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Asia-Pacific Tax Bulletin
 
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Issue No. 4 - 2017 of the Asia-Pacific Tax Bulletin is now available online.

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Number 4 - 2017 contains the following:
ARTICLES
Australia
Central Management and Control and the Bywater Case: A Quantum Leap or Clarification of the Status Quo?
James Meli
In this article, the author examines the outcome in the recent Australian High Court case, Bywater Investments Ltd v. Commissioner of Taxation; Hua Wang Bank Berhad v. Commissioner of Taxation, and contrasts it with earlier court decisions on the meaning of central management and control to ascertain whether the Bywater decision is a major step forward in jurisprudence determining the place of corporate residence, or merely a reaffirmation of the approach taken in the earlier cases. The article also canvasses evidentiary matters concerning the independence of board decision making and the meaning of carrying on a business in the context of passive investment entities.
Australia
Foreign Beneficiaries and Australian Trusts: Their Position Is Still No Clearer
Gene Goodsell
In this article, the author examines the Australian legislation concerning the taxation of capital gains derived by foreign beneficiaries of Australian trusts. He challenges the Commissioner of Taxation’s approach of taxing capital gains derived by an Australian–resident trust from assets located abroad, which have no connection with Australia, and where the gains are distributed to non-resident beneficiaries, as contrary to the intent of the legislation. To resolve the situation, the article advocates further case law to give guidance on the availability of relief from capital gains tax for foreign beneficiaries of Australian trusts.
China
The New China Country Practice Chapter of the UN Practical Manual on Transfer Pricing: Reflections on Post-BEPS Transfer Pricing in the Middle-Kingdom
Rafael Triginelli Miraglia, Mimi Wang, Cheng Chi
In this article, the authors critically analyse the China Country Practice Chapter inserted into the United Nations Practical Manual on Transfer Pricing for Developing Countries in 2016. They present a critique of the major transfer pricing challenges facing China and the purported solutions to them. In this context, the article gives an overview of the strategies and practice developments of China’s State Administration of Taxation, addressing conceptual gaps and linking the tax administration’s policy statements to its enforcement practice.
India
Secondary Adjustment: A Potential Wave of New Transfer Pricing Litigation
Abhishek Dugar and Lakshita Bhandari
This article discusses the recent amendments to India’s Income Tax Act, which incorporate secondary adjustments into the country’s transfer pricing regime. The authors critique the language of the new statutory provisions and examine a variety of challenges to their application, which are likely to result in further transfer pricing litigation.
India
Multilateral Instrument Opens Window for Alternate Dispute Resolution for Indian Companies
Bhavik Timbadia
In this article, the author examines the implications for India as a signatory to the OECD’s multilateral instrument to implement treaty-related measures to prevent base erosion and profit shifting. In particular, the article considers the implications of the multilateral instrument’s mandatory dispute resolution mechanism and India’s adoption of the corresponding relief provision in opening up opportunities for Indian taxpayers to utilize advance pricing agreements more widely in the future.
India
Corporate Tax Concessions in India: Are They Equitable?
R. Kavita Rao and Sacchidananda Mukherjee
In this article, the authors discuss the equity aspects of corporate tax incentives in India and analyse the effectiveness of some of the incentives against their stated objectives. The article attempts to provide an overview of the status of corporate tax concessions in India by comparison with comparable countries, and asks whether the incentives discriminate across size classes of firms in India, whether the incentives are effective in achieving their intended objectives, and whether the government’s stated objective of a reduction in tax rates and incentives will bring about a level playing field.
Regional
Automatic Exchange of Information and BRICS: Why and How Does It Affect Emerging Economies?
Xiaoqing Huang
In this article, the author canvasses the procedure by which the new international automatic exchange of information mechanism was formulated, addressing the relative roles that powerful Western states and emerging economies (represented by BRICS countries) played in it. The article argues that automatic exchange of information has become a global standard without any significant participation by the developing world. Instead, the approach has been one of “lead and follow”, which has damaged the legitimacy of the process.
CASE NOTES
Australia
Full Federal Court Upholds Transfer Pricing Adjustments on Interest Charged on Intra-Group Loans
Gaurav Gupta
This case note explains the recent Full Federal Court of Australia judgment in Chevron Australia Holdings Pty Ltd v. Commissioner of Taxation, in which the Court upheld on appeal the Commissioner’s transfer pricing adjustments in respect of the interest rate charged on intra-group loans.
India
Case Notes
Abhishek Dugar

The author provides three case notes on recent significant international tax decisions released by the Supreme Court of India and the Delhi High Court.

The first note explains the Supreme Court’s February 2017 decision in Director of Income Tax v. AP Moller Maersk AS, which confirmed the decisions of the Income Tax Appellate Tribunal and the High Court that payments made to the AP Moller Maersk AS international shipping line by its agents located in India for the use of a shared global telecommunication facility were not fees for technical services, which would have been liable for tax in India. Rather, the Supreme Court held that the payments were cost reimbursements, which did not have an income character and, therefore, were not liable to tax in India.

The second case addresses the Supreme Court’s decision in Formula One World Championship Limited v. Commissioner of Income Tax, International, which upheld the Delhi High Court’s decision that the taxpayer carried on a business in India through a permanent establishment and was liable to tax in India in respect of the profits attributable to that permanent establishment.

The third note outlines the judgment of the Delhi High Court in Commissioner of Income-tax, International-2 v. ZTE Corporation, which held that payments for software embedded in mobile telephone equipment were not royalties, but were part of the purchase price of the equipment itself. Therefore, India could not impose tax on the software component of the purchase price as a tax on a royalty.
New Zealand
New Zealand Taxpayer Entitled to Foreign Tax Credit for Tax Sparing Granted to Controlled Foreign Company
Kevin Holmes
This note summarizes the New Zealand High Court decision in Lin v. Commissioner of Inland Revenue, which entitled a New Zealand-resident taxpayer with relevant interests in certain controlled foreign companies in China to a foreign tax credit for both tax paid in China by the controlled foreign companies and to tax spared in China arising from tax concessions granted to those companies.
INTERNATIONAL PERSPECTIVE ON ASIA-PACIFIC TAXATION AND INVESTMENT
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