Income Tax Assessment Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 832 - Hybrid mismatch rules  

Subdivision 832-B - Concepts relating to mismatches  

Operative provisions

SECTION 832-130   Meaning of subject to foreign income tax  

832-130(1)    

An amount of income or profits is subject to foreign income tax in a foreign country in a *foreign tax period if *foreign income tax (except a tax covered by subsection (7) ) is payable under a law of the foreign country in respect of the amount because the amount is included in the tax base of that law for the foreign tax period.

Note:

Subdivision 832-C (Hybrid financial instrument mismatch) has effect as if certain amounts that are subject to a concessional rate of foreign income tax were not subject to foreign income tax: see section 832-235 .

832-130(2)    
To avoid doubt, an amount of income or profits may be subject to foreign income tax in a foreign country in a *foreign tax period even if the relevant entity ' s tax base is nil, or a negative amount.

Effect of credits etc. for underlying taxes

832-130(3)    

Despite subsection (1) , if:

(a)    an amount (the pre-credit amount ) of income or profits would, apart from this subsection, be *subject to foreign income tax in a foreign country; and

(b)    an entity is entitled under the law of the foreign country to a credit, rebate or other tax concession in respect of the amount for foreign tax (other than a withholding-type tax) payable under a tax law of a different country (including Australia);

then only so much of the pre-credit amount as reasonably represents an amount not effectively sheltered from *foreign income tax (except a tax covered by subsection (7) ) by the credit, rebate or tax concession is subject to foreign income tax .

Note:

This subsection is disregarded in working out whether an amount of income or profits is dual inclusion income: see subsection 832-680(3) .

Effect of " dividend received deductions " in foreign countries

832-130(4)    

Despite subsection (1) , if:

(a)    an amount (the pre-deduction amount ) of income or profits would, apart from this subsection, be *subject to foreign income tax in a foreign country; and

(b)    the amount consists of a dividend received by an entity from a company; and

(c)    the entity is entitled to a *foreign income tax deduction in respect of all or part of the amount of the dividend;

then only so much of the pre-deduction amount as reasonably represents an amount not effectively sheltered from *foreign income tax (except a tax covered by subsection (7) ) by the foreign income tax deduction is subject to foreign income tax .

Effect of CFC regimes

832-130(5)    
An amount of income or profits of an entity is subject to foreign income tax if the amount is included in working out the tax base of another entity under a provision of a law of a foreign country that corresponds to section 456 or 457 of the Income Tax Assessment Act 1936 (including a tax base that is nil, or a negative amount).

Effect of foreign hybrid mismatch rules

832-130(6)    
In determining for the purposes of this section whether a payment is included in a tax base of a law of a foreign country as mentioned in subsection (1) , disregard the effect of the following:

(a)    any provisions of *foreign hybrid mismatch rules of a foreign country;

(b)    

any provisions of another law of a foreign country relating to *foreign income tax (except a tax covered by subsection (7) ) that has substantially the same effect as foreign hybrid mismatch rules.

Certain foreign taxes disregarded in this Division

832-130(7)    

This subsection covers each of the following:

(a)    *credit absorption tax;

(b)    *unitary tax;

(c)    withholding-type tax;

(d)    municipal tax;

(e)    in the case of a federal foreign country - a State tax;

(f)    

*foreign GloBE tax or other foreign minimum tax.

Note:

The definitions of credit absorption tax and unitary tax are in section 770-15 .

832-130((8)    

Foreign minimum tax mentioned in paragraph (7)(f) includes a tax specified in regulations made for the purposes of paragraph 393(2)(c) of the Income Tax Assessment Act 1936 .