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Question 6

Last updated 8 November 2011

To evaluate and monitor the compliance risks in respect of Australian taxpayers' international related party dealings apart from those in specified countries we need to identify the principal countries where those dealings are undertaken and identify the nature and significance of the activities undertaken in those countries.

If you had international related party dealings during the income year, disregarding your dealings with parties located in any of the specified countries, answer yes to this question and complete the required fields.

This question also collects information about use of your property, services or any other benefit in your offshore branch operations not carried on in the specified countries where your attribution of your income or expenses in relation to the property, services or other benefit is internally recorded as a 'dealing' with your branch operations: refer to the Introduction of these instructions for more information. Accordingly, also treat the reference in this question 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.

Only dealings conducted on the taxpayer's own behalf need to be taken into account in the answer to this question. That is, dealings by a financial services entity on behalf of its clients are not to be included. For example, where you arranged for the purchase of a currency swap on behalf of your customer such that a related foreign subsidiary served as the contracting party this would not be included in the answer to this question. However any service fee you received from this related foreign subsidiary for arranging the transaction would be an international related party dealing that would be included in the answer to this question.

The dollar amounts or values asked for in this question 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.

To complete this question, you need to:

  • identify all your international related party dealings
  • disregard all your dealings with related parties located in specified countries
  • group your remaining dealings according to the country where the related party is located
  • total the dollar value of your dealings (expenses/losses plus revenue/gains, excluding principal and principal repayment amounts) for each country
  • determine the three countries that have the highest dollar value of related party dealings
  • then, in respect of the three countries with the highest dollar value of related party dealings, group the dealings in each of the countries according to activity type
  • total the dollar value of your dealings (expenses/gains plus revenue/losses, excluding principal and principal repayment amounts) for each activity type
  • work out the three activity types with the highest dollar value for each of the three countries.

In the first column at C, M and W, list the codes of the three countries with the highest dollar value of international related party dealings.

List these codes in descending order of total dollar value.

Further Information

For the list of country codes, see Appendix 3.

End of further information

In the second column labelled Activity code, list the codes of the three activity types with the highest dollar value of international related party dealings in relation to each of the countries identified in the first column.

List these codes in descending order of total dollar value.

Further Information

For the list of activity type codes, see Appendix 5.

End of further information

In the third column labelled Expenditure, provide the total amount of expenditure/losses incurred (excluding principal and principal repayment amounts) in respect of each activity type identified in the second column in relation to the relevant country identified in the first column.

In the fourth column labelled Revenue, provide the total amount of revenue/gains earned (excluding principal and principal repayment amounts) in respect of each activity type identified in the second column in relation to the relevant country identified in the first column.

Example

During the income year an Australian taxpayer undertook the following international dealings.

Country entity located

Relation to taxpayer

Activity

Activity code

Expenditure

Revenue

Total dollar value

Brazil

Branch of subsidiary

Derivatives

6

6,650,000

6,890,000

13,540,000

Canada

Branch

Loan

7

 

300,000

300,000

Canada

100% subsidiary

Derivatives

6

1,360,000

4,000,000

5,360,000

Canada

100% subsidiary

Guarantees

8

 

870,000

2,070,000

Canada

Branch

Other

99

2,470,000

790,000

3,260,000

Egypt

100% subsidiary

Advisory services

2

 

400,000

400,000

Egypt

100% subsidiary

Loan

7

3,666,000

4,330,000

7,996,000

Egypt

95% subsidiary

Leasing

10

280,000

300,000

580,000

France

100% subsidiary

Advisory services

2

 

500,000

500,000

France

Branch

Loan

7

6,560,000

5,680,000

12,240,000

France

na

Derivatives

6

4,580,000

4,450,000

9,030,000

Japan

100% subsidiary

Loan

7

6,320,000

4,100,000

10,420,000

Japan

Branch

Treasury services

14

 

200,000

200,000

Vietnam

100% subsidiary

Derivatives

6

3,850,000

3,600,000

7,450,000

Vietnam

100% subsidiary

Other

99

2,450,000

450,000

2,900,000

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

Country entity located

Total expenditure amounts

Total revenue amounts

Total dollar value amounts

Brazil

6,650,000

6,890,000

13,540,000

Canada

5,030,000

5,960,000

10,990,000

Egypt

3,946,000

5,030,000

8,976,000

France

6,560,000

6,180,000

12,740,000

Japan

6,320,000

4,300,000

10,620,000

Vietnam

6,300,000

4,050,000

10,350,000

Note: The expenditure incurred and the revenue earned in relation to derivatives transactions in France were disregarded in calculating the total value of transactions in this country because they were undertaken with unrelated parties.

With this information the Australian taxpayer completes question 6 as follows.

Example of question 6 completed

Note: The Australian taxpayer recorded:

  • the highest value of related party dealings in Brazil, even though these dealings related to one activity type, derivatives
  • the Australian taxpayer will complete the first row for the first country recording the relevant information in respect of the taxpayer's derivatives dealings
  • the remaining fields relating to the first country will be left blank, indicating the Australian taxpayer did not have any other related party dealings in Brazil
  • its second highest value of related party dealings in France
  • the Australian taxpayer will complete the first two rows for the second country recording the relevant information in respect of the taxpayer's related party dealings - financing activities and advisory services
  • the remaining fields relating to the second country will be left blank, indicating the Australian taxpayer did not have any other related party dealings in France
  • its third highest value of related party dealings in Canada
  • the Australian taxpayer undertook four types of activities in Canada, only the three activities with the highest values are entered into the relevant fields of this question. That is, the details of the Australian taxpayer's internally recorded loan for its Canadian branch operations is not shown at this question in this schedule.
 

QC24292