Item 3a, example

A taxpayer purchased trading stock for $20 million from an international related party.

The appropriate response to this item is Y for yes at B, if, rather than paying for the trading stock with a funds transfer to the related party's loan account, the taxpayer decided to settle the debt by any of the following:

  • forgiving royalties that would otherwise be payable by the international related party
  • transferring title in a fixed asset
  • agreeing to a discount on specified future transactions.

However, where individual debts between two parties are aggregated or netted and the net balance settled monetarily, this is not classed as a non-monetary consideration.

For the purposes of Schedule 25A, a permanent establishment is to be treated as a separate party from its head office or other related parties. Consequently, where non-monetary consideration passes between a permanent establishment and its head office in return for the provision of services or other transactions listed on Schedule 25A, the appropriate answer to item 3a is Y for yes at B.

    Last modified: 21 Feb 2012QC 25356