Central management and control
If the only reason for holding board meetings in Australia or directors attending board meetings from Australia was because of the effects of the COVID-19 pandemic, then we will not apply compliance resources to determine if your central management and control was in Australia.
COVID-19 resulted in overseas travel bans and restrictions and a high degree of uncertainty around international travel. You may have been concerned about these effects on your corporate residency status because of a need to change locations of board meetings or where directors attended them from.
Some boards of foreign-incorporated companies that are not Australian tax residents may have temporarily suspended their normal pattern of board meetings because either:
- there were overseas travel bans or restrictions
- the board made the decision to halt international travel because of COVID-19.
If these companies instead held board meetings in Australia or directors attended board meetings from Australia, this alone will not (in the absence of other changes in the company’s circumstances) alter the company’s residency status for Australian tax purposes for that period.
Permanent establishment
COVID-19 resulted in overseas travel restrictions. Foreign companies may be concerned about potential effects on their business and tax affairs because of the presence of employees in Australia.
The effects of COVID-19 will not, alone, result in the company having an Australian permanent establishment if it meets all the following:
- The foreign-incorporated company did not have a permanent establishment in Australia before the effects of COVID-19.
- There are no other changes in the company’s circumstances.
- The unplanned presence of employees in Australia is the short-term result of them being temporarily relocated or restricted in their travel because of COVID-19.
We will not apply compliance resources to determine if you have a permanent establishment in Australia if:
- you did not otherwise have a permanent establishment in Australia before the effects of COVID-19
- the temporary presence of employees in Australia continues to solely be as a result of COVID-19 related travel restrictions
- those employees temporarily in Australia will relocate overseas as soon as practicable following the relaxation of international travel restrictions; and
- you have not recognised those employees as creating a permanent establishment in Australia or generating Australian source income for the purpose of the tax laws of another jurisdiction.
This approach was applicable until 31 December 2021.
From 1 January 2022, this approach does not apply. You will be required to consider whether ongoing arrangements give rise to a permanent establishment in Australia. You should contact us and apply for early engagement to discuss the taxation consequences of these ongoing arrangements.
We have separately published an addendum to Taxation Ruling TR 2002/5 which provides an example on the issue of temporal permanence in the context of COVID-19. This provides taxpayers with assurance that we will continue to consider the impacts of the COVID-19 global pandemic where relevant when determining whether a permanent establishment exists.