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This question seeks information in order to assess the specific transfer pricing risk of Australian taxpayers receiving incorrect or no recharge amounts for providing employee share-based remuneration to employees of non-residents subsidiaries. We wish to ascertain the level of recharge amounts being received by Australian taxpayers and the pricing methodology used in respect of these amounts.
Under employee shared-based remuneration plans, an Australian entity within a multinational group may remunerate employees of non-resident subsidiaries by providing phantom shares in the listed parent company of the group, shares, share options or share rights.
The recharge amount refers to the compensation you received in return for providing the employees of your non-resident subsidiary with share-based remuneration. The recharge amount does not include any compensation received in relation to the costs of administering an employee share-based plan, rather this would be of the nature of a service arrangement that would be reported at question 13.
This question only seeks information about the plans provided by Australian taxpayers to employees of non-resident subsidiaries, and not visa versa.
The term 'employees' refers to individuals who provide personal services/labour to an entity and would be regarded as employees of that entity for legal or tax purposes. For example, employees would include the directors of a non-resident subsidiary.
Where an employee holds a position of employment in both an Australian taxpayer and a non-resident subsidiary of the taxpayer, consideration should be given to what 'capacity' the share-based remuneration is received. For example, where an individual is an employee of the Australian taxpayer and a director of a non-resident subsidiary, any share-based remuneration paid by the Australian taxpayer to the individual in their capacity as a director of the non-resident subsidiary would come within this question. This accords with the approach taken in Article 16 of the OCED Model Tax Convention regarding the allocation of taxing rights (where a resident of a Contracting State receives payments in their capacity as a director of a company resident in the other Contracting State, the payments may be taxed in that other State).
For more information about share-based remuneration plans for employees of non-resident subsidiaries, including application of the arm's length principle to arrive at an appropriate recharge amount, refer to OECD Tax Policy Studies No. 11 (2005) - The Taxation of Employee Stock Options (particularly Chapter 4 - Impact on Transfer Pricing).
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The dollar amounts or values asked for in this question are all based on your income tax records.
If you did provide share-based remuneration to any employees of your non-resident subsidiaries during the income year, answer yes to this question and complete the required fields.
To complete this question you need to:
- identify the share-based remuneration provided to employees of your non-resident subsidiaries
- determine if the relevant non-resident subsidiary paid a recharge amount to you in relation to the share-based remuneration provided to their employee
- then total the recharge amounts paid to you during the income year
- work out the principal arm's length pricing method used to set or review consideration in respect of these recharge amounts.
In the first column, at C provide the total recharge amounts included in your assessable income.
In the second column, at D specify the principal arm's length pricing method used to set or review consideration in respect of these recharge amounts.
Last modified: 09 Nov 2011QC 24292
For the list of pricing methodology codes, see Appendix 6.
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