The Australian government has recently announced that foreign investment approvals will be subject to standard conditions in relation to tax compliance, reporting and other tax matters. The government says it is “ensuring companies operating in Australia pay tax on their Australian earnings”. While this change does not affect foreign investors’ ordinary Australian tax compliance, it is likely to add to the complexity and cost of foreign investment applications and the ongoing compliance burden for successful applicants. It may also expose foreign investors to civil and criminal penalties, and even orders for divestment, for failure to comply.
Foreign investors who propose to acquire certain Australian entities, businesses or assets which meet value thresholds are required to obtain approval from the Treasurer via the Foreign Investment Review Board (FIRB). The Treasurer may reject a proposal if it is contrary to Australia’s “national interest”. Proposals may also be approved subject to conditions designed to protect the national interest. The impact that a proposal may have on Australian tax revenues has long been a factor that may be considered in assessing the national interest. However, except for certain real estate investments and other proposals that raise specific national interest concerns, most approvals have previously been granted without conditions.
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