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Implicit Support in Cross-Border Financing: Challenges for MNEs and Impact on Borrower Company’s Credit Rating
Observations of the SingTel Case
The Australian Federal Court issued its long-awaited decision in Singapore Telecommunications Limited (hereafter SingTel Limited) on Friday, December 17, 2021, with a single Federal Court Judge ruling in favor of the Commissioner of Taxation (hereafter Commissioner) and dismissing the taxpayer’s appeal.
In SingTel, the taxpayer and a related party signed a loan note issuance agreement (LNIA) that was subject to amendment. Both parties focused on Section 815-A of the 1997 Income Tax Assessment Act (hereafter ITAA 1997). As a result, the court addressed division 13 of the Income Tax Assessment Act (hereafter ITAA 1936). The primary issue for the Federal Court to resolve under Subsection 815-A ITAA 1997 was whether the taxpayer received a “transfer pricing benefit” under Section 815-15 (1) ITAA 1997.
1. Background and Facts of the Case
After signing an LNIA with a British Virgin Islands-registered company (the subscriber), Singapore Telecom Australia Investments Pty Ltd, or SAI, issued a loan note to the company (formerly Cable & Wireless Optus).
After the LNIA, a series of procedures was taken to generate the additional cash needed for the acquisition, including refinancing a short-term ...