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  • Permanent establishments (branch operations)

    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

    Permanent establishment is defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). It includes:

    • business operations carried on by an Australian resident entity at or through a fixed place of business in another country
    • business operations carried on by a foreign resident entity at or through a fixed place of business in Australia.
    Further Information

    For more information, refer to TR 2002/5Income tax: Permanent establishment - What is 'a place at or through which [a] person carries on any business' in the definition of permanent establishment in subsection 6(1) of the Income Tax Assessment Act 1936?

    End of further information

    Although branch operations are not an 'entity' or 'party' separate from the taxpayer who undertakes those operations, working out the taxable profits of branch operations involves attributing income and expenditure of the taxpayer on a separate entity basis.

    For income and expenditure of the taxpayer that is not wholly or directly earned from, or incurred in, its branch operations, the income or expenditure may be attributed to branch operations on the basis of internally recorded 'dealings' on the proviso that those records are both of the following:

    • reflect the functions and assets of the business operations carried on at or through the permanent establishment
    • represent the best estimate of branch profits that can be made in the circumstances.
    Further Information

    For more information, refer to:

    • TR 2001/11Income tax: international transfer pricing- operation of Australia's permanent establishment attribution rules
    • TR 2005/11Income tax: branch funding for multinational banks.
    End of further information

    The information collected at question 18 in this schedule includes what you have internally recorded as dealings between you and your branch operations, and income/gains you have returned or the expenses/losses you have claimed in respect of those internally recorded dealings. In the schedule and instructions, unless otherwise stated, a reference to your branch operations includes:

    • business operations carried on by an Australian resident entity at or through a fixed place of business in another country
    • business operations carried on by a foreign resident entity at or through a fixed place of business in Australia.
    Last modified: 08 Aug 2014QC 26054