On March 27, 2017 the Australian Taxation Office (ATO) published an updated list of public documents that are under consultation. One of the documents on the list is Draft Taxation Ruling TR 2017/D2 (which was released on March 15, 2017 for comments). The draft Ruling sets out the Commissioner's preliminary but considered view on how to apply the central management and control test of company residency following Bywater Investments Limited & Ors v. Commissioner of Taxation; Hua Wang Bank Berhad v. Commissioner of Taxation [2016] HCA 45; 2016 ATC 20-589 (Bywater).
Although the draft Ruling obviously relates to Australia, it still might be interesting for international tax experts from other countries to take notice of this draft Ruling, since we on regular basis have to decide from where a company is managed and controlled. In that perspective it might be interesting to read what circumstances tax authorities from different jurisdictions take into account and how they value these circumstances for determining from where a company is managed and controlled.
ATO invites interested parties to comment on the draft Ruling. The due date for comments is May 12, 2017.
According to the draft Ruling a company is a resident or a resident of Australia under the central management and control test of residency if it:
a carries on business in Australia; and
b has its central management and control in Australia.
The draft Ruling furthermore states that four matters are relevant in determining whether a company meets these two criteria:
1 Does the company carry on business in Australia?
2 What does central management and control mean?
3 Who exercises central management and control? and
4 Where is central management and control exercised?
With respect to the above the draft Ruling discusses the following subjects:
· Does a company carry on business in Australia?
· What does central management and control mean?
o What is 'decision making'?
o Acts of central management and control
o Matters of Company Administration
o The relevance of a company's activities
· Who exercises central management and control of a company?
o A starting point
o Mere legal power or authority to manage a company is not sufficient to establish exercise of central management and control
o Legal authority or power is not necessary for a person to exercise central management and control
o Company outsiders - is a person merely influential over decision makers or do they exercise central management and control of that company?
o The relevance of formal documentation
· Where is central management and control of a company exercised?
o Multiple places of central management and control
o Relevance of a company's activities
o Relevant considerations
Click here to be forwarded to the text of Draft Taxation Ruling TR 2017/D2 as available on the website of ATO.
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