Anthony Seve, KPMG transfer pricing partner, said the ruling places increased compliance and documentation obligations on larger companies. This, he said, is reflective of global developments.
“Although the obligations will be more onerous to comply with, the ruling and underlying law essentially seeks to follow the OECD’s BEPS Action Plan mantra of ensuring tax is paid where the value-added activity takes place and taxpayers support what they have done in this context,” he said.
“In some ways, the increase in documentation can be seen to be part of the new era of increased transparency, where companies will be expected to be ready to give additional information to revenue authorities.
“To have a so-called 'reasonably arguable position', which is important to support international transactions and to reduce penalties, taxpayers will now need to focus on having this updated documentation.”
Mr Seve said the recent ATO announcements included some good news for SMEs.
“By way of upcoming good news, simplified procedures for smaller companies recently announced are very welcome and should help thousands of SMEs, and even some large companies with lower-value transactions,” he said.
KPMG also made comment on the OECD’s discussion paper on the use of profit splits in the context of global value chains – BEPS Action 10, issued on 16 December 2014.
Mr Seve said this OECD paper represents a preliminary view that poses a number of questions.
“The underlying theme, however, is that the use of profit splits can be very helpful in ensuring tax is paid where value is added, although the application of this valuation method needs to be tightened,” he said.