ATO Guidelines on the Attribution of Profits to an Agency PE

The Australian Taxation Office (ATO) released on 6 of October 2005 a guide on how to apply Australia’s permanent establishment (PE) attribution rules to an Agency PE. The guide, which is based on several ATO taxation rulings, follows in part a previous ATO discussion paper on attribution of profits to commissionaire PE’s, released on 30 of June 2002.
The guidelines released by the ATO include:
- A summary of the principles and approaches used by the ATO to attribute profits to Agency PE’s; and
- Examples illustrating how these principles and approaches are applied to sales agency and toll manufacturing patterns.

The ATO position appears to be largely based on the recent OECD approach on attribution profits to PE’s. In fact, the similarity in approaches between the OECD and the ATO are evident on the fact the both differentiate between functions, assets and risks assumed by the dependent agent and functions, assets and risks of the Agency PE.

If you are interested on the subject, see also the UK approach dealing with solutions involving marketing and distribution - commissionaires.

Since this is a subject of my personal interest I will come back to it soon.