Court finds in favour of Glencore

The Federal Court has issued a decision today on whether dealings between Swiss-based Glencore International AG and an Australian subsidiary breached transfer pricing rules in relation to the sale and purchase of copper concentrate in the 2007 to 2009 years.

The case considers transfer pricing rules (Subdivision 815-A) the object of which is to ensure related Australian and non-resident entities are taxed consistent with the arm’s length principle. The Commissioner had argued before the Court that amendments made to an agreement between Glencore International AG and its Australian subsidiary were not arm’s length dealings. The Commissioner had issued Glencore with three sets of amended assessments that arose as a consequence of this.

The court rejected aspects of the Commissioner’s interpretation of the relevant transfer pricing rules. In doing so the court found that the terms operating between the Australian copper mine and its Swiss trader parent to calculate the price at which the mine sold its entire copper concentrate production were within an arm’s length range.

“The most significant issue in multinational taxation is ensuring that the Australian arms of companies have arm’s length dealings with offshore related parties. Transfer pricing rules ensure these transactions are priced fairly and that multinational companies do not underpay tax in Australia,” Deputy Commissioner Jeremy Geale said.

The ATO will consider this decision and whether an appeal is appropriate.

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