Income Tax Assessment Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 815 - Cross-border transfer pricing  

Subdivision 815-C - Arm ' s length principle for permanent establishments  

Operative provisions

SECTION 815-225   Meaning of arm ' s length profits  

815-225(1)    
The arm ' s length profits for a *PE of an entity are worked out by allocating the actual expenditure and income of the entity between the PE and the entity so that the profits attributed to the PE equal the profits the PE might be expected to make if:

(a) the PE were a distinct and separate entity; and

(b) the activities and circumstances of the PE, including the functions performed, assets used and risks borne by the PE, were those of that separate entity; and

(c) the conditions that operated between that separate entity and the entity of which it is a PE were the *arm ' s length conditions.

815-225(2)    
The conditions to which the *arm ' s length conditions mentioned in paragraph (1)(c) relate are the conditions that would operate between the separate entity and the entity of which it is a *PE if the assumptions in paragraphs (1)(a) and (b) were made.

815-225(3)    
For the purposes of subsection (1):

(a) the actual expenditure of an entity is taken to include losses and outgoings; and

(b) the actual income of an entity is taken to include any amount that is, or is to be, included in the entity ' s assessable income.