International Dealings Schedule (IDS)

Transcription

1 International Dealings Schedule (IDS) How IDS information is used by the ATO Presented by Ron Stevenson, Senior Director, International Division Authorised Australian Competent Authority, ATO Michael Morton, Profit Shifting Risk Manager, International Risk & Strategy, International Division, ATO Di Liu, International Tax Advisor, International Division, ATO September 2015

2 Current status of the IDS Current status of IDS and its use Business taxpayers having international related party dealing greater than $2 million, branch operations, interests in foreign entities, affected by the thin capitalisation rules, or having other designated international dealings (e.g. interest expense overseas, royalty expense overseas, offshore banking units), are required to report and lodge IDS as part of their business tax return reporting The IDS has been operational since tax time 2012 Enacted new international tax law reforms have been reflected at IDS reporting requirements In 2014, approx. 13,000 IDS were lodged by business taxpayers Unclassified 2

3 How ATO uses the IDS IDS information is used in a number of ways as part of risk management activities: Reporting Risk analysis Case selection and risk profiling Marketing and education Unclassified 3

4 Reporting The reports are mainly used for: Evidence based legislative reform recommendations for Treasury Internal reporting, for example to ATO Executives and for ATO Annual Reports Reporting to Government (e.g. Senate Estimates / Committees / Enquiries, including the recent enquiry into Corporate Tax Avoidance) Unclassified 4

5 Risk analysis Risk analysis is undertaken to: identify factors that may increase the risk of base erosion and profit shifting occurring determine the significance of risk and likelihood of its occurrence develop specific actions to address base erosion profit shifting risk Unclassified 5

6 Risk analysis ATO uses IDS and other data for risk analyses in the following way: Analyse patterns and trends in international related party dealings, structures and debt positions / flows Undertake industry and market analysis Identify key environmental factors and drivers of profitability and other financial outcomes Scan the global and domestic environments for emerging issues Unclassified 6

7 Case selection and risk profiling The risks and tax planning that the ATO is currently focusing its compliance activities on includes: debt dumping and thin capitalisation marketing/procurement hubs offshore digital tax structures IP migration hybrid mismatches treaty shopping Unclassified 7

8 Case selection and risk profiling Cases are selected through running risk models across income tax return, IDS and other information sources and risk profiling activities Unclassified 8

9 Case selection and risk profiling Risk Models use quantitative methods to detect risk in the taxpayer population based on internal and external data sources. They: aim to quantitatively detect activities, transactions and restructure events exhibiting the hallmarks of profit shifting risk determine the consequence (net tax at risk) and likelihood of the risk occurring before assigning an overall risk value / ranking The risk values and risk rankings are used to determine the taxpayers to be profiled during a case selection process The risk models are reviewed frequently to improve their accuracy and currency Unclassified 9

10 Case selection and risk profiling The purpose of risk profiling is to validate the risk model hit(s), identify any additional tax risks, and decide about the appropriate risk treatment strategy During risk profiling, IDS data and other internal and external data is also used to decide on a prioritised case pool based on perceived taxpayer risk A wide range of ATO officers are involved in this process Taxpayers exhibiting higher levels of risk are prioritised for risk treatment activities Unclassified 10

11 Marketing and education IDS data is also used for: speeches and media briefings by Senior ATO staff identifying taxpayers requiring assistance through educational activities and developing guidance products Unclassified 11

12 Compliance update from the ATO IDS other uses Specific labels within the IDS are available to the Treasury whilst negotiating double-tax agreements in providing more information to assist in setting withholding tax rates, e.g. royalties Unclassified 12

13 Compliance update from the ATO IDS reporting platforms: electronic lodgement v paper v new Standard Business Reporting (SBR) The IDS combines with business tax returns (Company, Trust and Partnership) ELS, Paper and SBR IDS is SBR-enabled Unclassified 13

14 Compliance update from the ATO Compliance cost review issues Recommendation from IGoT Transfer Pricing review 2012 Overall costs in relation to compliance with the recent Div815 and its documentation requirements, in connection with IDS reporting Business data and accounting system for compliance cost reduction Simplification of transfer pricing documentation as a compliance cost reduction initiative for SME taxpayers with cross-border dealings Unclassified 14

15 Compliance update from the ATO Country-by-Country (CbC) reporting by OECD initiatives The proposed policy measure of introducing the new OECD standards on transfer pricing documentation and CbC reporting, indicated that the CbC reporting apply in relation to income years commencing on or after 1 January 2016 The threshold for CbC is multi-nationals with a global turnover of greater than AUD$1 billion Current challenges for the ATO is how to minimise compliance costs and at the same time fulfilling our obligations with other OECD / DTA partners who also participate in the new CbC regime Unclassified 15

16 Compliance update from the ATO Internal governance of the IDS; Our risk models have improved over the past 3 years to the extent that the amount of NFA cases arising from case selection have been all but eliminated Subsequently, this equates to compliance costs for both the ATO and taxpayers being reduced by selecting the appropriate risks and correct taxpayers for review Unclassified 16

17 Compliance update from the ATO Transition from Div.13 to Subdiv.815-B and impact on IDS Subdivision 815-B apply in relation to income years commencing on or after 29 June 2013 Reasonable arguable position (RAP) and Subdivision 284-E, transfer pricing documentation TR 2014/8 sets out our views on the transfer pricing documentation requirements in Subdivision 284-E It is recommended by TR 2014/8 that a list of five key questions be considered when documenting transfer pricing treatment in light of taxpayer facts and circumstances (e.g. what are the comparable circumstances relevant to identifying the arm's length conditions?) Unclassified 17

18 Compliance update from the ATO Transfer Pricing Simplified documentation New simplified record-keeping options under PS LA 2014/3 The current transfer pricing regime includes Subdivision 284-E documentation requirements. This may impose an administrative burden on a business disproportionate to its risk of not complying with the transfer pricing rules Four options provided by the new simplified record-keeping aim to help businesses with low non-compliance risks to comply with their transfer pricing provisions, while minimising their record-keeping and compliance costs Unclassified 18

19 Compliance update from the ATO More notable questions asked Q8 service arrangements Q17 restructuring events Q18 branch operations Reporting of international loans for Q3 and Q4, IRPDs Unclassified 19

20 Compliance update from the ATO Sections B-F of IDS more recent law changes and their tax reporting requirements on IDS Foreign dividend, section 23AJ effective until Royal Assent of the Bill 4 of 2014 on 16 October 2014, and Subdivision 768-A effective from 17 October 2014, change to Q24 of IDS (non-assessable foreign income) Law change to the thin capitalisation rules section D of IDS De minimum threshold of debt deductions to $ 2 million Reporting of the worldwide gearing test Simplified transfer pricing documentation rule and TR 2014/8 transfer pricing documentation and Subdivision 284-E are referenced to and applied for IDS 2015 Unclassified 20