The ATO on Wed 12.11.2014, issued Taxation Ruling TR 2014/6, which provides the Commissioner’s views on the application of s 815-130 of the ITAA 1997 regarding the relevance of actual commercial or financial relations to the identification of conditions relevant to ascertaining whether an entity gets a transfer pricing benefit from the actual conditions, which operate between the entity and another entity in connection with cross-border dealings.
Subsection 815-130(1) provides the “basic rule” for the way in which the arm’s length conditions are to be identified, based on the commercial or financial relations, in connection with which, the actual conditions operate.
Subsections 815-130(2) to 815-130(4) then provide exceptions to that rule depending on whether the form and substance of those relations is consistent, or on what independent entities dealing wholly independently with one another in comparable circumstances would have done, or would not have done.
Those exceptions, known as the “reconstruction” power, operate automatically and there is no discretion with their application. The Ruling explains their operation in the ATO’s view.
The Ruling was previously issued as Draft Taxation Ruling TR 2014/D3 and differs from the Draft.
DATE OF EFFECT: Applies to income years commencing on or after 29 June 2013 in relation to income tax. In relation to withholding tax, it applies to income derived, or taken to be derived, in income years commencing on or after 29 June 2013.
[LTN 219, 12/11/14]