International
8. Pricing and Capitalisation
Firm / Chambers:
Last updated: 31 Jul 2015
- Transfer pricing and thin capitalisation have come under heavy scrutiny in recent times and numerous amendments have been made to the law.
- The interaction of the Organisation for Economic Cooperation and Development (OECD) guidelines with domestic laws has also added another dimension to the already complex rules.
- Transfer pricing laws are designed to discourage Australian companies from paying more than normal prices and fees for goods and services from their related foreign companies. The idea is that this will reduce the taxable income on which tax in Australia is paid.
- The Commissioner of Taxation in Australia has powers to make adjustments so that prices and fees paid to related foreign companies are at arm’s length.
- Thin capitalisation rules apply where an Australian secures a loan from a related foreign entity at a rate higher than a rate determined to represent an arm’s length transaction.
- Adjustments would be made to rectify the position and more accurately reflect the taxation liability.
View more Information on Tax & Superannuation