[866] Tax Office examines foreign tax credit schemes - Taxpayer Alert.

Australasian Business Intelligence, May, 2007

Byline: Lisa Mak

May 27, 2007 (Weekly Tax Bulletin - ABIX via COMTEX) -- The Australian Taxation Office has released Taxpayer Alert TA 2007/3 "Income Tax: Foreign tax credit enhanced return bond investment". The document describes an arrangement where an Australian resident taxpayer gains access to foreign tax credits for withholding tax. This alert applies to arrangements that have some of the following characteristics: an Australian resident taxpayer establishes a wholly owned limited liability company (LLC) in an offshore jurisdiction; the LLC is treated as a foreign hybrid for Australian tax purposes; the LLC acquires bonds issued in Great Britain and the payment of interest on the bonds is claimed to attract British withholding tax.

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