International Tax. 15/16 May State Convention Queensland. Ian Dinnison KPMG. Paper Written & Presented By: Ian Dinnison

Transcription

1 International Tax 15/16 May 1998 State Convention Queensland Ian Dinnison KPMG Paper Written & Presented By: Ian Dinnison Taxation Institute of Australia 2000 Disclaimer: The material published in this paper is published on the basis that the opinions expressed are not to be registered as the official opinions of the Taxation Institute of Australia. The material should not be used or treated as professional advice and readers should rely on their own enquiries in making any decisions concerning their own interests.

2 IAN DINNISON International tax Ian Dinnison KPMG Australia now has one of the most extensive and complicated systems of taxing the offshore income of resident corporate groups. When matched with the Foreign Investment Fund provisions in Part XI of the 1936 Act, the transferor trust provisions and the sec. 47A deemed dividends, there are real risks that not only will potentially abusive transactions be caught by these antiavoidance provisions, but commercial transactions will be inadvertently effected. The changes to Part X of the 1936 Act announced in December 1996 are a major revamp of Australia s Controlled Foreign Corporation (CFC) laws and the fourth major change of law in this area in the last 10 years. The changes have the potential to tax transactions that have little (if any) nexus with Australia. The additional Australian tax costs could adversely affect the competitiveness of Australian businesses operating overseas. At best, it is likely that the changes will triple the compliance costs of Australian multinational groups. BACKGROUND. Prior to 1987, most foreign source income which was subject to tax overseas was exempt from Australian tax. Further, dividends received from foreign subsidiaries were granted a full rebate of tax in Australia. Only interest and royalties received from treaty countries were taxed in Australia, with a foreign tax credit. This exemption/rebate system did provide the opportunity for some fairly aggressive tax planning opportunities. This system was replaced as from 1 July 1987 with a comprehensive foreign tax credit system. This FTC system was relatively generous in that it allowed a credit for underlying taxes paid with no tier limitation in respect of non-portfolio dividends (i.e., where the Australian parent owned at least 10%, either directly or indirectly, of the company paying the dividend). However, this system had two principle defects, namely; any additional Australian tax could be deferred indefinitely by accumulating the income offshore; and the administrative costs associated with identifying the foreign taxes paid and tracking the credits through the various tiers as dividends are paid back to Australia. Given that dividends paid back from subsidiaries in most of the developed countries usually carried foreign tax credits at least equal to the Australian tax, little additional Australian tax was being collected, despite significantly increased administrative costs. The CFC rules that became effective on 1 July 1990 were designed to overcome these two problems. The stated aim of those CFC rules was to subject to Australian tax, income derived by foreign companies that are controlled by Australian residents, other than foreign income subject to a tax system comparable to Australia s or that of CFCs predominantly engaged in active business. Accordingly the 1990 CFC rules divided the world into 60 countries that were identified as having tax systems comparable to Australia (the so-called listed countries ) and the others. The CFC system then set out rules determining how the current year profits of the foreign subsidiaries, and dividends paid by them, are taxed in Australia. Listed countries included all of Australia s major trading partners and most (but not all) of those countries with which Australia had concluded double tax agreements. Most North American, European and Asian countries were listed. Only certain designated income of listed countries were subject to the Australian CFC rules, including: TAXATION INSTITUTE OF AUSTRALIA 420

3 INTERNATIONAL TAX untaxed capital gains on the disposal of specified tainted assets including shares; interest, royalties, offshore income and shipping income derived by the foreign subsidiary if that income was subject to a reduction in tax in the listed country; and certain foreign tax incentives that were identified and specifically listed in the regulations. These concessions basically involved tax holidays or reductions for passive income i.e., the various concessions for holding companies, co-ordination centres, service providers, etc. Non-portfolio dividends from these listed countries were exempt from Australian tax. Unlisted countries were subject to a different set of rules. In summary, the tainted income of an unlisted country CFC was attributed to the first tier Australian parent if the foreign company did not satisfy an active income test. Tainted income was made up of three items, namely: Tainted sales income, which were sales by the CFC to an Australian associate or sales of goods that had been purchased from an Australian associate. Sales by the CFC where it had manufactured or substantially altered the goods were not tainted sales. Tainted services, which were services provided by the CFC to any associate (including non-residents) or any Australian operations. The tainted services definition was much wider in that there was a perception of the Australian Revenue that services can be more easily transferred overseas. Passive income, which included interest, rentals, gains on the sale of certain assets, and other forms of passive investment type income. The active income test meant that the tainted income of an unlisted country CFC would not be attributed back to Australia if the tainted income was less than 5% of the gross turnover of the company. Accordingly, an unlisted country CFC would earn a small amount of tainted income without attribution occurring. Dividends from unlisted countries CFC were generally fully taxable in Australia, with a foreign tax credit for any underlying foreign taxes paid. The dividends would be exempt only to the extent that they represented profits that had previously been attributed back to (and taxed in) Australia. Accordingly, this resulted in the Australian parent affectively being fully taxed on the profits of the unlisted country CFC on a repatriation basis, albeit with foreign tax credits. Therefore, the active income test was simply a deferral of Australian tax. THE 1997 RULES Creation of a New List A new short list of broad exemption countries comprising seven countries will be used to determine whether amounts of designated income have been concessionally taxed and should therefore be attributed to the Australian attributable taxpayer under the CFC measures. This list is attached as Appendix A. The balance of the previously listed countries will now comprise a new list of limited-exemption countries (with some modifications due to the dissolution of the USSR and Yugoslavia and the addition of Vietnam and the Czech Republic). The type of income subject to attribution in respect of CFCs resident in this new list will be similar to those attributed under the 1990 rules applicable to Unlisted Country CFCs. The limited-exemption list is attached as Appendix B. However, dividends repatriated from limited-exemption list country CFCs will be exempt under sec. 23AJ, similar to dividends repatriated from the previous listed country CFCs. The creation of the two lists applies in calculating attributable income for statutory accounting periods of CFCs commencing on or after 1 July For other purposes (e.g., the taxation of dividends and branch profits), the changes are to apply from 1 July Uniform Active Income Tests The previous active income test for listed country CFCs was calculated by dividing gross tainted eligible designated concessional income (EDCI) by gross EDCI. In most cases the test would be failed because the tainted EDCI and EDCI were likely to be the same. The active income test will be failed even though the CFC s tainted income may not be a significant proportion of its primary business income. Alternatively, the income of a listed country CFC may consist entirely of tainted income and yet the CFC will pass the active income test assuming that income was subject to normal rates of tax in the country of residence. The changes will mean that the active income test for unlisted country CFCs will be applied to all CFCs. The test for all CFCs will therefore be determined by dividing a CFC s gross tainted turnover by its gross turnover. However, the active income test will not be applied to branches of Australian companies in broad-exemption listed countries or unlisted countries. New Concessions Exclusion from tainted services income and tainted rental income Broadly, sec. 448(6A) ensures that amounts are not treated as tainted where the following three requirements are satisfied: (i) the income was derived from an associate CFC resident in the same country (the definition of associate is in sec. 318); (ii) the income was taxed at the country s normal company rate of tax; and (iii) the payment of the amount was not deductible for CFC purposes against any attributable income of the associated CFC paying that amount. Removal of the transfer pricing rules to transactions between CFCs in same broad-exemption listed countries An international agreement (sec. 136AC) for the purposes of the transfer pricing rules in the CFC measures will not include an agreement where, at all times, all parties to the agreement are CFCs resident of the same broad-exemption listed country. This has the effect of excluding the agreement from the transfer pricing rules because the transfer pricing rules only apply to international agreements (refer sec. 400(aa)). 421 QUEENSLAND STATE CONVENTION MAY 1998

4 IAN DINNISON Removal of thin capitalisation and debt creation rules The thin capitalisation and debt creation rules will no longer apply in determining the attributable income of a CFC because the need for the rules will be greatly reduced following the creation of a short list of countries. The short list for accruals taxation purposes should make it more difficult to shift profits to another company without those profits being either taxed at full rates in a broadexemption listed country or accruals taxed under the CFC measures. Foreign Source Income Derived by CFCs The new rules will ensure that the attributable income of CFCs resident in limited-exemption list countries will include income derived by that CFC which: do not comprise tainted income (i.e., the income consists of active income); are not treated as sourced in that limited exemption list country; are not subject to tax in any listed country (limited and broad exemption list). Essentially, this ensures that there is similar treatment between broad-exemption listed and limited-exemption listed countries in respect of foreign source income derived by CFCs resident in those countries. Modifications have also been made to the rules for CFCs in broad-exemption listed countries to ensure that sec. 385(2)(a)(ii) can apply to amounts of adjusted tainted income that have only been taxed in a limited-exemption listed country. These tainted amounts should be included in attributable income because they have not been taxed by a broad-exemption listed country. Treatment of CFCs in limited-exemption listed countries Under the new rules, an amount derived by the CFC will be included in notional assessable income if the amount is not adjusted tainted income, is not derived from sources within the CFC s country of residence and is not subject to tax in a listed country. Treatment of CFCs in broad-exemption listed countries The 1997 amendments ensure that the foreign source income rule, set out in sec. 385(2)(a)(ii), can apply to amounts of tainted The 1997 amended rules applicable to CFCs can be summarised as follows: Pre 1 July 1997 Post 1 July 1997 Active income test Broad-exemption list countries Active Income Test is failed where Active Income Test is failed where tainted EDCI is more than 5% of tainted income is more than 5% gross EDCI of gross turnover Tainted EDCI Tainted Income EDCI Gross Turnover Limited-exemption listed countries As above As above Unlisted countries Active Income Test is failed where No change tainted income is more than 5% of gross turnover Tainted Income Gross Turnover Key income attributed Limited-exemption list countries EDCI Tainted sales Interest Tainted services Royalties Passive income Capital gains Interest Royalties Capital gains Rental income Broad-exemption list countries EDCI No change Interest Royalties Capital gains Unlisted countries Tainted sales No change Tainted services Passive income Interest Royalties Capital gains Rental income Continues next page TAXATION INSTITUTE OF AUSTRALIA 422

5 INTERNATIONAL TAX Pre-1 July 1997 Post-1 July 1997 Foreign source income derived by CFC subject to attribution Broad-exemption list countries Non EDCI income which are not Tainted income (other than EDCI taxed in any listed country income) which are not taxed in any broad exemption listed country Non-tainted income (other than EDCI) which are not taxed in any broad exemption or limited exemption listed country Limited-exemption list countries As above Non-tainted income which are not taxed in any listed country Unlisted countries No specific rule No change Transfer pricing rules Transfer pricing rules are applicable Transfer pricing rules are applicable to to all transactions between CFCs. all transactions between CFCs other than transactions between CFC s resident of the same broad exemption listed country Thin capitalisation and debt Applicable to all CFCs No longer applicable creation rules Services and rental income from If concessionally taxed it is included Subject to certain conditions this type same country CFC in the calculation of the active of income is not tainted and will not income test and attributable income. be attributable Non portfolio dividends received from CFCs by Australian company Broad-exemption list countries Exempt No change Limited-exemption list countries Exempt No change Unlisted countries Exempt where exempting receipt No change (although concept of exempting receipt has been amended in certain circumstances) income derived by a CFC in a broad-exemption listed country if the amounts have only been taxed in a limited-exemption listed country. Non-tainted income will be excluded from sec. 385(2)(a)(ii) if they are taxed in a listed country (either broad-exemption or limited-exemption). OTHER COMPLIANCE MEASURES Election to vary a CFC s statutory accounting period An election to vary a CFC s statutory accounting period can take effect immediately if made during the first period that a company becomes a CFC. Section 319(4A) allows a varied period to be adopted on the acquisition of a company to align its statutory accounting period with the period normally used by the company for the preparation of accounts or with the period used for the purposes of complying with the tax laws of another country. These are the only alternative statutory accounting periods permitted (sec. 319(3)). The first period using the new day will be the period next commencing after the election is made. This treatment is more favourable than the prior arrangements whereby the first period using the new day is the period commencing after the end of the statutory accounting period in which the election is made. Elections for Wholly Owned CFCs An attributable taxpayer can make an election on behalf of a CFC if the CFC is wholly owned by the taxpayer either directly or indirectly through other entities. A CFC is to be treated as wholly owned by an attributable taxpayer if the taxpayer is the only attributable taxpayer (sec. 361) and has an attribution percentage (sec. 362) in the CFC of 100%. Where these conditions are satisfied, the attributable taxpayer is to be able to make elections on behalf of the CFC for the purposes of sec. 319(2), sec. 421 and sec. 438(3A) (new secs 319(7), 421(1A) and 438(3B) respectively). Time Allowed for a CFC to Elect for CGT Rollover Relief An election that can be made by a CFC for rollover relief during a statutory accounting period is to be valid if made on or before the lodgment of a return by an attributable taxpayer in which the statutory accounting period of the CFC ends (secs 421(1)(c), 421(1)(d), 438(3A)(c) and 438(3A)(d)). If there is more than one 423 QUEENSLAND STATE CONVENTION MAY 1998

6 IAN DINNISON attributable taxpayer, the election will be valid if made before the later of the lodgment dates for the affected tax returns. BRANCHES Section 23AH allows an exemption for branches located in limitedexemption listed countries. The treatment of branches in broad-exemption listed countries and unlisted countries was not changed. Tainted income derived by limited-exemption listed country branches will prima facie be taxable in Australia i.e.: passive income: tainted sales income; and tainted services income. However, an active income test shelter will be available for limited-exemption listed country branches. The active income test for limited exemption listed country branches will be similar to that applicable to income derived by CFCs i.e., where less than 5% of gross turnover consists of tainted income, all of the branch income would be tax exempt. In determining the amount of tainted sales income derived by the branch, it is to be assumed that the branch and the head office are separate independent entities. This table below summarises the rules relating to foreign branch income taxation for periods pre-and post-1 July Accordingly, there may be increased compliance for some taxpayers as they will now be faced with three tests for branch activities. Also, branches in broad-exemption listed countries may be treated more harshly than limited-exemption listed country branches as they cannot rely upon an active income test all of their EDCI is effectively taxable in Australia, even if it constitutes a nominal percentage of the branch s activities. The exemption under sec. 23AH is modified for amounts derived by an Australian company through a listed country branch (i.e., a permanent establishment) to allow the exemption to apply to amounts derived through a branch in a limited-exemption listed country. Exemption for Branch Income Limited-exemption listed countries Adjusted tainted income derived through a branch in a limitedexemption listed will not be exempt under sec. 23AH unless the branch passes an active income test. Section 23AH(1)(ca) has the effect that the exemption under sec. 23AH will not be available for amounts of adjusted tainted income derived through a branch in a limited-exemption listed country unless the branch satisfies an active income test. The adjusted tainted income of a branch is to be determined in accordance with new sec. 23AH(10A). Section 23AH(10A) provides that the adjusted tainted income of a branch is to be determined in the same way as the adjusted tainted income of a CFC. The rules for determining adjusted tainted income are in sec. 386 of the CFC measures. The only amounts that will be taken into account are those derived through the branch (sec. 23AH(10A)(a)). Foreign branch capital gains Sections 23AH(6) and (7) allow the exemption under sec. 23AH to apply to gains or profits of a capital nature from the disposal of land, buildings or depreciable property by a branch in a limitedexemption listed country providing the gains or profits are subject to tax in a listed country. The exemption will not be available, however, for gains or profits of a capital nature that give rise to adjusted tainted income (secs 23AH(6)(f) and 23AH(7)(f)). Tainted sales income A foreign branch in a limited-exemption listed country and its Australian head office are to be treated as separate legal entities for the purpose of determining whether the branch has derived tainted sales income. Amounts of tainted sales income derived by these branches will not qualify for exemption under sec. 23AH unless the branch satisfies an active income test. Section 23AH(10A)(d) provides that a branch in a limitedexemption listed country will be taken to have purchased goods from its Australian head office for the purposes of determining tainted sales income if the goods would have been purchased by the branch from the head office assuming: the branch were a distinct and separate company (called the PE company) from the head office (called the HQ company); the PE company and the HQ company were engaged in the same or similar activities under the same or similar conditions as the branch and the head office respectively; and the PE company were dealing wholly independently with the HQ company. The HQ company is also to be treated as an associate of the PE company. The modifications made by the amendments are to apply only where goods are acquired by a branch from its head office and not where the head office acquires goods from the branch (sec. 23AH(10A)(e)). In the latter case, the sale of goods by the head office is taxable in Australia under the general provisions of the Principal Act and the head office is allowed a deduction for the cost of goods purchased by the branch. No amount is derived by the branch because generally arrangements within the same legal entity do not give rise to income or outgoings for taxation purposes. The exemption under sec. 23AH is thus not applicable to the sale of goods by the head office. Branch location Pre-1 July 1997 Post-July 1997 Broad-exemption listed countries Exempt other than EDCI Exempt other than EDCI Limited-exemption listed countries Exempt other than EDCI Exempt other than tainted income where active income test is failed Unlisted countries Taxable with foreign tax credit Taxable with foreign tax credit TAXATION INSTITUTE OF AUSTRALIA 424

7 INTERNATIONAL TAX AFI subsidiary branches - limited-exemption listed countries Branches of Australian financial institutions (AFIs) in limitedexemption listed countries with an exemption for banking income broadly consistent with the exclusion from accruals taxation available under the CFC measures for AFI subsidiaries. These changes will not apply to AFI branches in broadexemption listed countries. Active income test for branches - limited-exemption listed countries An active income test concession will allow branches in limited-exemption listed countries to derive up to 5% of gross turnover as tainted income and still obtain full exemption under sec. 23AH. Essentially, this is the same test applicable to income derived by CFCs in unlisted countries under the present rules subject to certain modifications discussed below. The rules for determining the active income test are provided in sec. 23AH(10B). Broadly, the active income test that applied for unlisted country CFCs is to be used for branches subject to certain modifications. As discussed above, this active income test will now apply to all CFCs. In broad terms, the active income test for limited exemption listed country branches are as follows: the company was in existence at the end of the relevant statutory accounting period; the company has prepared the necessary accounting records in accordance with commercially accepted accounting principles and those records give a true and fair view of the financial position of the company; the company has complied with the substantiation requirements set out in sec. 451; not more than 5% of the gross turnover of the company consists of tainted income. In applying this test, it is to be assumed: the only amounts that will be taken into account are those derived through the branch (sec. 23AH(10B)(a)); the year of income of the taxpayer will be used as the statutory accounting period of the taxpayer s branch (sec. 23AH(10B)(b)); the modifications to adjusted tainted income discussed above (relating to tainted services and sales income and AFIs) are to apply in determining the gross tainted turnover of the branch (secs 23AH(10B)(d), (e), (f) and (g)). OTHER CHANGES There are several other legislative changes and transitional rules required as a consequence of the creation of the new lists and changes to the status of various countries. The amendments will give effect to the following consequential changes and transitional rules: An amount derived by an unlisted country company through a branch in a limited-exemption listed country will be an exempting receipt (hence, exempt on distribution to Australia) if the amount is not tainted income and is also taxed in a listed country (broadexemption or limited-exemption listed). The concept of notional exempt income has been narrowed for unlisted country CFCs carrying on businesses in limited exemption list countries through permanent establishments - income from such permanent establishments will no longer be automatically exempt even if they are subject to subject to full tax in the country of operation. The concept of EDCI is expanded under the new CFC rules an item of designated income (interest, shipping income, royalties, capital gains, certain offshore financial services related income) which is subject to tax in a limitedexemption list country would not be treated, under the current CFC rules, as EDCI. Under the new rules, such an exclusion exists only where the item of income is subject to tax in a broad-exemption list country. Only the CFC tax laws of the 7 broad exemption list countries will be recognised for the purposes of double tax relief provision, sec. 456A. A tax credit is to be available for foreign tax forgone on income subject to accruals taxation under the CFC measures in circumstances where tax sparing provisions in a double taxation agreement require that a credit be provided. The taxation of a CFC s retained profits under sec. 457 has been modified where the CFC is treated as changing residence because of changes to the list(s) of countries: a three year residency threshold rule will be applied: CFCs which have been resident for three years or more in the newly listed country will be exempt from sec. 457 attribution; sec. 431(4) will not operate to deny a CFC s prior-year losses if the CFC is treated as changing residence solely as a result of changes to the list(s) of countries; special transitional rules are applicable to the listed country status of certain countries Czechoslovakia, the USSR and Yugoslavia given the special circumstances surrounding these countries. Hong Kong is to continue to be treated as an unlisted jurisdiction following the establishment of the Hong Kong Special Administrative Region of the People s Republic of China on 1 July Change of residency as a result of addition to Listed Country List section 457 attribution rules By way of background, the Australian controllers of a CFC are generally taxed under sec. 457 on the CFC s accumulated distributable profits if the CFC changes residence from an unlisted to a listed country. This includes all pre-acquisition profits and pre CFC profits. The rationale for the profits being taxed at the residence change time is because they are likely to be low taxed and can be distributed as exempt dividends (under sec. 23AJ) after the CFC becomes a resident of a listed country. Modifications have been made to soften the impact of sec. 457 where a CFC becomes a resident of a listed country as a result of the country becoming listed (e.g., on the listing of the Czech Republic or Vietnam as limited-exemption countries from 1 July 1997). Section 457 will not apply in cases where a CFC was a resident of a country for three or more years prior to the country s listing (sec. 457(3)(c)). In other cases (i.e., where a 425 QUEENSLAND STATE CONVENTION MAY 1998

8 IAN DINNISON Changes relating to branch income derived by unlisted country CFCs Branch location Pre-1 July 1997 Post-July 1997 Broad-exemption listed country Exempt (sec. 23AJ) when distributed No change to Australia if non-edci and subject to tax in a listed country (Broad-exemption or limitedexemption listed) Limited-exemption listed country Exempt (sec. 23AJ) when distributed to Exempt (s. 23AJ) when distributed to Australia if non-edci and subject to Australia if non-tainted income tax in a listed country and subject to tax in any listed (Broad-exemption or limited- country (broad-exemption or exemption listed) limited exemption listed) Unlisted country Not exempt No change CFC has been a resident of the country for less than three years), sec. 457 will apply but only to the realised profits of the CFC (sec. 457(3)(d)). There will therefore be no deemed disposal of assets held by the CFC in calculating the amount to which sec. 457 will apply. Gains on the disposal of assets held at the residence change time by a CFC that was resident of a country for less than three years prior to the country s listing will be included in the attributable income of the CFC when the gains are realised (sec. 384(2)(e) and 385(2)(e)). These gains are to be included in attributable income even though the CFC may satisfy the active income test. Exempting profits derived through a CFC s branch in a listed country An amount derived by an unlisted country CFC through a branch in a limited-exemption listed country will be an exempting receipt if the amount is not adjusted tainted income and is also taxed in a listed country (either a broadexemption or limited-exemption listed country). Exempting receipts are amounts that can be distributed by an unlisted country CFC as exempt dividends under sec. 23AJ (see above). An unlisted country company could distribute profits derived through a branch in a listed country as exempt dividends under sec. 23AJ providing the profits were not EDCI and were subject to tax in a listed country (sec. 377(1)(a), sec. 378(1) and sec. 380). The concept of EDCI is now not applicable, however, for branches in limited-exemption listed countries. Dividends paid from non-tainted profits derived by an unlisted country company through a branch in a limitedexemption listed country are exempt if the profits are taxed in the limited-exemption listed country. This exemption is consistent with the general policy that non-tainted amounts that have been taxed in a listed country can be distributed as exempt dividends. Tax-sparing credits Tax sparing occurs where tax forgone by a listed country in providing tax incentives to Australian investors is deemed to be paid for the purposes of Australia s foreign tax credit system A credit is available for foreign tax forgone on income subject to accruals taxation under the CFC measures in the limited circumstances where tax-sparing provisions of a double taxation agreement require that a credit be provided. Section 393 provided a deduction in calculating attributable income for foreign tax paid by a CFC. Where the attributable taxpayer is a company, foreign tax is deemed to be paid under sec. 160AFCA equal to the taxpayer s attribution percentage of the deduction available under sec The 1997 amendments will extend this treatment by deeming foreign tax to have been paid for foreign tax forgone under tax sparing arrangements. The amount of foreign tax taken to have been paid will be equal to the taxpayer s attribution percentage of the total of: the sec. 393 amount; and the amount of foreign tax not actually paid because of a particular provision of a law of a listed country that is deemed to have been paid under a double tax agreement or sec. 160AFF. Capital gains tax rollover relief Section 419 provides capital gains tax rollover relief to transfers of assets between group companies, including CFCs in circumstances similar to sec. 160ZZO. Under the previous sec. 419, the following transfers were available for rollover relief provided the other requirements are satisfied: 1990 CGT Rollover relief Location of transferor Listed country Unlisted country Location of transferee Same listed country; Australia; any unlisted country in which the transferor carried on business through a PE of any unlisted country and the rollover asset was used in connection with that PE Any unlisted country; Australia TAXATION INSTITUTE OF AUSTRALIA 426

9 INTERNATIONAL TAX Under the new rules, sec. 419 will be amended such that the following transfers would be available for rollover relief provided the other requirements are satisfied: 1997 CGT Rollover Relief Location of transferor Broad-exemption listed country Non-broad-exemption listed country Location of transferee Same broad-exemption listed country Australia Any non-broad exemptionlisted country in which the transferor carried on business through a PE of any nonbroad-exemption listed country and the rollover asset was used in connection with that PE Any non-broad-exemption listed country Australia Non broad exemption listed country will be defined in sec. 320(1) to mean: (a) an unlisted country; or (b) a limited-exemption list country. APPENDIX A Broad-Exemption Listed Countries Canada France Germany, Federal Republic of Japan New Zealand United Kingdom United States APPENDIX B Limited-Exemption Listed Countries Austria Myanmar Bangladesh Netherlands Belgium New Caledonia Brazil Norway Brunei Pakistan Bulgaria Papua New Guinea China Philippines Czech Republic Poland Denmark Portugal Fiji Romania Finland Saudi Arabia French Polynesia Singapore Greece Solomon Islands Hungary Spain Iceland Sri Lanka India Sweden Indonesia Switzerland Ireland Taiwan Israel Thailand Italy Tokelau Kenya Tonga Kiribati Turkey Korea, Republic of Tuvalu Luxembourg Vietnam Malaysia Western Samoa Malta Zimbabwe 427 QUEENSLAND STATE CONVENTION MAY 1998