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INCOME TAX ASSESSMENT ACT 1997 - SECT 832.555

Identifying a secondary response country

             (1)  This section applies if an amount gives rise to a * deducting hybrid mismatch, other than a deducting hybrid mismatch covered by subsection (2).

Dual residents--no secondary response

             (2)  This subsection covers a * deducting hybrid mismatch if:

                     (a)  the only * liable entity in respect of income or profits of the * deducting hybrid is the deducting hybrid; and

                     (b)  the liable entity satisfies the residency test in subsection (9) in both deducting countries.

Note 1:       For the meaning of liable entity , see section 832- 325.

Note 2:       If the deducting hybrid is a dual resident, the mismatch may be neutralised by any country.

Country is a primary response country unless this section provides otherwise

             (3)  A country in which the amount gives rise to a deduction or * foreign income tax deduction (a deducting country ) is a primary response country in relation to the * deducting hybrid mismatch unless the country is identified as the secondary response country under subsection (4), (5), (6), (7) or (8).

Both countries recognise the same liable entity--residence country is secondary response

             (4)  If :

                     (a)  the * deducting hybrid is itself the * liable entity in each deducting country; and

                     (b)  in one deducting country, the deducting hybrid does not satisfy the residency test in subsection (9); and

                     (c)  in the other deducting country, the deducting hybrid does satisfy the residency test;

then the country mentioned in paragraph (b) is the secondary response country.

             (5)  If:

                     (a)  in both deducting countries, the same entity is the * liable entity in respect of the income or profits of the * deducting hybrid; and

                     (b)  in one deducting country, the liable entity does not satisfy the residency test in subsection (9); and

                     (c)  in the other deducting country, the liable entity does satisfy the residency test;

then the country mentioned in paragraph (b) is the secondary response country.

Countries recognise different liable entities--non-parent country is secondary response

             (6)  If:

                     (a)  the * liable entity for one deducting country is a different entity to the entity that is the liable entity for the other deducting country; and

                     (b)  in one deducting country, the * deducting hybrid is the liable entity;

then the country mentioned in paragraph (b) is the secondary response country.

             (7)  If:

                     (a)  the * liable entity for one deducting country is a different entity to the entity that is the liable entity for the other deducting country; and

                     (b)  the * deducting hybrid is not the liable entity in either country; and

                     (c)  in one deducting country, the entity that is a liable entity is also a liable entity in respect of the income or profits of the entity that is the liable entity in the other deducting country;

then the country mentioned second in paragraph (c) is the secondary response country.

             (8)  If:

                     (a)  the * liable entity for one deducting country is a different entity to the entity that is the liable entity for the other deducting country; and

                     (b)  subsections (6) and (7) do not apply; and

                     (c)  in one deducting country, the deducting hybrid and the liable entity both satisfy the residency test in subsection (9);

then the country mentioned in paragraph (c) is the secondary response country.

Residency test

             (9)  An entity satisfies the residency test in this subsection in relation to a country, if:

                     (a)  if the country is Australia--the entity is an * Australian entity; or

                     (b)  if the country is a foreign country:

                              (i)  the entity is a resident of the foreign country for the purposes of the law of the foreign country relating to * foreign income tax (except * credit absorption tax, * unitary tax or a withholding-type tax); or

                             (ii)  the tax base, as it relates to foreign income tax (except credit absorption tax, unitary tax or a withholding-type tax), includes income from worldwide sources.



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