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Beyond borders

Beyond borders

By Andy Bubb & Daniel Osvath


Tax law has taken on an international flavour in recent years given the increasingly globalised economy. This presents challenges for taxpayers and their advisers in navigating the demands of different countries’ tax systems. An emerging trend is the heightened ability of revenue authorities to obtain information relating to foreign jurisdictions. This is happening in two ways – increased cooperation with other governments and increased powers to compel the disclosure of information by taxpayers. How can lawyers respond to this complex and demanding environment and enable their taxpayer clients to comply with obligations in multiple jurisdictions? Producing documents relating to offshore activities. Cross-border transactions between related entities, such as the provision of loans and services, have resulted in a growing number of transfer pricing disputes. As the name suggests, these disputes concern the hypothetical price at which a transaction would take place if the parties were independent. The disputes are highly technical, requiring expert evidence, and give rise to many practical issues for taxpayers concerning the location of relevant information, which may be held outside Australia. An issue that often arises in Australian transfer pricing disputes is the receipt of a formal offshore notice from the Australian Taxation Office (ATO). An offshore notice is the legal basis on which the ATO requests information that is held offshore from a taxpayer. Failure to comply with an offshore notice has fewer implications than non-compliance with an information notice requesting onshore documents, which is a criminal offence and can result in financial penalties. However, practitioners must be aware that non-compliance with an offshore notice carries adverse evidentiary implications, namely that if a taxpayer fails to comply it cannot later seek to rely on any such documents in any subsequent taxation litigation unless the Commissioner of Taxation provides consent.

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