Tag Archives: International Tax; Expanding overseas; Tax Residence; Corporate Tax Residence; Company Tax

Are you sure your foreign company is outside the Australian tax net?

On 30 June 2017, a paper of mine was published in the Asia Pacific Tax Bulletin.

The article discusses the impact of the High Court decision in Bywater and specifically addresses whether it:

  1. represented a clear step towards a substance over form approach in applying the central management or control test; or
  2. did no more than confirm the status quo as a purely factual analysis in the particular circumstances.

As e-commerce and the digital economy continue to change the global economic landscape, expanding overseas isn’t as simple as incorporating a company in a chosen jurisdiction. Rather, Australian proprietors have to ensure that they successfully navigate both Australia’s tax residence rules and the controlled foreign company regime in order to ensure that the income generated offshore is not taxed directly in the hands of either:

  1. the foreign-incorporated company itself (where it is treated as an Australian tax resident); or
  2. any Australian-resident controller(s) (where the foreign-incorporated company is not an Australian tax resident but it is a controlled foreign company with attributable income)

It is only after jumping through these two hoops that Australian shareholders will be taxed in the ordinary course as and when the relevant foreign company distributes dividends.

If you or your clients need any assistance in relation to expanding overseas, or to review any existing structures, feel free to get in touch!