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The Australian Taxation Office has released a taxpayer alert outlining its concerns about treaty shopping arrangements designed to obtain the benefit of a reduced withholding tax rate under a double tax agreement (DTA) in relation to royalty or dividend payments from Australia.
The alert highlights that the ATO is likely to make follow-up inquiries where we detect treaty shopping arrangements.
The ATO said it is concerned that arrangements described in this alert may be entered into or carried out by taxpayers for a principal or main purpose of obtaining a treaty benefit to which they would not otherwise be entitled. These arrangements may attract the operation of the anti-avoidance rules provided under Australia’s DTAs.
As part of its engagement and assurance activities, the ATO is currently reviewing international transactions for these types of arrangements. It is engaging with taxpayers and advisers about existing and proposed arrangements.
The ATO advises that if you have entered into, or are contemplating entering into, an arrangement of this type, it encourages you to discuss your situation with the ATO by emailing the Tax Treaties mailbox.
Even if your arrangement has existed for some time, the ATO encourages you to engage with it as the anti-avoidance rules under our DTAs may potentially apply to payments in the future.