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Edited version of your private ruling
Authorisation Number: 1012477730762
Ruling
Subject: Foreign income tax offset
Question and Answer:
Can AusCo claim a foreign income tax offset for the withholding tax paid in Country A subject to the restrictions in Division 770 of the Income Tax Assessment Act 1997?
Yes
This ruling applies for the following period:
Year ended 30 June 2014
Year ended 30 June 2015
Year ended 30 June 2016
Year ended 30 June 2017
The scheme commenced on:
1 July 2013
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
AusCo is an Australian company located in Australia.
AusCo has signed an agreement with a company in Country A (Company B).
AusCo will provide services to Company B.
Invoices will be issued to Company B whereby Company B will withhold x% tax and pay AusCo the left over amount.
The x% tax falls under the Country A government's Income Tax Code.
The director of AusCo has provided two sample documents with the private ruling application.
One document is produced by Company B on receiving an invoice from AusCo. Company B takes the document (manually) to the Country A Tax Office along with a cheque made out to the Country A Public Sector. The document will show x% tax.
Company B must lodge this document by a certain day of the following calendar month after the invoice was received along with full payment to the Country A Tax Office for the x% tax.
The second document is the receipt issued by the Country A Tax Office to Company B and is stamped by the Country A Tax Office to signify that payment has been made.
Company B keeps both documents (ie the originals) for y years as part of the Country A record keeping requirements.
AusCo receives scanned copies of both these documents for its record keeping purposes.
There is no double tax agreement between Country A and Australia.
Relevant legislative provisions
Income Tax Assessment Act 1997 Division 770.
Reasons for decision
To be entitled to a foreign income tax offset:
the entity must have actually paid an amount of foreign income tax and
the income or gain on which the entity has paid the foreign income tax must be included in the entity's assessable income for Australian income tax purposes.
Record keeping
To claim a foreign income tax offset, the entity must keep adequate records of foreign income and tax paid.
AusCo has signed an agreement with a company in Country A (Company B).
AusCo will provide services to Company B.
Invoices will be issued to Company B whereby Company B will withhold x% tax and pay AusCo the left over amount.
The director of AusCo has provided two sample documents with the private ruling application.
One document is produced by Company B on receiving an invoice from AusCo. Company B takes the document (manually) to the Country A Tax Office along with a cheque made out to the Country A Public Sector. The document will show x% tax.
Company B must lodge this document by a certain day of the following calendar month after the invoice was received along with full payment to the Country A Tax Office for the x% tax.
The second document is the receipt issued by the Country A Tax Office to Company B and is stamped by the Country A Tax Office to signify that payment has been made.
In the case of AusCo, it is noted that original documents showing tax paid in Country A by Company B will not be sent to AusCo each month as the originals need to be kept by Company B according to Country A's record keeping rules. AusCo will receive a scanned copy of the original documents.
The Australian Tax Office will accept the scanned copies of documents showing the tax paid in Country A if the original documents are issued from the Country A Tax Office.