The Board of Taxation has released a discussion paper seeking comments to assist it in developing advice to the Government on the advantages and disadvantages of Australia adopting the OECD functionally separate entity approach to the determination of profits attributable to a permanent establishment in its tax treaty negotiations and in domestic law.
The Board noted the review arises from the new Article 7 (Business Profits) and commentary approved by the OECD in its 2010 Model Tax Convention on Income and on Capital, which incorporated a new authorised approach to the attribution of profits to permanent establishments.
The Board has also been asked to examine and report on the current special rule that limits the deemed interest deduction on internal funds used by foreign banks in their Australian branches to the London Interbank Offer Rate (LIBOR).
The Board is due to report to the Assistant Treasurer by 30 April 2013.
COMMENTS are due by 14 December 2012.
Source: Board of Taxation media release No 42, 31 October 2012
[LTN 211, 31/10]