Document ID: chunk:federal_register_of_legislation:C2018A00084:clause:1_3:p7
Version: federal_register_of_legislation:C2018A00084
Segment Type: clause
Provision Reference: sch 1 cl 3 (pt 7/10)
Character Range: 105514–108104

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.
 (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 interest is made;
 (c) whether the interposed foreign entity engages in substantial commercial activities in carrying on a banking, financial or other similar business.
 (3) The paying entity is not entitled to the deduction mentioned in paragraph (1)(e).
 (4) Subsection (3) does not apply if it is reasonable to conclude that:
 (a) the following requirements are satisfied:
 (i) the amount of the payment is taken into account under Part X of the Income Tax Assessment Act 1936;
 (ii) the sum of the *attribution percentages of each *attributable taxpayer in relation to the interposed foreign entity, for the purposes of sections 456 and 457 of that Act in respect of the income year in which the payment is made, is at least 100%; or
 (b) requirements similar to those in paragraph (a), under the law of a foreign country that has substantially the same effect as Part X of that Act in respect of that foreign country, are satisfied in relation to the interposed foreign entity; or
 (c) assuming that the payment were treated as being divided into 2 separate payments:
 (i) the requirements in paragraph (a) would be satisfied in relation to one of those separate payments; and
 (ii) the requirements in paragraph (b) would be satisfied in relation to the other of those separate payments.
 (5) Subsection (3) does not apply if it is reasonable to conclude that, assuming that the payment had been made directly to the ultimate parent entity:
 (a) the payment would:
 (i) be *subject to foreign income tax at a