BHP Billiton Ltd, an Australian resident taxpayer, is part of a dual-listed company arrangement (“the DLC Arrangement”) with BHP Billiton Plc (“Plc”).
BHP Billiton Marketing AG is a Swiss trading hub in the group which, during the relevant years, was a controlled foreign company (CFC) of BHP Billiton Ltd because BHP Billiton Ltd indirectly held 58 per cent of the shares in the Swiss trading hub. BHP Billiton Plc indirectly held the remaning 42 per cent.
The Swiss trading hub purchased commodities from both BHP Billiton Ltd’s Australian subsidiaries and BHP Billiton Plc’s Australian entities and derived income from sale of these commodities into the export market.
There was no dispute that BHP Billiton Marketing AG’s income from the sale of commodities purchased from BHP Billiton Ltd’s Australian subsidiaries was “tainted sales income” to be included in the assessable income of BHP Billiton Ltd under Australian CFC provisions. The question was whether sale of commodities purchased from BHP Billiton Plc’s Australian entities (“the disputed income”) should also be included in the taxable income of BHP Billiton Ltd under Australian CFC provisions.
Whether of not that income should also be included in the taxable income of BHP Billiton Ltd’s depends on whether BHP Billiton Plc’s Australian entities were to be considered “associates” of the Swiss Trading hub.
The Australian Tax Office found, that the BHP Billiton Plc’s Australian entities were “associates” of the Swiss Trading hub and included income from those sales of commodities under Australian taxation according to Australian CFC provisions.
BHP Billiton Ltd disagreed and filed a complaint over the decision to the Australian Tax Tribunal
The Tax Tribunal found in favor of BHP Billiton Ltd.
The Australian Tax Office disagreed with this decision an filed an appeal to the Federal Court.
BHP Biliton Ltd then appealed this decision to the High Court of Australia.
The High Court of Australia dismissed the appeal of BHP Billiton and found in favor of the Australian Tax Office.
Australia vs BHP Billiton Ltd March 2020