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Ruling

Subject: Transfer of jurisdiction of company registration

Question 1

Is Company X considered the same company for the purposes of section 4-1 of the Income Tax Assessment Act 1997 (ITAA 1997), as defined in section 995-1 of the ITAA 1997, both before and after Company X's transfer of registration from the jurisdiction of Country X to the jurisdiction of Country Y?

Answer: Yes.

This ruling applies for the following period:

1 January 2012 to 31 December 2012

The scheme commences on:

The scheme has not commenced.

Relevant facts and circumstances

Company X is a wholly owned subsidiary of Company Y (incorporated in Country X).

Due to expected changes in the Country X regulatory environment, the company group is considering re-domiciling Company X.

Company X will be re-domiciled to Country Y and as such will no longer have a corporate presence in Country X.

Company X is incorporated under the provisions of the Country X Companies Code.

In a letter dated xxxx the agent confirmed that Company X currently has the legal power to act, hold property, enter into legal contract and sue and be sued in its own name, and will retain its legal capacity and all rights and obligations despite the change in domicile.

Company X has been lodging Australian income tax returns on the basis it is deriving Australian sourced income through a permanent establishment (PE) in Australia.

For commercial reasons, the group intends that Company X continue in existence as the same legal entity after the restructure. Those reasons include:

On the basis that companies in Country Y are required to have a minimum of two shareholders, Company Y will transfer a small number of shares in Company X to a third party (a new shareholder), which is expected to have a negligible impact on the overall ownership of Company X. With regard to the remaining shares, Company Y will continue holding the same shares in Company X both before and after the re-domiciliation (i.e. Company Y is not required to swap its shares as a result of the re-domiciliation, due to the fact that Company X continues its legal status as the same entity).

Subsequent to the re-domiciliation, Company X will continue to engage in the same business as it currently does.

Under Country X law, companies are allowed to migrate to foreign jurisdictions provided that the laws of the foreign jurisdiction allow for this migration. The taxpayer states that the laws in Country X and Country Y allow for this migration.

Under Country X law, the re-domiciliation is deemed to be a mere transfer of a company's registered office. From a fiscal and accounting perspective, Company X is no longer treated as a company incorporated under the laws of Country X.

Company X has given and undertaking to the ATO that they will amend their Articles of Association to include a clause which will give Company X the specific right to transfer their domicile to any overseas location.

Company X must provide evidence that it has ceased to exist in Country X. Upon receipt of this evidence, the appropriate government body in Country Y will issue a certificate of continuance.

The appropriate government body in Country Y will also issue a certificate for the provisional
registration of Company X in Country Y.

Upon completion of the registration process in Country Y, the appropriate government body in Country X will issue notices to the Country X tax authorities advising them of the change in domicile.

The governing objects of Company X will remain the same both before and after the change of jurisdiction from Country X to Country Y.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 4-1

Income Tax Assessment Act 1997 section 995

Reasons for decision

Section 4-1 of the ITAA 1997 states that:

That income tax is payable by each individual and company, and by some other entities.

A 'company' is defined in section 995-1 of the ITAA 1997 as:

(a) a body corporate; or

(b) any other unincorporated association or body of persons; but does not include a partnership or a non-entity joint venture.

As the term 'body corporate' is not defined in Australia's income tax legislation, the ordinary meaning of the term applies. The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01, defines a body corporate as a person, association or group of persons legally incorporated in a corporation.

The Commissioner has considered the meaning of the term 'body corporate' in Miscellaneous Taxation Ruling MT 2006/1 - The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian business number (ABN) (MT 2006/1)

Paragraph 30 of MT 2006/1 states that the term 'body corporate' has the following meaning:

'Body Corporate' is not a defined term. The term takes its meaning from the general law. 'Body corporate' is a general term to describe an artificial entity having separate legal existence. A body corporate has the ability to continue in existence indefinitely and to keep its identity regardless of changes to its membership. It also has the power to act, hold property, enter into legal contract, sue and be sued in its own name, just as a natural person can.

Company X is currently legally incorporated in Country X. Company X has the ability to continue in existence indefinitely and to keep its identity regardless of changes to its shareholding. Company X's Constitution enables it to act, hold property, enter into legal contract and sue and be sued in its own name.

Accordingly, Company X is a body corporate for the purposes of the ITAA 1997. It is also a 'company' as defined in section 995-1 of the ITAA 1997.

The taxpayer has stated that under Country X law, companies are allowed to migrate to foreign jurisdictions, maintaining their legal personality, provided that the laws of the foreign jurisdiction allow for this migration.

The Commissioner accepts the taxpayer's statements to the effect that both the jurisdictions of Country X and Country Y will allow Company X to legally deregister as a company under Country X jurisdiction, and register as a company under Country Y jurisdiction, whilst continuing its legal rights, obligations and identity.

There is nothing in Company X's Constitution which prevents the transfer of the company between jurisdictions.

Further, Company X will amend their Articles of Association to include a clause which will give Company X the specific right to transfer their domicile to any overseas location.

Company X will maintain its governing objects after the change of jurisdiction from Country X to Country Y.

Company X's shareholding will remain essentially the same after the change in jurisdiction from Country X to Country Y.

In conclusion, the Commissioner accepts that Company X will be considered the same company for the purposes of section 4-1 of the ITAA 1997, as defined in section 995-1 of the ITAA 1997, both before and after Company X's transfer of registration from the jurisdiction of Company X to the jurisdiction of Company Y.

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