Income Tax Assessment Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 832 - Hybrid mismatch rules  

Subdivision 832-F - Branch hybrid mismatch  

Operative provisions

SECTION 832-485   Branch hybrid  

832-485(1)    
An entity is a branch hybrid , in relation to a payment made to the entity, if:

(a) subsection (2) applies to the entity in relation to a country and a payment; and

(b) subsection (4) applies to the entity in relation to the payment.

Residence country applies branch profits exemption

832-485(2)    
This subsection applies to an entity in relation to a country (the residence country ) and a payment made to the entity if, for that country:

(a) the entity satisfies the residency test in subsection 832-555(9) and is a *liable entity in respect of its own income or profits; and

(b) the payment is treated as income derived by the liable entity in carrying on a business at or through a *PE in another country; and

(c) as a result of an exemption or other tax concession to which that liable entity is entitled in respect of income derived in carrying on a business at or through the PE, the payment is not:

(i) if the residence country is Australia - *subject to Australian income tax; or

(ii) if the residence country is a foreign country - *subject to foreign income tax in that foreign country.

Note:

For the meaning of liable entity , see section 832-325 .

832-485(3)    
In determining whether subparagraph (2)(c)(i) is satisfied, disregard the effect of subsection 23AH(4A) of the Income Tax Assessment Act 1936 .

Branch country fails to tax payment

832-485(4)    
This subsection applies to an entity in relation to the other country mentioned in paragraph (2)(b) (the branch country ) and a payment made to the entity if:

(a) the payment is treated as not having been derived in carrying on a business at or through a *PE of the entity, or as otherwise not having a sufficient connection to a taxable presence in the branch country, for the purposes of:

(i) if the branch country is Australia - this Act; or

(ii) if the branch country is a foreign country - the law of the branch country relating to *foreign income tax (except a tax covered by subsection 832-130(7) ); and

(b) as a result, the payment is not:

(i) if the branch country is Australia - *subject to Australian income tax; or

(ii) if the branch country is a foreign country - *subject to foreign income tax in that foreign country.

Modified meaning of permanent establishment

832-485(5)    
Subsection (6) applies if:

(a) the residence country has entered into, with the branch country:

(i) if either the residence country or the branch country is Australia - an *international tax agreement; or

(ii) if subparagraph (i) does not apply - a treaty or other agreement relating to the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital; and

(b) the agreement or treaty (as the case requires) contains:

(i) if either the residence country or the branch country is Australia - a *permanent establishment article; or

(ii) if subparagraph (i) does not apply - a provision corresponding to a permanent establishment article.

832-485(6)    
A reference in this section to a *PE in a country is taken to be a reference to a permanent establishment within the meaning of the relevant agreement or treaty in the country.