For the purposes of the local file, we are adopting the definitions of international related parties (IRP) and international related party dealings (IRPD) used in the international dealings schedule (IDS).
International related parties are:
- persons who are not dealing wholly independently with one another in their commercial or financial relations, and
- whose dealings or relations can be subject to either
Persons not dealing wholly independently with one another
IRPDs include back-to-back arrangements.
IRPDs are not confined to scenarios involving dealings between entities with common formal controllers of voting rights ownership interests above a fixed threshold.
Whether parties, as a matter of practical fact, are not dealing wholly independently with one another in their commercial or financial relations, depends on all circumstances. Refer to examples provided in the definition.
Dealings subject to Subdivision 815-B or Article 9
There cannot be a transfer pricing benefit under subsection 815-120(1) or pursuant to Article 9 of a relevant tax treaty if the conditions of a relevant entity’s commercial or financial dealings are inherently not capable of affecting the amount of the entity’s taxable income, losses, tax offsets or withholding tax under Australian income tax law.
Whether the conditions of an entity’s commercial or financial dealings with the entity’s overseas subsidiary, in the course of the entity’s business operations carried on at or through the entity’s overseas permanent establishment, would be capable of affecting the entity’s taxable income, losses, offsets or withholding tax under Australian income tax law would depend on all the relevant facts and circumstances, including the nature and duration of the relevant dealing.
Dealings with reporting entity's own branch not included
The definition of International related party dealings only covers dealings or relations between different persons or entities and therefore does not include any 'dealings' with your own branch operations. Internally recorded 'dealings' with your own branch operations may be reported at Question 18 of the International Dealings Schedule in accordance with the IDS instructions for Question 18.
IRP counterparty can't be Australian tax resident unless transaction through its offshore branch operations
The tax residency of the IRP counterparty to the transaction/RAS provided at Question 9 (LCMSF38) cannot be Australian unless the IRP counterparty is entering into the transaction in the course of its business operations carried on through its overseas permanent establishment (branch operations), as provided at Question 10 (LCMSF208) and Question 11 (LCMSF209).