On 28 June 2023, the ATO released a draft update to Practical Compliance Guideline PCG 2018/9DC1 (revised Draft PCG), which maintains its revised stricter approach to the central management and control (CMC) test of company residency per Taxation Ruling 2018/5 (TR 2018/5) and adds a new risk assessment framework. This is designed to assist foreign incorporated companies self-assess whether the ATO is likely to apply compliance resources to review their tax residency. The new framework replaces the ATO’s extended transitional compliance approach, where a company could rely on the concession under TR 2004/15 (now withdrawn).
In response, BDO has prepared a submission outlining the issues of concern in the revised Draft PCG including providing reference to and explanation of relevant provisions in relation to permanent establishment/branch exemption rules and the similarity of treatment for a controlled foreign company (CFC) under the CFC rules (section 23AH ITAA 1936, subdivisions 768-A and 768-G ITAA 1997, and Part X of ITAA 1936).
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