ATO Interpretative Decision
ATO ID 2008/24 (Withdrawn)
Income Tax
Foreign Hybrid Limited Partnership: UK limited partnershipFOI status: may be released
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This ATO ID is withdrawn as it is superseded by Taxation Determination TD 2009/2.This document has changed over time. View its history.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is a United Kingdom (UK) limited partnership that was formed in England, a 'foreign hybrid limited partnership' (as defined in section 830-10 of the Income Tax Assessment Act 1997 (ITAA 1997)) in an income year in which the partners do not actually pay income tax in the UK in relation to the income or profits of the UK limited partnership?
Decision
Yes. A UK limited partnership that is formed in England can be a 'foreign hybrid limited partnership' (as defined in section 830-10 of the ITAA 1997) in an income year in which the partners do not actually pay income tax, because, if tax was imposed on the income or profits of the UK limited partnership, it would be imposed on the partners rather than the UK limited partnership itself.
Facts
A UK limited partnership is formed in England under the UK Limited Partnership Act 1907 and is governed by the Partnership Act 1890.
The UK limited partnership is a resident of the UK.
The UK limited partnership meets the definition of 'limited partnership' in section 995-1 of the ITAA 1997 and satisfies the requirements of paragraphs 830-10(1)(a), 830-10(1)(c), 830-10(1)(d) and 830-10(1)(e) of the ITAA 1997 for being a 'foreign hybrid limited partnership'.
The limited partner of the UK limited partnership is an Australian resident, and the only income derived by the UK limited partnership is not subject to tax in the hands of limited partners that are non-residents of the UK.
Reasons for Decision
One of the requirements for a limited partnership to be a 'foreign hybrid limited partnership', as defined in section 830-10 of the ITAA 1997, is that foreign tax must be imposed under the law of the foreign country on the partners, not the limited partnership, in respect of the income or profits of the limited partnership for the income year (paragraph 830-10(1)(b) of the ITAA 1997).
The provision looks to whether the law of the foreign country taxes the income of the limited partnership in the hands of the partners or the limited partnership. In order to be a 'foreign hybrid limited partnership', the foreign law must impose tax on the partners, rather than the limited partnership (in a case where the partnership has a choice of tax treatment, it must have chosen that the partners, and not the partnership, are taxed).
Furthermore, the Explanatory Memorandum to the Taxation Laws Amendment Act (No. 1) 2004 explains, at paragraph 9.25:
...the limited partnership must be treated, for the purposes of the tax law of the foreign jurisdiction in which it was formed, as a partnership (i.e. foreign tax must be imposed on the partners)... It is only these limited partnerships that are to be afforded foreign hybrid limited partnership treatment. Therefore, where a limited partnership elects for entity treatment in the foreign jurisdiction, it will not meet this condition and will not be a foreign hybrid...
The focus is on the operation of the law in relation to the particular type of entity, rather than on the tax circumstances of an individual partnership or partner.
Furthermore, the loss limitation part of the foreign hybrid provisions (Subdivision 830-C of the ITAA 1997) contemplates limited partnerships being foreign hybrids in income years in which the partnership suffers a loss, being an income year in which no partner would pay foreign tax in the foreign country.
Therefore, in satisfying paragraph 830-10(1)(b) of the ITAA 1997, it is not necessary that the partners actually have a foreign income tax liability in relation to the income of the limited partnership in an income year. Provided that, if foreign tax were to be imposed on the income or profits of the limited partnership, tax would have been imposed on the partners and not on the limited partnership, the condition is satisfied.
The UK taxes the income or profits of limited partnerships formed under the UK Limited Partnership Act 1907 in the hands of the partners, and not the partnership itself. Therefore paragraph 830-10(1)(b) of the ITAA 1997 is satisfied in relation to the UK limited partnership in an income year, even if the partners are not actually subject to foreign tax on the income or profits of the UK limited partnership in that income year.
Date of decision: 11 January 2008Year of income: Year ended 30 September 2008 Year ended 30 September 2009 Year ended 30 September 2010 Year ended 30 September 2011 Year ended 30 September 2012 Year ended 30 September 2013 Year ended 30 September 2014 Year ended 30 September 2015 Year ended 30 September 2016 Year ended 30 September 2017 Year ended 30 September 2018
Legislative References:
Income Tax Assessment Act 1997
section 830-10
section 995-1
Limited Partnerships Act 1907 (UK)
Related ATO Interpretative Decisions
ATO ID 2006/334
Other References:
Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 1) 2004
Keywords
Foreign hybrid limited partnership
Foreign hybrids
Limited partnerships
Non resident partnerships
ISSN: 1445-2782
| Date: | Version: | |
| 11 January 2008 | Original statement | |
| You are here | 1 May 2009 | Archived |