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Edited version of your written advice
Authorisation Number: 1051320213984
Date of advice: 18 December 2017
Ruling
Subject: International issues - Other
Question
Is Company A a significant global entity under subsection 960-555(1) or (2) of the Income Tax Assessment Act (ITAA) 1997 for the purposes of the country-by-country reporting obligations in Subdivision 815-E of the ITAA 1997?
Answer
No
This ruling applies for the following period:
201Y income tax year
Relevant facts and circumstances
● Company A is an Australian resident.
● Company A is a wholly owned subsidiary of Company B, which is not an Australian resident.
● Company A is controlled by Company B under accounting standards.
● Company B’s Financial Report for the 201X income tax year contains consolidated financial statements for Company B and its consolidated subsidiaries.
● Company A is not consolidated with Company B for the relevant accounting purposes. This is due to the limited materiality of Company A’s annual revenue when compared to Company B’s consolidated revenue.
Relevant legislative provisions
Corporations Act 2001 Section 334
Income Tax Assessment Act 1997 Subdivision 815-E
Income Tax Assessment Act 1997 Section 815-355
Income Tax Assessment Act 1997 Subdivision 960-U
Income Tax Assessment Act 1997 Section 960-555
Income Tax Assessment Act 1997 Section 960-560
Income Tax Assessment Act 1997 Section 995-1
Reasons for decision
Subdivision 815-E of the ITAA 1997 requires significant global entities to provide statements under the CbC reporting obligations to the Commissioner of Taxation (Commissioner).
Pursuant to paragraphs 815-355(1)(a) and (b) of the ITAA 1997, Australian entities that were significant global entities in the previous income year are required to provide one or more statements to the Commissioner.
Significant global entity is defined in Subdivision 960-U of the ITAA 1997. Subsections 960-555(1) and (2) of the ITAA 1997 provide that:
960-555(1)
An entity is a significant global entity for a period if the entity is a *global parent entity:
(a) whose *annual global income for the period is $1 billion or more; or
(b) in relation to whom the Commissioner makes a determination under subsection (3) for the period.
960-555(2)
An entity is also a significant global entity for a period if:
(a) the entity is a member of a group of entities that are consolidated for accounting purposes as a single group; and
(b) one of the other members of the group is a *global parent entity:
(i) whose *annual global income for the period is $1 billion or more; or
(ii) in relation to whom the Commissioner makes a determination under subsection (3) for the period.
…
Meaning of global parent entity
Under section 960-560 of the ITAA 1997, a global parent entity is an entity that is not controlled by another entity according to accounting principles, or, where accounting principles do not apply in relation to the entity, commercially accepted principles related to accounting.
Company A is not a global parent entity under section 960-560 of the ITAA 1997 as it is wholly owned and controlled by Company B.
As such, Company A is not a significant global entity under subsection 960-555(1) of the ITAA 1997 and it is not necessary to consider paragraphs 960-555(1)(a) and (b) of the ITAA 1997.
Member of a group of entities consolidated for accounting purposes
An entity can also be a significant global entity under subsection 960-555(2) of the ITAA 1997 if it is a member of a group of entities that are consolidated for accounting purposes as a single group and one of the members of the group is a global parent entity who meets the annual global income threshold.
In reference to paragraph 960-555(2)(a) of the ITAA 1997, Law Companion Guideline LCG 2015/3 Subdivision 815-E of the Income Tax Assessment Act 1997: Country-by-Country reporting states that ‘a subsidiary of a global group that is not included in the global parent entity’s consolidated financial statements will not meet the definition of a significant global entity…’
Company A, as a non-consolidated subsidiary of Company B, has not been included in the consolidated financial statements of Company B for the 201X income tax year. This is due to the limited materiality of Company A’s annual revenue when compared to Company B’s consolidated revenue.
Company A is therefore not a significant global entity for the 201X income tax year beginning under paragraph 960-555(2)(a) of the ITAA 1997 and it is not necessary to consider paragraph 960-555(2)(b) of the ITAA 1997.
As such, Company A is not a significant global entity under subsection 960-555(1) or (2) of the ITAA 1997 for the 201X income tax year.
This means Company A is not required to provide statements relating to CbC reporting obligations to the Commissioner for the 201Y income tax year pursuant to Subdivision 815-E of the ITAA 1997.