Following on from the decisions in Bywater Investments Limited & Ors v. Commissioner of Taxation; Hua Wang Bank Berhad v. Commissioner of Taxation  HCA 45; the ATO issued TR 2018/5 to cement their opinion on the central management and control test in determining the
Tax residency of Companies.
Their conclusions set out in their simplest form follow:
The ATO concluded that no single factor alone will necessarily determine where central management and control of a company is exercised. The relevance and weight to be given to each question will depend on the facts and circumstances of the case and surrounding circumstances.
The matters most likely to influence a court’s decision, as to where those who control and direct the operations of a company do so from, are:
- where those who exercise central management control do so, rather than where they live
- where the governing body of the company meets
- where the company declares and pays dividends
- the nature of the business and whether it dictates where control and management decisions are made in practice
- minutes or other documents recording where high-level decisions are made.
Other matters, of lesser weight, the courts have considered in analysing where a company’s central management and control is exercised include:
- where those who control and direct the company’s operations live
- where the company’s books are kept
- where its registered office is located
- where the company’s register of shareholders is kept
- where the shareholder’s meetings are held
- where its shareholders reside.
These factors are used to help identify where a company’s directors, or others, actually make its high-level decisions and in doing so determine where they actually manage and control the company.
This Ruling however did not deal with the voting power test of company residency for foreign incorporated companies or the question of when a company carries on a business.
Date of Issue: 17 October 2018
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