APPENDIX 3

The ATO’s Tax Rulings[1]

The Australian Taxation Office (ATO) has publicly maintained its position in respect of the treaty based transfer pricing rules for some time. This attachment sets out a number of rulings that have been issued which articulate this position.

1986 - IT 2311

The Tax Ruling was on remission of penalties where Division 13 or comparable treaty provisions are applied (issued 18 June 1986), consistently refers to adjustments being made under Division 13 or the Treaty provisions.

1992 - IT 2670

IT 2670 on the meaning of trading stock (issued 5 March 1992) states that the Treaties can operate to make transfer pricing adjustments to Australian taxpayers (paragraph 18).

1992 - TR 92/11

TR 92/11 on transfer pricing and loan arrangements and credit balances (first issued 1 October 1992), refers to adjustments being made under the Treaty provisions (paragraphs 63-79).

1994 - TR 94/14

Taxation Ruling TR 94/14 ‘Income tax: application of Division 13 of Part III (international profit shifting)’ specifically addresses the interaction between Division 13 and Australia's Double Taxation Agreements. It explicitly states that ‘The Commissioner may apply the provisions of Division 13 and/or the treaty provisions’ (paragraph 18) and that ‘Australia's double taxation agreements, which appear as schedules to the Income Tax (International Agreements) Act 1953 ("the IT(IA)A"), contain their own provisions to deal with profit shifting arrangements in certain circumstances’ (paragraph 184); and that ‘...the Commissioner may apply the provisions of Division 13 and/or the treaty provisions’ (paragraph 186).

1995 - TR 95/23

TR 95/23 on advance pricing arrangements (issued 22 June 1995) refers to the Commissioner making transfer pricing adjustments under Division 13 and/or the Treaty (paragraph 35).

1997 - TR 97/20

TR 97/20 on transfer pricing methodologies (issued 5 November 1997) notes that the Treaties may apply in cases to which Division 13 also applies (paragraphs 1.10-11).

1999 - TR1999/1

TR1999/1 on intra-group services (issued 20 January 1999) refers to the Commissioner making transfer pricing adjustments under Division 13 and/or the Treaty (paragraphs 1, 14-15, 29).

2001 - TR 2001/11

TR 2001/11 on the operation of Australia’s permanent establishment attribution rules (issued 31 November 2011), states that both Division 13 and the Treaty provisions may apply and that furthermore, the Business Profits articles of the Treaties are self-operating (paragraphs 2.1 to 2.9).

2001 - TR 2001/13

TR 2001/13 on interpreting Australia’s double tax agreements (issued 19 December 2001), reiterates the position of earlier rulings that the transfer pricing rules in Australia’s Treaties are “empowering” rather than merely “permissive” (paragraphs 29-33).

2002 - TD2002/20

TD2002/20 on film production companies (issued 22 August 2002) refers to transfer pricing adjustments being allowable under Division 13 and the Treaty.

2007 – TR2007/1

TR2007/1 on the effects of transfer pricing determinations (issued 7 March 2007) refers to subsections 170 (9B) providing an unlimited time to make transfer pricing amendments under a prescribed provision or a relevant provision (paragraph 26).

2010 - TR 2010/7

TR 2010/7 on the interaction of Division 820 and the transfer pricing provisions (issued 27 October 2010), notes that ‘an adjustment applying the arm's length principle to the pricing or profit allocation in respect of a taxpayer's international dealings is authorised on the basis of Australia's transfer pricing provisions in Division 13 and those related treaty provisions.’ It goes on to refer to the amendments made in 1982 to section 170 as well as the favourable comment, in obiter , from the Federal Court (Middleton J) in SNF (Australia) Pty Ltd v Commissioner of Taxation (paragraphs 39-42).

2011 - TR 2011/1

TR 2011/1 on the application of the transfer pricing provisions to business restructurings (issued 9 February 2011), notes that the Treaty permits transfer pricing adjustments (paragraphs 9 and 44).

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