Ned shelton ukti e-commerce webinar - 20 feb 13

1© Ned Shelton 2013

By Ned SheltonManaging Director, Starting in Australia Pty Ltd

[email protected] www.StartingInAustralia.com.au

www.SheltonsGroup.comPhone +61 2 9089 8792

UKTI: E-Commerce in Australia – Brits big business

20 February, 9.30am - 10am (UK)

www.StartingInAustralia.com.au 2

Sheltons – established in 1994 in Europe Offices in Denmark, Cyprus and Australia Areas

Sheltons International Tax Training Institute (Sheltons-SITTI)

Local and international tax Corporate services

Australian office (Sydney) – not ‘Sheltons’ but ‘Starting in Australia’

‘Sheltons’ & ‘Starting in Australia’


Working exclusively with foreigners doing business in Australia – existing and planned

Services Tax advice & compliance Legal assistance Company secretarial Full range of accounting services, GST & payroll admin Providing local director, public officer, co secretary + business advice, intro to trusted partners & suppliers

Specialists – many specific issues affect the inward investor

Independent – work well with your UK accountants and lawyers

Cost efficient – one stop but specialist shop

Starting in Australia Pty Ltd


Pure export – do nothing Customs and GST issues AUD 1,000 exemption – per consignee/addressee No GST on import if GST-free in Aus (e.g., wheelchairs,

food, clothing) Customs duty important GST payable at customs clearance – unless

arrangement made for monthly/quarterly payments

E-commerce - phases


Pure export – use .com.au domain Need an Australian entity Does not necessarily cause profits to be taxable in

Australia Useful (in searching), reassuring

Pure export – use .com.au domain + marketing in Australia Normally still not taxed in Australia on profits– even if

have own staff here conducting marketing

E-commerce - phases


Australia – 30% (flat, not progressive)– 2012 - reductions announced then withdrawn– Applies to Aus subsidiary’s profits and to Aus branch’s

profits

UK – 24%– 23% from 1 April 2013– small profits rate currently 20%, new SPR to be

announced on 20 March 2013

UK vs Australia – company tax


Branch (‘permanent establishment’)

ABC Ltd

Branch

ABC Ltd has a branch in Aus

UK

Australia


Branch (‘permanent establishment’)

Do you have a branch (‘Permanent establishment’ (PE)) in Australia – deliberately – or accidently? It matters.

‘A branch’ – general term, often used in the context of company law

‘Permanent establishment’ (PE) – a tax term If UK business has a PE in Australia – taxed in

Australia on the ‘business profits’ (i.e. trading profits) attributed to the PE

PE arises if there is a certain type of physical presence in Australia


Branch (permanent establishment)

Examples of a PE in Australia (i.e. gives rise to 30% Australian tax on the profits): An office generally trading / carrying on business Selling through an (unrelated or related) agent who

is mainly working for the UK principal UK business ‘has a building site or construction or

installation project in [Australia] or supervisory or consultancy activity [in Australia] connected with such a site or project, but only if that site, project or activity lasts more than 12 months;’

Example of no PE (no Australian tax): Export to Australia via unrelated importer Sales rep who simply introduces customers to the

UK business head office Renting a warehouse (for storage and delivery of

your goods)


The profits from an Australian PE are most likely exempt from tax in the UK if UK business is a UK company

What is best – to have a PE in Australia or not? UK corporate tax - lower than Australian tax Thus: best to not be taxed in Australia – thus only pay

23% or less in UK – rather than 30% in Australia Also: not being taxed in Australia means reduced tax

compliance burden in Australia, avoids ‘discussions’ on transfer pricing, etc.

(If the Australian tax rate was less than the UK, best to have a PE here)

UK tax – re Australian branch


Australian subsidiary

ABC LtdABC Ltd has a subsidiary in Aus

UK

Australia ABC Pty Ltd


30% corporate tax (flat, no progression) Profits calculation roughly similar to UK company No dividend withholding tax on the distribution of

the 70 (i.e. 100 less tax of 30) UK Co potentially not taxed on the dividend of 70

received (exemption method) Thus: from the 100 pre-tax Aus profits, UK Co

receives 70 cash > UK tax (of nil) Gain on sale by UK Co of shares in Australian

subsidiary – potentially exempt in the UK

UK tax - with Australian subsidiary


UK corporate owner, tax aspects: No PE preferred – slightly less tax in total – and no/less

Australian tax compliance burden PE vs. subsidiary – little difference (30% Aus tax in both

cases, probably no UK tax on dividend from sub or PE profits)

UK corporate owner, non tax aspects: Far easier to do business in the form of a subsidiary – if

significant interaction and transactions in Australia (e.g. employing staff, renting property, marketing, interaction with local customers)

Running a business with no branch (PE) or with a branch – cumbersome

Costs (legal, tax, accounting) – best to have no PE; PE vs. subsidiary: about equal

Depends on the case

No PE vs. PE; PE vs. subsidiary


Can be formed in a day / on the spot No minimum share capital needed Must have

an Australian resident director (company law) and an Australian resident public officer (tax law)

Strict responsibilities for both Small companies do not need to prepare

financial statements or be audited Must always file tax returns GST (= VAT) quarterly for small companies

Forming & running an Australian company

15© Ned Shelton 2013

Thank you, that’s all for this time!

Documents

Ned shelton ukti e-commerce webinar - 20 feb 13