Australia: Taxpayer failed to meet burden of proof in transfer pricing dispute (Full Federal Court decision)
A Full Federal Court decision concerning burden of proof in a transfer pricing dispute involving cross-border related party financing.
Taxpayer failed to meet burden of proof in transfer pricing dispute
The Full Federal Court on 8 March 2024 rejected the taxpayer’s appeal, holding that the taxpayer had failed to meet its burden of proof in a transfer pricing dispute involving cross-border related party financing.
The case is: Singapore Telecom Australia Investments Pty Ltd v. Commissioner of Taxation [2021] FCA 1597
In particular, the court found that arm’s length consideration must be established based on a common sense approach in developing a reliable hypothesis for the type of dealing that occurred, with due regard to the position of the taxpayer and the commercial context for the actual dealing. This necessitates a focus upon the characteristics of the dealing itself (not the subjective or special concerns of the taxpayer and other parties involved in the dealing).
KPMG observation
The decision highlights the importance of having comprehensive, relevant commercial and economic evidence to support transfer prices of related party transactions.
For more information, contact a KPMG tax professional in Australia:
Sean Madden | smadden3@kpmg.com.au
Kristie Schubert | kschubert3@kpmg.com.au
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.