BTO Australia Ltd, an Australian resident company, has entered into an arrangement to pay its parent company, BTO Ltd, a significant global entity company resident in the Cayman Islands, a large ($100 million) fee each year for marketing and administrative services. This arrangement will have the effect of reducing BTO Australia Ltd's tax payable and also shift large profits to the Cayman Islands, a jurisdiction with a very low tax rate. What avoidance rule is this arrangement likely to be subject to?

Question

Quizplus · Accepted Answer

The Answer of BTO Australia Ltd, an Australian resident company, has entered into an arrangement to pay its parent company, BTO Ltd, a significant global entity company resident in the Cayman Islands, a large ($100 million) fee each year for marketing and administrative services. This arrangement will have the effect of reducing BTO Australia Ltd's tax payable and also shift large profits to the Cayman Islands, a jurisdiction with a very low tax rate. What avoidance rule is this arrangement likely to be subject to?

BTO Australia Ltd, an Australian Resident Company, Has Entered into an Arrangement