The Australian Taxation Office (ATO) has issued draft taxation rules on permanent establishments, inviting comments from the public.

1. Australia Issues Draft Taxation Rules on Permanent Establishments
(Bristol, UK) - The Australian Taxation Office (ATO) has issued draft taxation rules on permanent establishments,
inviting comments from the public. The draft issue clarifies that Business Entities having a Permanent
Establishment (PE) do not inevitably establish that business is carried out through that PE, reports Nair & Co.’s
International Tax Services Team
Companies may form a PE abroad either under a tax treaty or a local definition for Australian tax purposes. Below
two matters are included under the draft ruling:
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Specific inclusions in the permanent establishment definition exist under domestic tax laws and Australian
treaties, for example, existence of substantial equipment. Even if the word ‘permanent establishment’
refers to a ‘business place through which business activities are carried on’, the inclusions made under the
concerned paragraph (relating to OECD Model paragraph 5.2) have broadened the definition of the term
“permanent establishment”. As a result, for companies having PE because of a specific inclusion, one
cannot infer that the company carries on business through that PE.
However, if an applicable tax treaty considers a company to carry out business activity through a PE, then
such consideration would only be applicable for the tax treaty purpose (local tax law provisions would not
be influenced by the same).
Based on the above points, domestic exemption for non-resident branch income is not applicable simply because
the company has a Permanent Establishment abroad (subject to certain other provisions).
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Services team please contact us.
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