Singtel loses landmark Australian tax case
- Federal Court dismisses company’s appeal of a tax assessment
- Court case relates to acquisition financing of Singtel Optus in 2001
Australia on Friday won a landmark court ruling against Singapore Telecommunications, a victory in the country’s battle against tax avoidance by multinational companies through cross-border financing arrangements.
Transactions between two wholly owned Singtel units “differed from those which might be expected to operate between independent enterprises dealing wholly independently with one another,” Judge Mark Kranz Moshinsky wrote for the court.
Tax experts warned in the aftermath of the decision that multinationals should expect scrutiny on intragroup financing that doesn’t appear to have taken place at arm’s length – as if it were done between two unrelated parties.
The arm’s-length principle is an often-contentious aspect of transfer pricing rules that govern transactions between companies within the same multinational group to make sure they aren’t abused for tax reasons.