Foreign companies now have greater certainty about when we might review their residency position under the central management and control test.
Practical Compliance Guideline PCG 2018/9 Central management and control test of residency: identifying where a company's central management and control is located provides practical guidance to help foreign-incorporated companies apply the principles set out in TR 2018/5 Income tax: central management and control test of residency and determine their residency position.
To help you understand the risk factors that make it more likely we'll review a company's residency position, PCG 2018/9 now includes a risk assessment framework that outlines our compliance approach according to three risk zones:
- Low - we will not normally allocate resources to review a company's residency position
- Medium - we may conduct further analysis to understand a company's residency position and tax outcomes through ordinary engagement and assurance activities (particularly if multiple moderate-risk factors apply)
- High - a company will likely be subject to compliance activity.
We have also updated the ongoing compliance approach for public groups to include additional circumstances where there is a very low risk that we would seek to treat a company as a resident under the central management and control test to provide ongoing certainty.
The transitional compliance approach introduced in 2017, which gave some companies time to review and adjust their governance arrangements to maintain their non-resident status, ended on 30 June 2023.
The updates include changes in response to feedback we received from the community on the Draft Practical Compliance Guideline, which was published on our legal database for public comment on 28 June 2023.
If you're unsure about your company's residency position after considering TR 2018/5 and PCG 2018/9, you should contact us to discuss your circumstances.