Document ID: chunk:federal_register_of_legislation:C2025C00029:section:5:p11
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 5 (pt 11/38)
Character Range: 7405628–7408371

income tax deduction is subject to foreign income tax.

Effect of CFC regimes
 (5) An amount of income or profits of an entity is subject to foreign income tax if the amount is included in working out the tax base of another entity under a provision of a law of a foreign country that corresponds to section 456 or 457 of the Income Tax Assessment Act 1936 (including a tax base that is nil, or a negative amount).

Effect of foreign hybrid mismatch rules
 (6) In determining for the purposes of this section whether a payment is included in a tax base of a law of a foreign country as mentioned in subsection (1), disregard the effect of the following:
 (a) any provisions of *foreign hybrid mismatch rules of a foreign country;
 (b) any provisions of another law of a foreign country relating to *foreign income tax (except a tax covered by subsection (7)) that has substantially the same effect as foreign hybrid mismatch rules.

Certain foreign taxes disregarded in this Division
 (7) This subsection covers each of the following:
 (a) *credit absorption tax;
 (b) *unitary tax;
 (c) withholding‑type tax;
 (d) municipal tax;
 (e) in the case of a federal foreign country—a State tax;
 (f) *foreign GloBE tax or other foreign minimum tax.
Note: The definitions of credit absorption tax and unitary tax are in section 770‑15.
 (8) Foreign minimum tax mentioned in paragraph (7)(f) includes a tax specified in regulations made for the purposes of paragraph 393(2)(c) of the Income Tax Assessment Act 1936.

832‑135  Safe harbour for translation rates
  If:
 (a) a payment has any of the following effects:
 (i) it gives rise to a deduction;
 (ii) it gives rise to a *foreign income tax deduction;
 (iii) it is *subject to Australian income tax;
 (iv) it is *subject to foreign income tax; and
 (b) for the purposes of this Division, the amount of one or more such effects is to be translated under Subdivision 960‑C into an entity's *applicable functional currency, or into Australian currency;
then it is reasonable for the purposes of item 11A of the table in subsection 960‑50(6) (as modified by the regulations) to apply an exchange rate to each translation so as best to achieve a consistent measure of the extent to which the payment had each such effect.
Note: Item 11A is added to the table in subsection 960‑50(6) by the regulations.

Subdivision 832‑C—Hybrid financial instrument mismatch

Guide to Subdivision 832‑C

832‑175  What this Subdivision is about

      This Subdivision neutralises a hybrid financial instrument mismatch if it involves a deduction, or non‑inclusion, in Australia.
      A deduction/non‑inclusion mismatch is a hybrid financial instrument mismatch if it is attributable to hybridity in the treatment of