Income Tax Assessment Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 832 - Hybrid mismatch rules  

Subdivision 832-F - Branch hybrid mismatch  

Operative provisions

SECTION 832-485   Branch hybrid  

832-485(1)  
An entity is a branch hybrid , in relation to a payment made to the entity, if:


(a) subsection (2) applies to the entity in relation to a country and a payment; and


(b) subsection (4) applies to the entity in relation to the payment. Residence country applies branch profits exemption

832-485(2)  
This subsection applies to an entity in relation to a country (the residence country ) and a payment made to the entity if, for that country:


(a) the entity satisfies the residency test in subsection 832-555(9) and is a *liable entity in respect of its own income or profits; and


(b) the payment is treated as income derived by the liable entity in carrying on a business at or through a *PE in another country; and


(c) as a result of an exemption or other tax concession to which that liable entity is entitled in respect of income derived in carrying on a business at or through the PE, the payment is not:


(i) if the residence country is Australia - *subject to Australian income tax; or

(ii) if the residence country is a foreign country - *subject to foreign income tax in that foreign country.
Note:

For the meaning of liable entity , see section 832-325.

832-485(3)  
In determining whether subparagraph (2)(c)(i) is satisfied, disregard the effect of subsection 23AH(4A) of the Income Tax Assessment Act 1936 . Branch country fails to tax payment

832-485(4)  
This subsection applies to an entity in relation to the other country mentioned in paragraph (2)(b) (the branch country ) and a payment made to the entity if:


(a) the payment is treated as not having been derived in carrying on a business at or through a *PE of the entity, or as otherwise not having a sufficient connection to a taxable presence in the branch country, for the purposes of:


(i) if the branch country is Australia - this Act; or

(ii) if the branch country is a foreign country - the law of the branch country relating to *foreign income tax (except *credit absorption tax, *unitary tax or a withholding-type tax); and


(b) as a result, the payment is not:


(i) if the branch country is Australia - *subject to Australian income tax; or

(ii) if the branch country is a foreign country - *subject to foreign income tax in that foreign country.
Modified meaning of permanent establishment

832-485(5)  
Subsection (6) applies if:


(a) the residence country has entered into, with the branch country:


(i) if either the residence country or the branch country is Australia - an *international tax agreement; or

(ii) if subparagraph (i) does not apply - a treaty or other agreement relating to the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital; and


(b) the agreement or treaty (as the case requires) contains:


(i) if either the residence country or the branch country is Australia - a *permanent establishment article; or

(ii) if subparagraph (i) does not apply - a provision corresponding to a permanent establishment article.

832-485(6)  
A reference in this section to a *PE in a country is taken to be a reference to a permanent establishment within the meaning of the relevant agreement or treaty in the country.


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