New International Tax Arrangements (Foreign-owned Branches and Other Measures) Act 2005 (64 of 2005)

Schedule 3   Australian permanent establishments of foreign financial entities

Part 3   Thin capitalisation

Income Tax Assessment Act 1997

27   Section 820-609

Repeal the section, substitute:

820-609 Effect on classification of head company or single company

(1) The *head company or single company is an outward investing entity (ADI) for a period (the trial period ) that is all or part of the grouping period if:

(a) apart from this Subdivision, the head company or single company would be an *outward investing entity (ADI) for the trial period; or

(b) apart from this Subdivision, the head company or single company would be:

(i) an *outward investing entity (non-ADI) and an *outward investor (financial) for the trial period; or

(ii) an *outward investing entity (non-ADI) and an *outward investor (general) for the trial period;

and at least one of the *Australian permanent establishments is a *permanent establishment through which a *foreign bank carries on banking *business in Australia.

(2) The *head company is also an outward investing entity (ADI) for the trial period if, apart from this Subdivision:

(a) the head company would satisfy subsection 820-585(2) for the trial period (triggering the exemption in section 820-585); or

(b) section 820-587 would apply Subdivision 820-D to the head company as if it were an *outward investing entity (ADI) for the trial period.

(3) The single company is also an outward investing entity (ADI) for the trial period if it is both a *foreign controlled Australian company and an *ADI for that period.

(4) The *head company or single company is an inward investing entity (ADI) for the trial period if:

(a) apart from this Subdivision, it would be an *inward investment vehicle (general) or an *inward investment vehicle (financial), and not an *outward investor (general) or an *outward investor (financial), for the trial period; and

(b) at least one of the *Australian permanent establishments is a *permanent establishment through which a *foreign bank carries on banking *business in Australia.

(5) The *head company or single company is an outward investing entity (non-ADI) and an outward investor (financial) for the trial period if, apart from this Subdivision, it would be an *outward investing entity (non-ADI) and:

(a) an *outward investor (financial); or

(b) an *outward investor (general);

for that period, and:

(c) at least one of the *Australian permanent establishments is a *permanent establishment of a *foreign entity that is a *financial entity; and

(d) none of the Australian permanent establishments is a permanent establishment through which a *foreign bank carries on banking *business in Australia.

(6) The *head company or single company is an inward investing entity (non-ADI) and an inward investment vehicle (financial) for the trial period if, apart from this Subdivision, it would be an *inward investing entity (non-ADI) and:

(a) an *inward investment vehicle (financial); or

(b) an *inward investment vehicle (general);

for that period and not an *outward investor (general) or an *outward investor (financial) for that period and:

(c) at least one of the *Australian permanent establishments is a *permanent establishment of a *foreign entity that is a *financial entity; and

(d) none of the Australian permanent establishments is a permanent establishment through which a *foreign bank carries on banking *business in Australia.

(7) This section has effect despite any other provision of this Division, except Subdivision 820-EA.

Note: If the head company or single company is an outward investor (financial) or inward investment vehicle (financial) under this section and satisfies subsection 820-430(5), it may choose under Subdivision 820-EA to be treated as an outward investing entity (ADI). Section 820-603 affects whether the company satisfies that subsection, by treating as part of the company each relevant foreign financial entity's Australian permanent establishment.