Tag: Principal Purpose Test (PPT)

Test of whether the pricipal purpose of the transaction is tax avoidance

2022: ATO Taxpayer Alert on Treaty shopping arrangements to obtain reduced withholding tax rates (TA 2022/2)

2022: ATO Taxpayer Alert on Treaty shopping arrangements to obtain reduced withholding tax rates (TA 2022/2)

The ATO┬áis currently reviewing treaty shopping arrangements designed to obtain the benefit of a reduced withholding tax (WHT) rate under a double-tax agreement (DTA) in relation to royalty or dividend payments from Australia. Typically, this benefit is sought via the interposition of one or more related entities between an Australian resident and the ultimate recipient of the royalty or dividend, where the interposed entity is a resident of a treaty partner jurisdiction. The ultimate recipient is generally located in a jurisdiction that either does not have a DTA with Australia or, where it is a treaty partner of Australia, the DTA provides a less favourable treaty benefit. A key purpose of Australia’s treaty network is to eliminate double taxation without creating opportunities for tax avoidance practices, such as treaty shopping arrangements. We are concerned that some taxpayers have entered into, or are considering implementing, arrangements interposing entities in treaty jurisdictions to obtain a more favourable tax outcome under a DTA ... Read more