The Australian Taxation Office (“ATO”) announced this week an extension of the due date for lodgement of the Country-by-Country report, master file and local file (collectively “CbCR”), from 31 December 2017 to 15 February 2018 for taxpayers with an income year ended on 31 December 2016.
The extension gives taxpayers with an income year ended on 31 December 2016, who are impacted by CbCR, an opportunity to ensure their local files have been prepared in accordance with the high-level design and XML Schema required by the ATO. It further gives Australian subsidiaries comfort that they will not face significant late lodgement penalties in the event that their global parent has not finalised and shared the group’s master file with the Australian subsidiary prior to 31 December 2017.
These CbCR lodgement obligations apply to Significant Global Entities (global turnover >A$1bn) (“SGEs”) and have been adopted by the ATO following the guidance provided by the OECD contained in Action Item 13: “Transfer Pricing Documentation and Country-by-Country Reporting” of the Base Erosion and Profit Shifting (“BEPS”) project.
The CbCR obligations aim to enhance transparency for tax authorities regarding large multinationals’ presence and operations across the globe.
Australian taxpayers that are captured by the CbCR reporting requirements are required to lodge the master file and local file directly with the ATO in the approved form unless an exemption has been granted by the ATO.
Australian subsidiaries may be exempted from lodging the Country-by-Country report directly with the ATO where this information is being made available by the tax authority of an overseas parent company through an Automatic Exchange of Information (“AEoI”) with Australia.
The ATO will consider granting an Australian subsidiary a lodgement exemption and replacement reporting periods for one or more of the three CbCR documents where the adoption of CbCR in the jurisdiction of the global parent differs from the adoption in Australia, or the income year of the parent differs to the Australian subsidiary. The process for seeking a lodgement exemption or a replacement reporting period requires engagement with the ATO directly and affected SGEs should commence an application immediately.
If no exemption has been granted and there is no AEoI arrangement with Australia, then the Australian subsidiary will be expected to lodge all three reports.
Penalties starting at A$105,000 may be levied for late lodgement of any of these three reports.
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Should you have any queries in relation to the lodgement extension as outlined above, or you have any questions with regard to CbCR, including your obligations regarding preparation and submission of master and local files, transfer pricing documentation and compliance schedules, please contact your local RSM office.