This question seeks information to assess the specific transfer pricing risk of Australian taxpayers receiving or paying incorrect or no recharge amounts for providing or receiving employee share-based remuneration to employees of non-resident subsidiaries. We want to ascertain the level of recharge amounts being received or paid by Australian taxpayers and the pricing methodology used in respect of these amounts.
The dollar amounts or values asked for in this question are all based on your income tax records.
Under employee shared-based remuneration plans, a multinational group may remunerate employees by providing phantom shares in the listed parent company of the group, shares, share options or share rights.
The 'recharge amount' refers to the compensation you received or paid in return for providing the employees with share-based remuneration. The recharge amount does not include any compensation received or paid in relation to the costs of administering an employee share-based plan since this would be compensation for services that you would report at question 8.
The term 'employees' refers to individuals who provide personal services or labour to an entity and would be regarded as employees of that entity for legal or tax purposes. For example, employees would include the directors of a non-resident subsidiary.
Where an employee holds a position of employment in both an Australian taxpayer and a non-resident subsidiary of the taxpayer, consideration should be given to what 'capacity' in which the share-based remuneration is received. For example, where an individual is an employee of the Australian taxpayer and a director of a non-resident subsidiary, any share-based remuneration paid by the Australian taxpayer to the individual in their capacity as a director of the non-resident subsidiary would be included at this question. This accords with the approach taken in Article 16 of the OECD Model Tax Convention regarding the allocation of taxing rights (which provides that payments received by a resident of a contracting state in their capacity as a director of a company resident in the other contracting state may be taxed in that other state).
For more information about share-based remuneration plans for employees of non-resident subsidiaries, including application of the arm's length principle to arrive at an appropriate recharge amount, refer to OECD Tax Policy Studies No. 11 (2005) - The Taxation of Employee Stock Options (particularly Chapter 4 - Impact on Transfer Pricing). You can purchase a copy of this publication by visiting the OECD bookshop website at OECD.org
End of further informationTo complete this question you need to:
- identify the share-based employee remuneration provided to or received from international related parties
- determine if there is a recharge amount paid or received in relation to the share-based remuneration provided to your employees
- determine the total amount of the recharge amounts paid by you during the income year
- determine the total amount of the recharge amounts received by you during the income year.
If you did provide (or receive) share-based remuneration to any employees of an international related entity during the income year, answer 'Yes' at label A of question 15 and complete the following labels:
- At label C, write the total recharge amounts you claimed as deductions for the income year.
- At label D, write the total recharge amounts you included in your assessable income for the income year.