Australia releases guidance on related-party marketing hubs

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On 16 January 2017, the Australian Taxation Office (ATO) issued a Practical Compliance Guideline which sets out the ATO’s compliance approach to transfer pricing issues related to the location and relocation of certain business activities and operating risks into a centralized operating model.

The aim of the practical compliance guideline is to assist taxpayers to assess the compliance risk of the transfer pricing outcomes for overseas related-party hubs in accordance with the ATO’s risk framework, understand the compliance approach, understand the options available to reduce the transfer pricing risk for a hub and understand what the ATO will be looking for when they review a hub.

The practical compliance guideline assigns hub arrangements one of six different transfer pricing risk categories:

  • White zone -self-assessment of risk rating unnecessary
  • Green zone – low risk
  • Blue zone – low to moderate risk
  • Yellow zone – moderate to high risk
  • Amber zone – high risk, and
  • Red zone – very high risk.

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