The Australian Taxation Office (ATO) has issued Draft Schedule 2 to Practical Compliance Guideline (PCG) 2017/1 ATO compliance approach to transfer pricing issues related to centralized operating models involving procurement, marketing, sales and distribution functions.
This draft guidance:
- assists taxpayers to comply with their transfer pricing obligations;
- allows taxpayers to self-assess the transfer pricing risk for certain types of purchases they make from a related-party offshore hub;
- helps taxpayers understand compliance response to their transfer pricing arrangements, in particular those dealings that are at a higher risk of shifting excessive profits to a low-tax jurisdiction.
The draft guidance gives taxpayers increased certainty over the risk profile of their commercial activities. It gives a practical administrative approach about how taxpayers can best meet their tax obligations while minimizing their costs of compliance.
Once finalized, Schedule 2 will apply from 1 January 2018. The draft PCG has been released for public consultation and submissions close on 27 July 2018.
