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Inbound distributor compliance guideline

Inbound distributor compliance guideline

The Australian Taxation Office (ATO) has released a draft guidance outlining high, medium and low risk EBIT margins for inbound distributors.


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The Australian Taxation Office (ATO) has released new guidance outlining its compliance approach to ‘inbound’ Australian distributors. The draft guidance, titled PCG 2018/D8 Transfer pricing issues related to inbound distribution arrangements (the PCG) outlines the ATO’s approach to risk rating based on profit level and functional factors for Australian inbound distributors, and at what profit levels it may dedicate resources to investigate further their transfer pricing arrangements.

Consistent with previous ATO PCGs released for marketing hubs (PCG 2017/1) and intra-group debt arrangements (PCG 2017/4), the PCG provides a high, medium low risk coloured zoning classification based on the Earnings Before Interest and Tax (EBIT) margin achieved by the inbound distributor. As such, the PCG represents a new and additional tool for the ATO in its attempts to shape and influence the behaviour of multinationals with respect to their transfer pricing distribution arrangements in Australia.

The PCG results in numerous considerations for Australian inbound distributors, both in the application of the PCG and how taxpayers may choose to respond.

The ATO has divided inbound distributors into four key industry categories, being:

  1. Life Sciences (including Pharmaceuticals)
  2. Information and Communication Technology (ICT)
  3. Motor Vehicles
  4. A ‘catch-all’ General Distributor category.


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