Australia: Draft legislation denying large multinationals deductions for low-taxed related-party intangibles payments
The measure is proposed to become effective 1 July 2023.
Denying large multinationals deductions for low-taxed related-party intangibles payments
The government released draft legislation which would deny large multinational taxpayers (with annual global income of AU$1 billion or more) deductions for payments relating to intangibles to related entities in low corporation tax jurisdictions (with a corporate income tax rate of less than 15%).
The proposal was announced as part of the government’s multinational tax integrity package in the 2022-23 October Budget.
The measure is proposed to become effective 1 July 2023.
Interaction with BEPS 2.0
There is no carve-out for multinational enterprises that will be subject to Pillar Two. It is unclear how top-up taxes that would arise under those rules (in particular, top-up tax under a domestic minimum top-up tax or an income inclusion rule) would be accounted for in the “low corporate tax jurisdiction” test as it appears to focus on headline tax rates. This could lead to double tax outcomes for taxpayers denied a deduction for payments that are also subject to a top-up tax to 15%.
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