On 15 December 2017 the Tax and Corporate Australia report was released. This report identified that there was a key compliance risk associated with the transfer pricing of inbound supply chain (ISC) arrangements, specifically the question of whether appropriate profit was being recognised in Australia.
The ISC strategy has been developed to help manage this risk.
The ISC strategy manages the transfer pricing risk associated with supply chains into Australia. It will ensure we provide transparent and tailored client experiences.
The strategy focuses on the key industry sectors of life science, information and communication technology, and motor vehicles, as well as general distributors.
The strategy includes the:
- publication of a practical compliance guideline to outline our compliance approach to these arrangements to help you make informed decisions about your tax affairs
- consistent treatment of transfer pricing risks associated with inbound distribution arrangements through various compliance approaches, promoting fairness.
On 13 March 2019, we published the Practical Compliance Guideline PCG 2019/1 Transfer pricing issues related to inbound distribution arrangements.
This guideline applies to subsidiaries of multinationals with inbound distribution arrangements that purchase goods and digital products or services from related parties and on-sell to customers.
It includes schedules specific to the life science, information and communication technology, and motor vehicle industries; and a general schedule for other distributors.
The guideline outlines:
- arrangements to which the guideline applies
- our compliance approach
- how we risk-assess inbound distribution arrangements
- our risk assessment framework, and
- how to increase certainty through the advanced pricing arrangements (APA) program.
This guideline is limited to the transfer pricing risks associated with inbound distribution arrangements. It does not affect our compliance approach to other tax issues that might arise in connection with your inbound distribution arrangements.
For more information, see the Practical Compliance Guideline PCG 2019/1 and identify whether you have an arrangement that fits within the guideline.
- Use the guideline to self-assess the risk of your arrangement.
- If you have any questions about the strategy, email ISCStrategy@ato.gov.au