KPMG hosts Chevron insights session | KPMG | AU
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KPMG hosts Chevron insights session

KPMG hosts Chevron insights session

Angela Wood, Frank Putrino, Alex Patrick, and Andy Bubb highlight key points coming from the Chevron case.


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On 1 May 2017, KPMG hosted John de Wijn Q.C. together with 35 Heads of Tax from Melbourne’s large multinational organisations. The group gathered to discuss the Full Federal Court of Australia’s much anticipated transfer pricing decision in Chevron Australia Holdings Pty Ltd v Commissioner of Taxation [2017] FCAFC 62, handed down on 21 April 2017, in which John de Wijn Q.C. appeared as Counsel for the Commissioner.

The Tax Insight article ublsihed on 24 April 2017 (Chevron Australia loses Full Federal Court appeal), identified that this decision has implications not only for taxpayers with cross-border related party financial dealings, but also for taxpayers with other cross-border related party dealings.

The group discussed how these implications extend to all taxpayers preparing for, or already the subject of, early engagement, review or audit by the Commissioner – not just those with related party dealings similar to Chevron.

The key themes discussed were the:

  • importance of taxpayers quickly establishing and evidencing key facts – fundamental in the context of the Court’s finding that the “task of ascertaining the arm’s length consideration is… fundamentally a factual inquiry into what might reasonably be expected if the actual agreement had been unaffected by the lack of independence and the lack of arm’s length dealing” (refer Pagone J at [126])
  • Court’s finding that the “prediction of what might reasonably be expected is not to be undertaken” as if a taxpayer’s Australian business is an “orphan” (separate from, and independent of, its multinational parent), but rather as if it were its parent’s “twin” (refer Pagone J at [130])
  • optics of a disputed transaction, and the importance of related party dealings making economic and commercial sense.

The group agreed that these themes will continue to play out in preparing for and resolving tax disputes over the next decade. They will also require taxpayers to consider related party transactions going forward, and more importantly, consider the Commissioner’s view on related party transactions entered into in prior years.

With very little existing case law on the interpretation and application of Australia’s transfer pricing legislation, the Court’s decision serves as a reminder to taxpayers that in addition to transfer pricing, they must focus on the commerciality, economics and evidence underpinning related party and cross-border transactions.

With the response to this event being resoundingly positive, and guests appreciating the opportunity to discuss these key themes, we will be hosting Tom Thawley S.C. (Counsel for the Commissioner) together with Kristen Deards (Counsel for Chevron) at a similar event in Sydney on 1 June 2017.

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