Document ID: chunk:federal_register_of_legislation:C2018A00084:clause:1_1:p28
Version: federal_register_of_legislation:C2018A00084
Segment Type: clause
Provision Reference: sch 1 cl 1 (pt 28/35)
Character Range: 70495–73154

given rise to a *hybrid financial instrument mismatch or a *hybrid payer mismatch.

Assumption—residence country treated payment as non‑branch income
 (4) For the purposes of subsections (2) and (3), assume that the payment was instead treated as income derived by the *liable entity but not in carrying on a business at or through a *PE in another country for the purposes of:
 (a) if the residence country is Australia—this Act; or
 (b) if the residence country is a foreign country—the law of the residence country relating to *foreign income tax (except *credit absorption tax, *unitary tax or a withholding‑type tax).

832‑485  Branch hybrid
 (1) An entity is a branch hybrid, in relation to a payment made to the entity, if:
 (a) subsection (2) applies to the entity in relation to a country and a payment; and
 (b) subsection (4) applies to the entity in relation to the payment.

Residence country applies branch profits exemption
 (2) This subsection applies to an entity in relation to a country (the residence country) and a payment made to the entity if, for that country:
 (a) the entity satisfies the residency test in subsection 832‑555(9) and is a *liable entity in respect of its own income or profits; and
 (b) the payment is treated as income derived by the liable entity in carrying on a business at or through a *PE in another country; and
 (c) as a result of an exemption or other tax concession to which that liable entity is entitled in respect of income derived in carrying on a business at or through the PE, the payment is not:
 (i) if the residence country is Australia—*subject to Australian income tax; or
 (ii) if the residence country is a foreign country—*subject to foreign income tax in that foreign country.
Note: For the meaning of liable entity, see section 832‑325.
 (3) In determining whether subparagraph (2)(c)(i) is satisfied, disregard the effect of subsection 23AH(4A) of the Income Tax Assessment Act 1936.

Branch country fails to tax payment
 (4) This subsection applies to an entity in relation to the other country mentioned in paragraph (2)(b) (the branch country) and a payment made to the entity if:
 (a) the payment is treated as not having been derived in carrying on a business at or through a *PE of the entity, or as otherwise not having a sufficient connection to a taxable presence in the branch country, for the purposes of:
 (i) if the branch country is Australia—this Act; or
 (ii) if the branch country is a foreign country—the law of the branch country relating to *foreign income tax (except *credit absorption tax, *unitary tax or a withholding‑type tax); and
 (b) as a result, the payment is