INCOME TAX ASSESSMENT ACT 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 815 - Cross-border transfer pricing  

Subdivision 815-A - Treaty-equivalent cross-border transfer pricing rules  

Operative provisions

SECTION 815-15   When an entity gets a transfer pricing benefit  

Transfer pricing benefit - associated enterprises

815-15(1)  
An entity gets a transfer pricing benefit if:


(a) the entity is an Australian resident; and


(b) the requirements in the * associated enterprises article for the application of that article to the entity are met; and


(c) an amount of profits which, but for the conditions mentioned in the article, might have been expected to accrue to the entity, has, by reason of those conditions, not so accrued; and


(d) had that amount of profits so accrued to the entity:


(i) the amount of the taxable income of the entity for an income year would be greater than its actual amount; or

(ii) the amount of a tax loss of the entity for an income year would be less than its actual amount; or

(iii) the amount of a * net capital loss of the entity for an income year would be less than its actual amount.

The amount of the transfer pricing benefit is the difference between the amounts mentioned in subparagraph (d)(i), (ii) or (iii) (as the case requires).

Transfer pricing benefit - business profits

815-15(2)  
A foreign resident entity gets a transfer pricing benefit if:


(a) the entity has a permanent establishment (within the meaning of the * international tax agreement ) in Australia; and


(b) the amount of profits attributed to the permanent establishment falls short of the amount of profits the permanent establishment might be expected to make if it were a distinct and separate entity engaged, and dealing, in the manner mentioned in the * business profits article ; and


(c) had the profits attributed to the permanent establishment included that shortfall:


(i) the amount of the taxable income of the entity for an income year would be greater than its actual amount; or

(ii) the amount of a tax loss of the entity for an income year would be less than its actual amount; or

(iii) the amount of a * net capital loss of the entity for an income year would be less than its actual amount.

The amount of the transfer pricing benefit is the difference between the amounts mentioned in subparagraph (c)(i), (ii) or (iii) (as the case requires).

Nil amounts

815-15(3)  
For the purposes of working out whether an entity gets a * transfer pricing benefit , and of negating that benefit under subsection 815-30(1) :


(a) treat an entity that has no taxable income for an income year as having a taxable income for the year of a nil amount; and


(b) treat an entity that has no tax loss for an income year as having a tax loss for the year of a nil amount; and


(c) treat an entity that has no * net capital loss for an income year as having a net capital loss for the year of a nil amount. Multiple transfer pricing benefits

815-15(4)  
To avoid doubt, an entity may get 2 or more * transfer pricing benefits , in one or more income years, in relation to one amount of profits, or one shortfall of profits. Meaning of associated enterprises article

815-15(5)  
An associated enterprises article is:


(a) Article 9 of the United Kingdom convention (within the meaning of the International Tax Agreements Act 1953 ); or


(b) a corresponding provision of another * international tax agreement . Meaning of business profits article

815-15(6)  
A business profits article is:


(a) Article 7 of the United Kingdom convention (within the meaning of the International Tax Agreements Act 1953 ); or


(b) a corresponding provision of another * international tax agreement .


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