If you are an overseas citizen or entity and want to conduct some business in Australia, you need to ensure that you conform with the various (and often complicated) tax laws. Some of these regulations are designed to clamp down on loopholes that may have been exploited by foreign firms in the past. Consequently, you need to be particularly careful to determine whether your operation can be classified as a 'permanent establishment' or not. What do you need to know about this type of determination?
Working out Your Position
As you can imagine, this law is very involved, and you need to take qualified legal advice to make sure that you do not fall foul.
Generally speaking, the ATO defines a permanent establishment as a 'fixed' place of business through which your enterprise carries on its trade. This does not mean that the enterprise has to have an actual building somewhere within the Australian continent. In fact, the tax authority uses a variety of different tests to determine the relationship between all those involved in providing goods and services. Some of these tests may want to know how you attract new customers, how they interact with you, how you support them and how you market to them in the first place.
Determination
Certainly, if you have a fixed place of business in Australia and are a foreign entity, then this will undoubtedly be classified as a permanent establishment. On the other hand, if you supply goods to an independent distributor in Australia and those goods generate sales income in this country, then your foreign entity could be classified as a permanent establishment too.
Tax Treaties
If this does happen to be the case, you need to look further into the various tax treaties between Australia and your home country. This will determine exactly what taxes you need to pay and when you should pay them.
Gearing up
If you do have a permanent establishment in Australia, then you will need to set up procedures to deal with it properly and carefully. You need to ensure that all documentation is lodged, that you have accounting standards in place and, of course, that the proper tax (if any is due) is paid.
Getting Advice
Get in touch with an accountant who specialises in helping overseas entities with their tax affairs. They'll help you keep on the right side of the law and advise accordingly.
For more information, contact a taxation service.
Share25 September 2020
Hi, everyone. Nancy here. I am currently studying for my degree in mathematics. As part of the “maths in the workplace” component of my degree, I am doing an internship with an auditing firm. Of course, getting to apply maths in a practical setting has been an absolute joy, but there have been a number of frustrations too. It has been a real eye-opener to see how many businesses have a haphazard approach to accounting and book-keeping. One of the jobs the auditing firm undertakes is to recommend improved accounting practices. A number of businesses which have hired professional accountants since the last audit have definitely thrived! I hope this blog captures the beauty of applying mathematical principles to business and using tried and true accounting methods. I trust my entries add up properly to give you an equal share of information and inspiration. Thank you.