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Australia Issues Draft Taxation Rules on Permanent Establishments
1. Australia Issues Draft Taxation Rules on Permanent Establishments
(Bristol, UK) - The Australian Taxation Office (ATO) has issued draft taxation rules on permanent establishments,
inviting comments from the public. The draft issue clarifies that Business Entities having a Permanent
Establishment (PE) do not inevitably establish that business is carried out through that PE, reports Nair & Co.’s
International Tax Services Team
Companies may form a PE abroad either under a tax treaty or a local definition for Australian tax purposes. Below
two matters are included under the draft ruling:
Specific inclusions in the permanent establishment definition exist under domestic tax laws and Australian
treaties, for example, existence of substantial equipment. Even if the word ‘permanent establishment’
refers to a ‘business place through which business activities are carried on’, the inclusions made under the
concerned paragraph (relating to OECD Model paragraph 5.2) have broadened the definition of the term
“permanent establishment”. As a result, for companies having PE because of a specific inclusion, one
cannot infer that the company carries on business through that PE.
However, if an applicable tax treaty considers a company to carry out business activity through a PE, then
such consideration would only be applicable for the tax treaty purpose (local tax law provisions would not
be influenced by the same).
Based on the above points, domestic exemption for non-resident branch income is not applicable simply because
the company has a Permanent Establishment abroad (subject to certain other provisions).
For more information about doing business overseas or to know more about ourInternational Expansion
Services team please contact us.
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Nair & Co., the leader in international business expansion services, provides accounting, HR, legal, tax and
compliance services for the set up and management of your international operations. Our model of a single-pointof-contact, supported by internal teams of experienced advisors, helps clients expand business and manage risk so
they can focus on their core business and sustain growth with minimal risk, stress and cost. We support nearly 250
clients in over 70 countries. Nair & Co. is headquartered in Bristol, UK, has 450 employees and offices in China,
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