Singapore Telecom Australia Investments Pty Ltd entered into a loan note issuance agreement (the LNIA) with a company (the subscriber) that was resident in Singapore. Singapore Telecom Australia and the subscriber were ultimately 100% owned by the same company. The total amount of loan notes issued to the Participant was approximately USD 5.2 billion. The terms of the LNIA have been amended on three occasions, the first and second amendments being effective from the date the LNIA was originally entered into. The interest rate under the LNIA as amended by the third amendment was 13.2575%. Following an audit, the tax authorities issued an assessment under the transfer pricing provisions and disallowed interest deductions totalling approximately USD 894 million in respect of four years of income. In the view of the tax authorities, the terms agreed between the parties deviated from the arm’s length principle. Singapore Telecom Australia appealed to the Federal Court, which in a judgment published on 17 December ...
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