|DATE:||(Date of pronouncement)|
|DATE:||February 9, 2011 (Date of publication)|
|Click here to download the judgement (transfer_pricing_australian_ruling.pdf)|
Australian Tax Office Ruling on Transfer Pricing Implications
The Australian Taxation Office has issued a ‘Taxation Ruling’ dated 9.2.2011 in which it has discussed the application of the transfer pricing provisions to business restructuring by multinational enterprises.
The Ruling considers situations where such transfers occur between MNE members to implement changes in the MNE’s existing business arrangements or operations. Common examples are product supply chain restructurings involving conversion of a distributor into a sales agency arrangement or of a manufacturer into a provider of manufacturing services. Business restructurings also commonly involve the transfer of the ownership and management of intangibles such as patents, trademarks and brand names.
The Ruling explains the following process for setting or reviewing transfer pricing
Step 1: Characterize the international dealings between the associated enterprises in the context of the taxpayer’s business
Step 2: Select the most appropriate transfer pricing methodology or methodologies
Step 3: Apply the most appropriate method and determine an arm’s length outcome
The Ruling refers extensively to the “Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD Guidelines)”.
The Ruling also gives practical examples to explain the transfer pricing law.
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