Private ruling: PAYG withholding obligations - assignees in global mobility program
Date of advice: 3 August 2017
Published: November 2017
Ruling period: Income year ending 30 June 2018 | Income year ending 30 June 2019 | Income year ending 30 June 2020 | Income year ending 30 June 2021
Date scheme commenced: 1 July 2017

Ruling: Q1: Is ABC Australia Pty Ltd (“ABC Australia”) required to account for PAYG pursuant to section 12-35 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953) in respect of ABC Belgium employees in Australia under a global mobility program, where the employee predominately only undertakes training, development and networking activities, with only some client related work (The Usual Arrangement)? | A1: No. | Q2: Does the type of visa obtained by the individual have any impact on the taxation outcome? | A2: No.

Relevant facts and circumstances: ABC Australia Pty Ltd (“ABC Australia”) is an Australian resident employer entity that is a member of the ABC global network of member firms that provides professional services. The ABC global member firms participate in global mobility programs. One of the major objectives of short term international assignments such as global mobility programs is to assist in the assignee’s career development. The ABC Global mobility program The ABC Global mobility program is an assignment program which offers generally three month work placements for employees of ABC. It provides a unique opportunity for ABC’ future leaders to gain essential international experience and a deeper understanding of the issues facing ABC’ clients in different markets. The main objectives of the program are to: ● Give ABC’ future leaders essential cross-border experience to support world-class teaming; ● Strengthen support for ABC’ top accounts, service line strategic needs, and skills shortages in priority emerging markets; and ● Facilitate the development of outstanding leaders with a global mindset and the ability to team collaboratively with those from different cultures in a way that leverages their different perspective. The ABC Global mobility program is a globally agreed arrangement which all ABC member firms participate in. There are foreign-resident assignees (“the assignees”) assigned to ABC Australia to participate in the program. The assignees in Australia will not be present in Australia for a period exceeding 183 days in an Australian year of income. The assignees remain employed by their foreign employer while in Australia. ABC Belgium, the “foreign employer” continues to pay the assignee’s fixed salaries while the assignees are in Australia. This salary is based on the foreign employment contract. The assignees remain resident of their home country for tax purposes while in Australia. The assignees continue to be subject to tax in their home country and the home country employer continues to withhold home country taxes on their salaries or they will pay tax on their salary. Visa Status Assignees enter Australia predominantly on a subclass 457 Temporary Work (Skilled) visa (issued before end of February 2018) or a Temporary Skills Shortage (TSS) visa or in some instances, on a subclass 400 Temporary Work (Short Stay Specialist) visa. Relationship between the Australian firm and the foreign employer The Global mobility program is created, owned and managed in accordance with the International Mobility Framework’s (IMF) Short Term Assignment policy. The foreign employer has identified that international experiences will be of benefit to its employees. The primary objective of the assignment of the assignees to ABC Australia is to provide foreign work-based training experience for employees of the foreign employer. It is not intended to meet any short-term resource needs in Australia. The foreign employer selects the candidates for the short-term assignments and has overall responsibility for the number of assignees assigned to Australia (however, agreed with the Australian firm). Globally, all transfers and assignment arrangements are governed by an Assignment Policy. There is no other specific contract or agreement between the Australian firm and the foreign employer. The foreign employer is not an Australian resident entity and does not have a permanent establishment in Australia. The foreign employer derives no income from the assignment. The assignees enter into employment contracts with the foreign employer before they are assigned to Australia (the Home Agreement). The assignees also enter into an agreement with the Australian firm (the Australian employment style work agreement). The Australian employment style work agreements are necessary for meeting the Australian firm's risk management requirements and to comply with certain legal requirements. They are not intended to be a formal employment contract. In providing the assignees with an Australian employment style work agreement there is no intention to create a formal financial contractual relationship between the Australian firm and the assignees. The Australian employment style work agreement outlines the assignee’s working conditions with the Australian firm such as duration of assignment, normal working hours, work location and dress standards. The Australian employment style work agreement is to be read in conjunction with the assignee’s Home Agreement. Certain clauses within the Australian employment style work agreement expressly refer to the terms of the assignee’s Home Agreement. Terms relating to remuneration, leave entitlements and termination are based on the assignee’s Home Agreement. The Australian firm provides the assignees with instructions as to the activities to be undertaken which will be carried out at either the Australian firm's work premises or client premises under the control and responsibility of the Australian firm. While working in Australia, the assignees will need to comply with the Australian firm's regulations, risk management and quality control protocols. Some assignees may undertake work which can be chargeable to clients of the Australian firm. The extent of monetary reward to the Australian firm will be determined by the amount of chargeable activity that the assignees are engaged in and will vary depending upon the individual assignees and the particular client with whom they may work. The Australian firm does not consider chargeable work a key element of the assignment. However, doing Australian client work may be incidental to the activities undertaken by the assignees as a requirement of due process. The foreign ABC office will receive no compensation as a result of the assignee’s presence in Australia. The Australian firm bears the responsibility for any work produced by the assignees and would be responsible for claims arising out of any defective work produced by the assignees or for any act of fraud or negligence during their participation in the program. All work completed by the assignees will be thoroughly reviewed by the Australian firm. Career development in a global environment The overall purpose of the assignee’s work at the Australian firm is career development. The Global mobility program sets out the training and work experience program objectives. The assignees receive training in professional services and practices which can be applied in the home country. The overarching objective and intent of the assignee’s participation in the program is to provide them with international experience and skills able to be utilised in their employment by the foreign employer. The assignment of assignees to Australia is neither intended to benefit the Australian entity economically nor result in material costs to the Australian firm. Costs and allowances The foreign employer does not charge the Australian firm for the provision of assignees. All the salary and social costs related to the assignees are borne by the home employer and not recharged to ABC Australia by the foreign employer. The foreign employer will be responsible for transportation costs (such as flights, excess baggage) and home country tax compliance. The Australian firm may: ● Provide the assignees with a daily per diem to subsidise daily living expenses such as food, laundry, public transportation, personal phone calls, etc; ● Meet the cost of corporate housing for the assignee for the duration of the assignee’s stay; ● Meet the cost of immigration compliance including the provision of a salary supplement if required; and ● Meet the cost of Australian tax compliance if required. In relation to the daily per diem provided: ● ABC Australia is required to pay the daily per diem as a participant to the Global mobility program (similarly, if an employee of ABC Australia participates in the program and is assigned to ABC Belgium office, ABC Belgium is required to pay the daily per diem as a participant to the Global mobility program); ● the cost remains a cost to ABC Australia, and is not recharged to a ABC Global pool, nor recharged to the assignee’s home country employer (similarly, if an employee of ABC Australia participates in the program and is assigned to ABC Belgium office, ABC Belgium would not seek to recharge the cost to ABC Australia); ● it is a travel allowance, intended to be used by the assignee to purchase food, drink and other incidental expenses that may arise as a result of the assignee being away from their ordinary place of residence (which is overseas); ● it varies depending on the Australian city the assignees are located in, and will range from $43 to $57 per day; and ● it is less than the Commissioner’s prescribed reasonable amount as set out in Taxation Determination TD 2016/13 Income tax: what are the reasonable travel and overtime meal allowance expense amounts for the 2016-17 income year (TD 2016/13). The Australian firm does not provide any other allowance in relation to the employment in Australia. None of the costs incurred by the foreign employer are recharged or otherwise invoiced to the Australian firm. Assumption(s) None

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Subsection 6-5(3) | Income Tax Assessment Act 1997 Section 6-10 | Income Tax Assessment Act 1997 Subsection 6-10(3) | Income Tax Assessment Act 1997 Section 6-20 | Income Tax Assessment Act 1997 Division 900 | Income Tax Assessment Act 1997 Subdivision 900-B | International Tax Agreements Act 1953 Section 11C | International Tax Agreements Act 1953 Schedule 13 | Taxation Administration Act 1953 S ection 12-1 of Schedule 1 | Taxation Administration Act 1953 Subsection 12-1(1A) of Schedule 1 | Taxation Administration Act 1953 Section 12-35 of Schedule 1

Reasons for decision: Summary: ABC Australia is not required to account for Pay As You Go (PAYG) pursuant to section 12-35 of Schedule 1 to the Taxation Administration Act 1953 (TAA) in respect of ABC Belgium employees in Australia under the Global mobility program, where the foreign employee predominately only undertakes training, development and networking activities, with only some client related work. | Detailed Reasoning - Detailed reasoning: Section 12-35 of Schedule 1 to the TAA states that an entity must withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an employee (whether of that or another entity). In other words, the entity that makes payments of salary, wages, commission, bonuses or allowances to an employee must withhold for PAYG. The terms “employee”, “salary”, “wages” and “allowances” are not defined in the TAA, and as such for the purpose of section 12-35 of Schedule 1 to the TAA, these terms takes on their ordinary meaning. In relation to the consideration of “employee”, information and documents provided by you shows that the assignees are employees of the home country, thus the assignees are “employees” for the purpose of section 12-35 of Schedule 1 to the TAA. As such, in relation to payments made to assignees participating in the Global mobility program, ABC Australia has PAYG withholding obligations under section 12-35 of Schedule 1 to the TAA where: a) ABC Australia is the entity that makes the payments that may be subject to PAYG withholding; b) these payments can be characterised as salary, wages, commission, bonuses or allowances; and c) these payments are paid to an individual as an employee of an entity (the entity in this instance does not have to be ABC Australia). You have advised that, under the Global mobility program, the following payments are made to assignees: ● salary (borne by the foreign employer); ● payments to meet the cost of the following (borne by ABC Australia): a. corporate housing for the assignee for the duration of their stay in Australia; b. immigration compliance including the provision of a salary supplement if required; and c. Australian tax compliance if required; and ● daily per diem (borne by ABC Australia). | Detailed Reasoning - Salary: Information and documents you have provided indicates that it is the foreign employer, and not ABC Australia, that pays the assignee’s salary while the assignee is in Australia under the Global mobility program. As ABC Australia is not the entity that pays the assignee’s salary, ABC Australia is not require to withhold PAYG under section 12-35 of Schedule 1 to the TAA in relation to the assignee’s salary. | Detailed Reasoning - Payments to meet certain costs associated with assignees: You indicated that ABC Australia may provide assignees with payments to meet the cost of the following: ● corporate housing for the assignee for the duration of their stay in Australia; ● immigration compliance including the provision of a salary supplement if required; and ● Australian tax compliance if required. As these payments do not appear to be salary, wages, commission or bonuses, ABC Australia is required to withhold PAYG under section 12-35 of Schedule 1 to the TAA if the above payments are considered to be allowances. As “allowances” is not defined in the TAA, we need to consider if these payments are “allowances” in the ordinary sense. "Allowance" is defined in the Macquarie Dictionary as "a definite sum of money allotted or granted to meet expenses or requirements". The ATO’s view of what constitute an allowance is found in Taxation Ruling TR 92/15 Income tax and fringe benefits tax: the difference between an allowance and a reimbursement (TR 92/15). Paragraph 6 of TR 92/15 explains that an allowance will usually consist of the payment of a definite predetermined amount to cover an estimated expense, and will be paid regardless of whether the recipient incurs the expected expense. In Case 153 10 TBRD 480, the Taxation Board of Review said at 484: Our view is that between employer and employee there is a marked difference between a reimbursement and an allowance. A reimbursement transfers from the employee to the employer the burden of expenses actually incurred in the course of employment. An allowance is designed to compensate the employee because the employer does not wish to be under the obligation of meeting such expenses directly or indirectly. Based on the information and documents provided, it does not appear that assignees bear the burden of expenses associated with corporate housing, immigration compliance, and Australian tax compliance. On the contrary, as per information and documents provided, ABC Australia (as the host country for the assignees), is to cover the cost of the following: ● The actual cost of housing; ● Other immigration specific costs and salary supplement; and ● Costs such as tax return and tax meetings. The above suggests that ABC Australia is willing to take the burden or obligation relating to the above costs which would otherwise be incurred by the assignees. It is not the case that an amount is paid to the assignee regardless of whether the assignee will incur the expected expense, but that the actual costs of these expenses will be met by ABC Australia. As such this supports the finding that the payments are in the form of reimbursements, and not allowances. As such this supports the finding that the payments are in the form of reimbursements, and not allowances. Thus, ABC Australia is not required to withhold PAYG under section 12-35 of Schedule 1 to the TAA in relation to payments to meet the costs of the following: ● corporate housing for the assignee for the duration of their stay in Australia; ● immigration compliance including the provision of a salary supplement if required; and ● Australian tax compliance if required. | Detailed Reasoning - Daily per diem: You indicated that ABC Australia may provide assignees with a daily per diem to subsidise daily living expenses such as food, laundry, public transportation, and personal phone calls. In relation to the daily per diem provided, you indicated that: ● the cost remains a cost to ABC Australia, and is not recharged to a ABC Global pool, nor recharged to the assignee’s home country employer; ● ABC Australia is required to pay the daily per diem as a participant to the Global mobility program; ● it is a travel allowance, intended to be used by the assignee to purchase food, drink and other incidental expenses that may arise as a result of the assignee being away from their ordinary place of residence (which is overseas); ● it varies depending on the Australian city the assignees are located in, and will range from $43 to $57 per day; and ● it is less than the Commissioner’s prescribed reasonable amount as set out in Taxation Determination TD 2016/13 Income tax: what are the reasonable travel and overtime meal allowance expense amounts for the 2016-17 income year (TD 2016/13). As the per diem is an allowance, ABC Australia is prima facie required to withhold PAYG under section 12-35 of Schedule 1 to the TAA unless an exception applies. Based on the facts and circumstances of this case, we have considered whether the daily per diem: ● is an allowance where the payer’s obligation to withhold PAYG can be varied to nil; and/or ● is a payment which satisfies one of the general exceptions in section 12-1 of Schedule 1 to the TAA, and thus is a payment which the payer is not required to withhold PAYG under section 12-35 of Schedule 1 to the TAA. Legislative Instrument No. F2015L01047 and the daily per diem You have indicated that the per diem is a travel allowance which is less than the Commissioner’s prescribed amounts under TD 2016/13. Division 900 of the ITAA 1997 sets out substantiation rules that apply to certain types of losses or outgoings. Taxation Ruling TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses (TR 2004/6) explains the way in which the substantiation exception in Subdivision 900-B of the Income Tax Assessment Act 1997 (ITAA 1997) operates for work expenses of employees that include reasonable travel allowance expenses, and includes an explanation of 'travel allowance’. Paragraph 5 of TR 2004/6 explains that in addition to TR 2004/6, the Commissioner publishes amounts that are considered to be reasonable for the purposes of the substantiation exception – for example, TD 2016/13. The types of allowances referred to in Division 900 of the ITAA 1997 are the types of allowances considered in Legislative Instrument No. F2015L01047 Australian Taxation Office - Taxation Administration Act 1953 - Pay as you go withholding - PAYG Withholding Variation: Allowances (Legislative Instrument No. F2015L01047), which applies from 1 July 2015. It states that there are no requirements to withhold an amount from allowances described in the legislative instrument, provided: ● the payee is expected to incur expenses that may be able to be claimed as a tax deduction at least equal to the amount of the allowance; and ● the amount and nature of the allowance is shown separately in the accounting records of the payer. A type of allowances referred to in Legislative Instrument No. F2015L01047 is Domestic or overseas travel allowance (excluding overseas accommodation allowance) involving an overnight absence from the payee's ordinary place of residence up to reasonable allowances amount published in the annual ATO Ruling. Paragraph 34 of TR 2004/6 explains that TR 2004/6 also has application to employers for determining whether or not amounts required to be withheld from payments of travel allowances can be varied where special circumstances exist. This is consistent with the PAYG withholding treatment of travel allowances as stated in Legislative Instrument No. F2015L01047. As such, if the daily per diem satisfies the conditions of Legislative Instrument No. F2015L01047, ABC Australia’s requirement to withhold PAYG under section 12-35 of Schedule 1 to the TAA in respect of the daily per diem is varied to nil. Based on the information and documents provided, we do not consider that the daily per diem satisfies the conditions of Legislative Instrument No. F2015L01047. The type of allowance most applicable to this case is that which concerns domestic or overseas travel allowances, mentioned above. However the type of employee to which this concession is aimed at is one whose ordinary place of residence is in Australia and who is required to travel domestically (within Australia but away from their ordinary place of residence); or to travel overseas away from Australia. It does not contemplate a converse scenario in which the payee is resident overseas and working temporarily in Australia. As such, ABC Australia is required to withhold PAYG from the daily per diem under section 12-35 of Schedule 1 to the TAA unless the daily per diem is a payment that satisfies a general exception under section 12-1 of Schedule 1 to the TAA. Section 12-1 of Schedule 1 to the TAA and the daily per diem Section 12-1 of Schedule 1 to the TAA provides general exceptions to the PAYG withholding obligations. Subsection 12-1(1A) of Schedule 1 to the TAA states an entity need not withhold an amount under Subdivision 12-B (which contains section 12-35) from a payment if the whole of the payment is not assessable income and is not exempt income of the entity receiving the payment. Subsection 6-5(3) and subsection 6-10(3) of the ITAA 1997 provides that the assessable income of a foreign resident includes ordinary and statutory income derived by the non-resident directly or indirectly from Australian sources and other ordinary or statutory income that a provision includes in your assessable income for the income year on some basis other than having an Australian source. In other words, a non-resident is generally liable to Australian tax only on ordinary and statutory income from Australian sources. Allowances are statutory income under section 6-10 of the ITAA 1997, as per section 15-2 of the ITAA 1997. As such, it is necessary to determine whether or not the assignee is a resident of Australia and then to determine the source of the income concerned (in this case the per diem). Subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) defines a resident or resident of Australia. In part it states: ● A person, other than a company, who resides in Australia and includes a person: − whose domicile is in Australia, unless the Commissioner is satisfied that his permanent place of abode is outside of Australia − who has actually been in Australia, continuously or intermittently, during more than one half of the year of income, unless the Commissioner is satisfied that his usual place of abode is outside of Australia and that he does not intend to take up residence in Australia; or who is: ● a member of the superannuation scheme established by deed under the Superannuation Act 1990; or ● an eligible employee for the purposes of the Superannuation Act 1976; or ● the spouse, or a child under 16, of a person covered by sub-subparagraph (A) or (B) ... In this case, as per information and documents provided, the Global mobility program supports short term mobility assignments of a period of generally three months. You have also indicated that assignees will not be present in Australia for a period exceeding 183 days in an Australian year of income. As such, the domicile of assignees is not in Australia, the assignees have not been continuously or intermittently in Australia during more than one half of the year of income and none of the three criteria under paragraph 6(1)(a)(iii) of the ITAA 1936 has been satisfied. As none of the conditions under subsection 6(1) of the ITAA 1936 have been met the assignees are not considered residents of Australia. As assignees are considered non-residents, income derived can only be assessable in Australia if that income is sourced in Australia. The source of income derived from employment is generally the place where the duties or services are performed. The remuneration received by the assignees while working in Australia has an Australian source. In determining liability on tax on Australian-sourced income received by a non-resident it is necessary to consider not only the income tax laws in Australia but also any applicable double tax agreement. The International Tax Agreements Act 1953 – Schedule 13 - Belgian Agreement operated to avoid the double taxation of income received by a non-resident of Australia from Australian sources. The Belgian Agreement was initially inserted as Schedule 13 to the International Tax Agreements Act 1953 (ITAA 1953) by Act No. 134 of 1977. Schedule 13 was repealed by Act No 45 of 2011 which however did not affect the operation of the agreement. The text of the agreement is set out in Australian Treaty Series 1979 No. 21 ([1979] ATS 21) (Belgian Agreement). The agreement is given the force of law by section 11C of the ITAA 1953. Article 15 of the Belgian Agreement outlines the treatment of income from employment. Sub-article 15(1) of the Belgian Agreement provides that remuneration derived by a resident of Belgium shall be taxable in Belgium unless the employment is exercised in Australia. If the employment is exercised in Australia then the income may also be taxed in Australia. Sub-article 15(2) of the Belgian Agreement contains a general exception to the rule in sub-article 15(1) of the Belgian Agreement. This exemption generally concerns employment of short duration abroad. For remuneration to qualify for the exemption, the following three conditions prescribed in sub-article 15(2) of the Belgian Agreement must be satisfied concurrently: (a) the recipient (the foreign assignee) is present in that other State (Australia) for a period or periods not exceeding in the aggregate 183 days in the year of income or in the taxable period, as the case may be, of that other State (Australia); and (b) the remuneration (per diem – allowance) is paid by, or on behalf of, an employer who is not resident of that other State (being ABC Belgium); and (c) the remuneration (per diem – allowance) is not deductible in determining taxable profits of a permanent establishment or a fixed base which the employer has in that other State (Australia). Paragraph (a) of Sub-Article 15(2) of the Belgian agreement The condition of paragraph (a) of Sub-Article 15(2) has been met as: ● the assignees are bound to only be assigned for a period of generally three months which is less than 183 days; and ● you have also indicated that assignees will not be present in Australia for a period exceeding 183 days in an Australian year of income. Paragraph (b) of Sub-Article 15(2) of the Belgian agreement Paragraph 5 of Taxation Ruling TR 2013/1 Income tax: the identification of 'employer' for the purposes of the short-term visit exception under the Income from Employment Article, or its equivalent, of Australia's tax treaties (TR 2013/1) explains that the term “employer” is not defined for the purposes of the short-term visit exception in provisions of Australia’s DTAs equivalent to Article 15(2) of the OECD Model Tax Convention on Income and on Capital ('the OECD Model’). In the case of Belgian DTA, as the term “employer” is not defined, it takes its meaning from Australian domestic law, as well as the context, object and purpose of the short-term visit exception, especially subparagraphs (b) and (c) of the OECD Model. With regards to subparagraphs 15(2)(b) and (c) of the OECD Model, the object of these paragraphs are set out in paragraph 6.2 of the Commentary on Article 15 of the OECD Model as follows: The object and purpose of subparagraphs b ) and c ) of paragraph 2 are to avoid the source taxation of short-term employments to the extent that the employment income is not allowed as a deductible expense in the State of source (in this case Australia) because the employer is not taxable in that State as he neither is a resident nor has a permanent establishment therein. These subparagraphs can also be justified by the fact that imposing source deduction requirements with respect to short-term employments in a given State may be considered to constitute an excessive administrative burden where the employer neither resides nor has a permanent establishment in that State. When determining which entity is the “employer”, a substance over form approach, should be adopted in analysing the relevant employment relationships. Under the economic employer approach, each case is examined to determine which entity exercises the main functions of the real employer. This is largely a matter of fact and degree having regard to all the relevant factors. Paragraph 13 of TR 2013/1 lists a number of factors to be taken into consideration when determining which entity is the real employer. In considering these factors in light of the circumstances of this case, we have taken the following considerations into account. In this case, ABC Belgium: ● exercises ultimate control over the assignees; ● remains responsible for leave entitlements; ● remains responsible for the payment of salary for the assignee’s services; and ● has an obligation to tax the salary of the assignees, pay superannuation contributions and workers compensation insurance. In this case, ABC Australia: ● is responsible for day to day control over assignees; ● bears the responsibility or risk for the results produced by the assignees; and ● provides the necessary equipment and resources to enable the assignees to perform the work. The assignment documentation does not specify whether a specified result is to be achieved at the conclusion of the assignment and it is silent on the subject of whether work can be delegated by the assignees. As a result it is assumed that there is no specified result to be achieved nor can work be delegated. The nature of the services rendered by the assignee is not an integral part of the business activities of ABC Australia. From the information supplied on balance, it is considered that ABC Belgium is the real employer of the assignee. As ABC Australia is paying the per diem, paragraph (b) of Sub-Article 15(2) will be satisfied if the per diem is paid by ABC Australia on behalf of ABC Belgium, who is not a resident of Australia. In relation to the phrase “on behalf of”, this term is not defined in the Belgian DTA nor the Agreements Acts. Also, Commentary on Article 15 of the OECD Model is silent on the term “on behalf of”. As such, the term “on behalf of” takes on its ordinary meaning. The Macquarie Dictionary defines “on behalf of” as: 1. as a representative of; 2. in the interest of, in aid of. In this case, ABC Australia is paying per diem to foreign assignees (whom are considered to be employees of ABC Belgium), but does not charge the cost of providing the per diem back to ABC Belgium. There is an issue of whether remuneration will be considered paid 'by’ or 'on behalf of’ an employer where the employer receives the benefits of employee’s work but does not bear any expense for it. An indicative approach taken by commentators on the operation of sub-article 15(2) of the OECD model in relation to such instances is that the remuneration should still be considered as paid 'on behalf of’ if the facts indicate an employment relationship and if the remuneration should have been charged back under the correct application of arm’s length principles following a corresponding adjustment in the profits. In light of the above approach, we consider that the per diem is paid by ABC Australia on behalf of ABC Belgium as: ● ABC Belgium and not ABC Australia is the employer of the foreign assignees as discussed above; and ● The per diem should theoretically be charged back to ABC Belgium if there is an adjustment in profits under the correct application of arm’s length principles between ABC Australia and ABC Belgium. This is due to the fact that the per diem is an expense incurred as part of the assignees’ participation in the Global mobility program, which facilitates their career and skills development, from which ABC Belgium, as their employer, will benefit. If this is the case, the per diem expense would not be allowed as a deductible expense of ABC Belgium in Australia for the reasons discussed below. Paragraph (c) of Sub-Article 15(2) of the Belgian Agreement As ABC Belgium does not have a permanent establishment or a fixed base in Australia, the per diem will not be deductible in determining taxable profits of a permanent establishment or a fixed base which ABC Belgium has in Australia. As such the conditions of paragraph (c) of Sub-Article 15(2) of the Belgian agreement is satisfied. Conclusion – Application of Article 15 of Belgian DTA and section 12-1 of Schedule 1 to the TAA to the per diem As all three conditions of Sub-Article 15(2) of Belgian agreement have been met, the per diem will not be taxable in Australia. As such, the per diem received by the assignees is not assessable income and is not exempt income of the assignees, as defined under section 6-20 of the ITAA 1997. As the per diem is non-assessable non-exempt income of the assignee, the conditions of subsection 12-1(1A) of Schedule 1 to the TAA has been satisfied, and consequently there is no obligation on ABC Australia to withhold from the per diem paid to the assignees under section 12-35 of Schedule 1 to the TAA. Summary – daily per diem As the per diem is non-assessable non-exempt income of the foreign assignee due to the application of Article 15 of the Belgian DTA, ABC Australia is not required to withhold PAYG under section 12-35 of Schedule 1 to the TAA as per subsection 12-1(1A) of Schedule 1 to the TAA. | Detailed Reasoning - Conclusion: In conclusion, in relation to assignees participating in the Global mobility program and the assignees are those as described in “The Usual Arrangement”: 1. Salary : ABC Australia is not require to withhold PAYG under section 12-35 of Schedule 1 to the TAA in relation to the assignee’s salary as ABC Australia is not the entity that pays the assignee’s salary. 2. Payments to meet certain costs : ABC Australia is not required to withhold PAYG under section 12-35 of Schedule 1 to the TAA as these payments are not in the form of salary, wages, commission, bonuses or allowances. Particularly, they are considered to be reimbursements and not allowances. 3. Daily per diem : ABC Australia is not required to withhold PAYG under section 12-35 of Schedule 1 to the TAA as the per diem is non-assessable non-exempt income to the assignees, and as such the condition in subsection 12-1(1A) of Schedule 1 to the TAA has been satisfied. | Summary: The type of visa obtained by the individual does not have any impact on the taxation outcome. | Detailed Reasoning - Detailed reasoning: As discussed in Question 1, withholding obligations under section 12-35 of Schedule 1 to the TAA involves examining: ● Who makes the payments that may be subject to PAYG withholding; ● Whether those payments can be considered as salary, wages, commission, bonuses or allowances; and ● Whether those payments are paid to an individual as an employee of an entity. Regardless of the type of visa obtained by assignees under the Global mobility program, the nature of the payments received by the assignees remains the same – that is, assignees receives the following payments under the Global mobility program: ● salary (borne by the foreign employer); ● payments to meet the cost of the following (borne by ABC Australia): a. corporate housing for the assignee for the duration of their stay in Australia; b. immigration compliance including the provision of a salary supplement if required; and c. Australian tax compliance if required; and ● daily per diem (borne by ABC Australia). As such, the following applies in relation to these assignees so long as other facts remain the same: 1. Salary : ABC Australia is not require to withhold PAYG under section 12-35 of Schedule 1 to the TAA in relation to the assignee’s salary, as ABC Australia is not the entity that pays the assignee’s salary. 2. Payments to meet certain costs : ABC Australia is not required to withhold PAYG under section 12-35 of Schedule 1 to the TAA, as these payments are not in the form of salary, wages, commission, bonuses or allowances. Particularly, they are considered to be reimbursements and not allowances. 3. Daily per diem : ABC Australia is not required to withhold PAYG under section 12-35 of Schedule 1 to the TAA as the per diem is non-assessable non-exempt income to the assignees, and as such the condition in subsection 12-1(1A) of Schedule 1 to the TAA has been satisfied.