiss Co

    A$10m

    0

    Capital

    Annual licence fee payable for patent licence from Swiss Co

    A$5m

    A$5m

    Revenue

    Annual licence fee payable for right to use trademarks from Irish Co

    US$15m

    AUD equivalent of US$15m

    Revenue

    Although the licence fee payable by Aus Co to Irish Co for the right to use trademarks is payable in US dollars, Aus Co does not return any assessable foreign exchange gains or deduct any foreign exchange losses because Aus Co pays Irish Co the annual licence fee of USD $15 million on the date of execution of the agreement. specified due date for payment under the agreement.

    Aus Co did not provide or obtain any non-monetary consideration in relation to the licence to use the patents or the right to use the trademarks.

    Aus Co has applied the transfer pricing methodology ‘Comparable uncontrolled price method’ to all payments made for the licence to use the patents and for the right to use the trademarks.

    Aus Co has prepared relevant contemporaneous transfer pricing documentation for 100% of the licence to use the patents and the right to use the trademarks.

    Aus Co completes the Questions for the IRP transactions/RAS in this example based on its accounting records as shown in the following tables.

    Table 12: Completed entry – 10 year patent licence from Swiss Co (Rights to use IP)

    Question no.

    Question label

    Response

    1

    Transaction Identifier

    [Transaction ID]

    2

    Related Transaction Identifier(s)

    [Transaction IDs for Table 8 and Table 54]

    3

    Transaction Category

    RUIP

    4

    Is this transaction part of a RAS?

    False

    5

    How many transactions are part of the RAS?

    na

    6

    Australian counterparty name

    [Australian counterparty name]

    7

    ABN or TFN of the Australian counterparty to the transaction/RAS

    [ABN or TFN]

    8

    Name of the IRP non-resident counterparty to the transaction/RAS

    Swiss Co

    9

    Tax residence of the IRP non-resident counterparty to the transaction/RAS

    CH

    10

    Was the transaction/RAS entered into by the non-resident counterparty in the course of its business operations carried on through a permanent establishment in a different country to its country of tax residence?

    False

    11

    Country of permanent establishment counterparty

    na

    12

    Amount of consideration paid (of a capital nature for income tax purposes) for the transaction/RAS

    10000000

    13

    Amount of consideration received (of a capital nature for income tax purposes) for the transaction/RAS

    0

    14

    Was non-monetary consideration provided (of a capital nature for income tax purposes) for the transaction/RAS?

    False

    15

    Was non-monetary consideration obtained (of a capital nature for income tax purposes) for the transaction/RAS?

    False

    16

    Amount of expenditure (not of a capital nature for income tax purposes) for the transaction/RAS that the reporting entity deducted for income tax purposes

    5000000

    17

    Amount of revenue (not of a capital nature for income tax purposes) for the transaction/RAS that the reporting entity returned as assessable for income tax purposes

    0

    18

    Average balance of debt interests

    na

    19

    Capitalised interest deducted

    na

    20

    Average balance of debt interests

    na

    21

    Capitalised interest returned

    na

    22

    Book values

    na

    23

    Was non-monetary consideration provided (not of a capital nature for income tax purposes) for the transaction/RAS?

    False

    24

    Was non-monetary consideration obtained (not of a capital nature for income tax purposes) for the transaction/RAS?

    False

    25

    Did you enter into a deferred foreign currency payment arrangement in relation to this transaction

    na

    26

    Foreign Currency Reporting Type

    na

    27

    Foreign Currency Code

    na

    28

    Amount of foreign exchange losses deducted for the transaction/RAS

    0

    29

    Foreign Currency Code

    na

    30

    Amount of foreign exchange gains returned for the transaction/RAS

    0

    31

    Foreign Currency Code

    na

    32

    What transfer pricing / capital asset pricing methodology has been applied to the transaction/RAS?

    CUP

    33

    What level of transfer pricing documentation has been prepared for this transaction/RAS?

    6

    34

    If the reporting entity is a bank and transaction is in a RAS, has the special short term tenor rule for ordinary borrowings and ordinary loans been applied to this RAS?

    False

    35

    If the reporting entity is a bank and this transaction is in a RAS, has the special short term tenor rule for short term derivatives been applied to this RAS?

    False

    36

    If the reporting entity is a bank and this transaction is in a RAS, has the special rule for FX derivatives been applied to this RAS?

    False

    37

    If the reporting entity is an OBU, is this transaction/RAS an OB activity?

    False

    38

    Is this transaction/RAS covered by a category on the Exclusions List?

    False

    39

    What category of the Exclusions List applies to this transaction/RAS?

    na

    40

    Transaction Comments

    [Comments]

     

    Table 13: Completed entry – Right to use trademarks from Irish Co (Rights to use IP)

    Question no.

    Question label

    Response

    1

    Transaction Identifier

    [Transaction ID]

    2

    Related Transaction Identifier(s)

    [Transaction IDs]

    3

    Transaction Category

    RUIP

    4

    Is this transaction part of a RAS?

    False

    5

    How many transactions are part of the RAS?

    na

    6

    Australian counterparty name

    [Australian counterparty name]

    7

    ABN or TFN of the Australian counterparty to the transaction/RAS

    [ABN or TFN]

    8

    Name of the IRP non-resident counterparty to the transaction/RAS

    Irish Co

    9

    Tax residence of the IRP non-resident counterparty to the transaction/RAS

    IE

    10

    Was the transaction/RAS entered into by the non-resident counterparty in the course of its business operations carried on through a permanent establishment in a different country to its country of tax residence?

    False

    11

    Country of permanent establishment counterparty

    na

    12

    Amount of consideration paid (of a capital nature for income tax purposes) for the transaction/RAS

    0

    13

    Amount of consideration received (of a capital nature for income tax purposes) for the transaction/RAS

    0

    14

    Was non-monetary consideration provided (of a capital nature for income tax purposes) for the transaction/RAS?

    False

    15

    Was non-monetary consideration obtained (of a capital nature for income tax purposes) for the transaction/RAS?

    False

    16

    Amount of expenditure (not of a capital nature for income tax purposes) for the transaction/RAS that the reporting entity deducted for income tax purposes

    AUD equivalent of USD 15000000

    17

    Amount of revenue (not of a capital nature for income tax purposes) for the transaction/RAS that the reporting entity returned as assessable for income tax purposes

    0

    18

    Average balance of debt interests held

    na

    19

    Capitalised interest deducted

    na

    20

    Average balance of debt interests issued

    na

    21

    Capitalised interest returned

    na

    22

    Book values

    na

    23

    Was non-monetary consideration provided (not of a capital nature for income tax purposes) for the transaction/RAS?

    False

    24

    Was non-monetary consideration obtained (not of a capital nature for income tax purposes) for the transaction/RAS?

    False

    25

    Did you enter into a deferred foreign currency payment arrangement in relation to this transaction

    na

    26

    Foreign Currency Reporting Type

    na

    27

    Foreign Currency Code

    na

    28

    Amount of foreign exchange losses deducted for the transaction/RAS

    0

    29

    Foreign Currency Code

    na

    30

    Amount of foreign exchange gains returned for the transaction/RAS

    0

    31

    Foreign Currency Code

    na

    32

    What transfer pricing / capital asset pricing methodology has been applied to the transaction/RAS?

    CUP

    33

    What level of transfer pricing documentation has been prepared for this transaction/RAS?

    6

    34

    If the reporting entity is a bank and transaction is in a RAS, has the special short term tenor rule for ordinary borrowings and ordinary loans been applied to this RAS?

    False

    35

    If the reporting entity is a bank and this transaction is in a RAS, has the special short term tenor rule for short term derivatives been applied to this RAS?

    False

    36

    If the reporting entity is a bank and this transaction is in a RAS, has the special rule for FX derivatives been applied to this RAS?

    False

    37

    If the reporting entity is an OBU, is this transaction/RAS an OB activity?

    False

    38

    Is this transaction/RAS covered by a category on the Exclusions List?

    False

    39

    What category of the Exclusions List applies to this transaction/RAS?

    na

    40

    Transaction Comments

    [Comments]

    The assignment by Aus Co to Swiss Co of its beneficial interest in the patents for A$100 million will be shown by Aus Co as an IRP transaction for the transaction category ‘Assignment of IP’. This is covered in Example 13.

    The services provided by Aus Co to Swiss Co will be shown by Aus Co as an IRP transaction for the relevant services transaction category. This is covered in Example 5.

    End of example
      Last modified: 14 Jun 2019QC 56216