In Episode 6 of Tax Chats: International Tax (101), Danielle delves into the complexities of transfer pricing, specifically focusing on issues for inbound taxpayers. 

These arrangements involving foreign-owned corporations, pose distinct tax challenges compared to their outbound counterparts. Transfer pricing is a key tax risk for these types of taxpayers, and it is critical to ensure taxpayers have reviewed and have documented support for their transfer pricing position each year before the lodgment of the Australian income tax return.

Tax Chats (International Tax 101) is a ten-part series where Danielle provides quick and practical updates on topical international tax issues. These updates are designed to help you (or your clients) identify and understand potential international tax and transfer pricing risks before any ATO review activity. 

If you have any questions in relation to international tax and transfer pricing, please contact Danielle by emailing [email protected].

Key takeaways:

1. Distributors – A common inbound arrangement, which generally requires specific profit margin expectations to be met, with a guideline usually around a 3% Return on Sales in line with the ATO’s Simplified TP Documentation Options in PCG 2017/2.

2. Service providers – A Cost Plus Margin is common for these types of taxpayers and mark-ups are usually in the range of 5% - 15% depending on the types of services being performed in Australia.

3. Transfer Pricing documentation – critical for taxpayers to have each year to ensure the transfer pricing is being properly applied and support is available for any ATO enquiries.  

Danielle Sherwin

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Danielle is a Partner in the Tax Services division in the Sydney office. 

Danielle specialises in international tax, with a focus on transfer pricing and international tax. She assists her clients with their international tax planning and transfer pricing needs, ranging from Significant Global Entities (SGE) assessment, Country-by-Country (CBC) reporting, transfer pricing planning and advisory to transfer pricing compliance and documentation. 

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