Document ID: chunk:federal_register_of_legislation:C2025C00029:section:3:p7
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 3 (pt 7/18)
Character Range: 7491234–7493906

deduction
832‑730 Back to back arrangements, etc.
832‑735 Determination may specify kinds of scheme and circumstances where no denial of deduction

Operative provisions

832‑725  Payments made to interposed foreign entity (integrity measure)—denial of deduction
 (1) Subsection (3) applies if:
 (a) an entity (the paying entity) makes a payment under a *scheme to a *foreign entity (the interposed foreign entity), either directly, or indirectly through one or more interposed *Australian trusts or Australian partnerships (within the meaning of Part X of the Income Tax Assessment Act 1936); and
 (b) the paying entity, the interposed foreign entity and another foreign entity (the ultimate parent entity) are in the same *Division 832 control group; and
 (c) the ultimate parent entity is not controlled by any other entity (other than an entity that is not a member of the Division 832 control group); and
 (d) the payment is of:
 (i) an amount of interest (within the meaning of subsection 128A(1AB) of the Income Tax Assessment Act 1936); or
 (ii) an amount under a *derivative financial arrangement; and
 (e) an entity is entitled to a deduction in an income year in respect of the payment (disregarding this section); and
 (f) the payment is not *subject to Australian income tax; and
 (g) either:
 (i) the payment is *subject to foreign income tax in one or more foreign countries, and the highest rate (the foreign country rate) at which the payment is subject to foreign income tax is 10% or less; or
 (ii) the payment is not subject to foreign income tax; and
 (h) it is reasonable to conclude (having regard to the matters in subsection (2)) that the entity, or one of the entities, who entered into or carried out the scheme or any part of the scheme did so for a principal purpose of, or for more than one principal purpose that includes a purpose of:
 (i) enabling a deduction to be obtained in respect of the payment; and
 (ii) enabling foreign income tax to be imposed on the payment at a rate of 10% or less, or enabling foreign income tax not to be imposed on the payment.
 (1A) For the purposes of subsection (1), disregard paragraphs 832‑130(7)(d) and (e) (exclusion of municipal and State taxes in working out what is *subject to foreign income tax).
 (2) For the purposes of paragraph (1)(h), have regard to the following matters:
 (a) the facts and circumstances that exist in relation to the *scheme;
 (b) if the payment is an amount of interest as mentioned in subparagraph (1)(d)(i)—the source of the funds used by the interposed foreign entity to provide the paying entity with the loan or other debt interest in respect of which the payment of