AUSTRALIAN TAX TREATIES
The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the MLI) has modified the application of this tax treaty. A synthesised text of the MLI and this tax treaty is available to facilitate the understanding of how the MLI modifies this tax treaty.
(a) an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State; or
(b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State,
and in either case conditions operate between the two enterprises in their commercial or financial relations which differ from those which might be expected to operate between independent enterprises dealing wholly independently with one another, then any profits which, but for those conditions, might have been expected to have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.(2)
Nothing in this Article, other than paragraph 4, shall affect the application of any law of a Contracting State relating to the determination of the tax liability of a person in cases where the information available to the competent authority of that Contracting State is inadequate to determine the profits accruing to an enterprise, provided that, on the basis of the available information, the determination of that tax liability of the enterprise is consistent with the principles stated in paragraph 1. (3)
Where a Contracting State includes, in accordance with the provisions of paragraph 1 or 2, in the profits of an enterprise of that Contracting State - and taxes accordingly - profits on which an enterprise of the other Contracting State has been charged to tax in that other Contracting State and where the competent authorities of the Contracting States agree, upon consultation, that all or part of the profits so included are profits which might have been expected to have accrued to the enterprise of the first-mentioned Contracting State if the conditions operative between the two enterprises had been those which might have been expected to have operated between independent enterprises dealing wholly independently with one another, then the other Contracting State shall make an appropriate adjustment to the amount of the tax charged therein on those agreed profits. In determining such adjustment, due regard shall be had to the other provisions of this Convention. (4)
Notwithstanding the provisions of paragraphs 1 and 2, a Contracting State shall not change the profits of an enterprise of that Contracting State in the circumstances referred to in those paragraphs, if an enquiry into the profits of that enterprise is not initiated within seven years from the end of the taxable year in which the profits that would be subject to such change, but for the conditions referred to in those paragraphs, might have been expected to have accrued to that enterprise. The provisions of this paragraph shall not apply in the case of fraud or wilful default or if the inability to initiate an enquiry within the prescribed period is attributable to the actions or inaction of that enterprise.