Diverted Profits Tax: how does it impact you?
On 9 February 2017, the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017 (the Bill) and Explanatory Memorandum were introduced into Parliament. The Bill introduces the Diverted Profits Tax (DPT) which was originally announced as part of the May 2016 Federal Budget.
Broadly, the DPT is aimed at preventing multinational corporations from “shifting profits made in Australia offshore to avoid paying tax” and allows the Australian Taxation Office to impose a penalty rate of tax at 40% on relevant diverted profits. The DPT will commence for years of income starting on or after 1 July 2017.The DPT is not limited to uncooperative taxpayers and is not a measure of last resort. All Australian related party cross border transactions where relevant income is subject to foreign tax at a rate of less than 24% are potentially within the scope of the DPT. Urgent action is required.