In April 2023, the Government released exposure draft legislation for public comment seeking to introduce a new measure to deny deductions for payments for the exploitation of intangible assets that are made by significant global entities to associates in foreign jurisdictions with a corporate tax rate of less than 15%.
The measure seeks to implement part of the Government’s multinational tax integrity agenda announced prior to the 2022 federal election and is set to apply to payments made from 1 July 2023. Refer to our submission in response to Treasury’s August 2022 consultation paper in which we previously made comments in respect of this policy.
We made a submission to Treasury highlighting various issues contained in the exposure draft legislation including the overly broad concepts adopted, practical difficulties in apportioning payments to determine the extent to which they relate to the use of intangible assets, the lack of any anti-avoidance purpose test and lack of any interaction with Australia’s royalty withholding tax rules and the forthcoming 15% global minimum tax such that double tax may arise where deductions are denied.
Additionally, we proposed a statutory de minimis to exclude low-value arrangements and a deferred start date given the measure is not likely to become law before 1 July 2023.
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