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.