• Question 3

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    Complete by placing an 'X' in the applicable box. If you answer 'yes', you need to provide information for three specified countries with the highest dollar value of dealings.

    To complete this question, you need to:

    • identify all your dealings with other parties (related and non-related) located in specified countries during the income year
    • group these dealings according to the specified country where the other party was located
    • total the dollar value of your dealings (expenses/losses plus revenue/gains, excluding principal and principal repayment amounts) for each specified country
    • work out the three specified countries where you had the highest dollar value of dealings.

    In the first column at C, G and K, list the codes of the three specified countries with the highest dollar value of dealings between you and other parties located in specified countries.

    List the codes in descending order of total dollar value.

    Further Information

    For the list of specified countries, see Appendix 2.

    End of further information

    In the second column at D, H and L, provide the total amount of expenditure/losses incurred (excluding principal and principal repayment amounts) in respect of your dealings with other parties located in each of the specified countries listed in the first column.

    In the third column at E, I and M, provide the total amount of revenue/gains earned (excluding principal and principal repayment amounts) in respect of your dealings with other parties located in each of the specified countries listed in the first column.

    In the fourth column at F, J and N, specify the codes that describe the nature of the principal activities undertaken with other parties in each of the specified countries listed in the first column. The principal activity for each country is that with the highest dollar value of dealings (expenses/losses plus revenue/gains) with other parties located in that country.

    Further Information

    For the list of codes for activity types, see Appendix 5.

    End of further information

    If your dealings with other parties were confined to one or two of the specified countries, only list those countries.

    We consider there is a higher tax compliance risk associated with international dealings by Australian taxpayers with particular tax jurisdictions. To assist us in developing our compliance strategies in relation to these risks we are seeking to identify the principal specified countries where the taxpayers' activities are undertaken and the level of taxpayer's activities in those countries.

    Only dealings conducted on the taxpayer's own behalf need to be taken into account. That is, dealings by a financial services entity on behalf of its clients are not to be included. For example, the following dealings would not be included in the answer to this question:

    • A dealing where you serve as the contracting party when completing the purchase of a currency swap on behalf of your customer.
    • Interest paid on demand deposits to customers/account holders located in specified countries.
    • Expenses billed to customers located in specified countries in respect of cash management services provided to those customers.
    • You have provided a customer located in a specified country with a loan to purchase a capital asset.

    The term dealings should be read widely to mean any type of interaction between you and any parties located in specified countries.

    For the purpose of this question parties includes (but not limited to):

    • individuals
    • companies
    • trusts
    • super funds
    • partnerships.

    This question also collects information about your internally recorded 'dealings' with your branch operations that records your attribution of your income and expenditure to the branch operations carried on in specified countries.

    Further Information

    For more information, see Permanent establishments.

    End of further information

    Also treat the reference to a 'party' as though it extended to:

    • offshore branch operations carried on by an Australian resident - treat such operations as though they were instead a separate 'party' located in the branch country
    • Australian branch operations carried on by a non-resident - treat such operations as though they were instead a separate 'party' located in Australia.

    Except for branch operations (refer above) or partnerships, treat the location of another party as the same as the tax jurisdiction in which the party is a resident. Treat the location of a partnership as the place where the partners are located or the partnership business is carried on.

    If, for unrelated parties, the taxing jurisdiction is not known, it is sufficient to determine the location based on the address supplied by the counterparty to the dealing.

    If you had dealings with another party (including a related party) in specified countries during the income year, answer yes to this question and complete the required fields.

    The dollar amounts or values asked for are all based on your accounting records.

    The amounts reported at this question may be reported in the financial statements as revenue/gains or expenses/losses, depending on the accounting treatment of the relevant item (for example, for dealings in derivatives, you may report revenue from net cash flows or you may report a gain in fair value). Therefore, for the purposes of this question, the terms: 'expenditure and losses' and 'revenue and gains' are interchangeable.

    The amounts reported at this question should include:

    • net capital gains (that is net of costs and net of losses) arising from portfolio investment activities (interests of less than 10% in companies and trusts) with entities located in specified countries
    • capital proceeds/revenue and capital cost/expenditure for your dealings with parties located in specified countries (for example, the sale or purchase of a non-current asset).

    Completion of question 3 for your 2011 income year

    We understand that for some taxpayers there may not have been enough time to change your accounting systems to allow you to collect all of the information required to complete this question for this first year. If this is the case for you we ask that you complete as much of question 3 as possible using your current systems and make a best effort to estimate figures where actual data is not possible. Include a covering letter with your International dealings schedule - financial services 2011 that indicates where you needed to estimate, and let us know what data you used to make this estimate. Any feedback you can provide to us on the difficulty or otherwise in completing this question would be appreciated and will be considered for future versions of the schedule.

    Example

    An Australian taxpayer engaged in the following dealings with entities during the income year.

    Country

    Country code

    Activity description

    Activity code

    Amount

    Expenditure or revenue

    Belize

    BLZ

    Derivatives

    6

    1,200,000

    Revenue

    Treasury activities

    14

    40,000

    Expenditure

    Cash & trade services

    4

    300,000

    Revenue

    Advisory services

    2

    70,000

    Expenditure

    Administrative services

    1

    25,000

    Expenditure

    Other

    99

    60,000

    Expenditure

    British Virgin Islands

    VGB

    Derivatives

    6

    3,000,000

    Revenue

    Cayman Islands

    CYM

    Derivatives

    6

    1,100,000

    Expenditure

    Advisory services

    2

    1,250,000

    Expenditure

    Other

    99

    90,000

    Expenditure

    Gibraltar

    GIB

    Cash & trade services

    4

    450,000

    Expenditure

    Cash & trade services

    4

    120,000

    Revenue

    Administrative services

    1

    600,000

    Expenditure

    San Marino

    SMR

    Treasury activities

    14

    800,000

    Expenditure

    Guarantees

    8

    1,600,000

    Expenditure

    Cash & trade services

    4

    280,000

    Revenue

    Other

    99

    1,500,000

    Expenditure

    Other

    99

    200,000

    Revenue

    Turkey

    TUR

    Advisory services

    2

    50,000

    Revenue

    Vanuatu

    VUT

    Treasury activities

    14

    200,000

    Expenditure

    Guarantees

    8

    970,000

    Revenue

    Cash & trade services

    4

    390,000

    Expenditure

    Cash & trade services

    4

    680,000

    Revenue

    Administrative services

    1

    300,000

    Expenditure

    The Australian taxpayer extracts the relevant data from the information above.

    Specified country

    Total expenditure amounts

    Total revenue amounts

    Total dollar value

    Dominant activity

    Activity code

    Belize

    195,000

    1,500,000

    1,695,000

    Derivatives

    6

    British Virgin Islands

     

    3,000,000

    3,000,000

    Derivatives

    6

    Cayman Island

    2,440,000

     

    2,440,000

    Advisory services

    2

    Gibraltar

    1,050,000

    120,000

    1,170,000

    Administrative services

    1

    San Marino

    3,900,000

    480,000

    4,380,000

    Other

    99

    Vanuatu

    890,000

    1,650,000

    2,540,000

    Cash & trade services

    4

    Note: The Australian taxpayer disregards the dealings for the entity located in Turkey, as Turkey is not a specified country.

    The three specified countries with the highest dollar value of dealings between the Australian taxpayer and entities located in these countries are San Marino, British Virgin Islands and Vanuatu.

    With this information the Australian taxpayer completes question 3 as follows.

    Example of question 3 completed

    Last modified: 09 Nov 2011QC 24292