U.S. multinationals with Australian operations can potentially be subject to double taxation based on Australia’s “hybrid mismatch rules.” These rules include a specific amount that is “subject to foreign tax” if it corresponds to Australia’s Controlled Foreign Company (CFC) rules that tax certain types of income in Australian-controlled foreign companies. The issue then becomes whether the U.S. GILTI rules correspond to Australia’s CFC rules.
The U.S. GILTI rules include certain income amounts of U.S.-controlled foreign companies in the U.S. tax base. The rules are meant to discourage the shifting of profits outside the U.S. that can otherwise be easily moved offshore such as intellectual property and other intangibles.
President Biden signed the Inflation Reduction Act of 2022 into law on August 16, 2022. As U.S. multinationals evaluate impact of changes in the new legislation, they need to consider the risk of double taxation for operations in countries with rules like Australia’s “hybrid mismatch rules.” .
That said, the hybrid mismatch rules are complex. There may be other provisions available under the rules to avert the potential double taxation impact of TD 2022/9, for which professional advice should be sought.
Click here to read the full article, prepared in partnership with Allinial Global member firm, Bentleys (Australia). As members of Allinial Global and TIAG, we leverage global relationships with like-minded firms across the globe and work together to deliver best-in-class solutions to our clients’ business needs. For more information about the interaction between U.S. and Australian tax regulations, contact us. We are here to help.
Partner-in-Charge, International Tax Services
Vince Houk, CPA, has more than 18 years of tax experience, including more than 12 years serving multinational…
Director, Transfer Pricing Services
Josh Finfrock has more than 17 years of experience working with multi-…