International Trade
ATO Issues Draft Practical Compliance Guideline on the
Taxation of the Migration of Intangible Assets
Published 22 May 2023

On 17 May 2023, the Australian Taxation Office (ATO) invited submissions regarding the taxation of intangible assets as laid out in Draft Practical Compliance Guideline PCG 2023/D2 (DPCG)

The DPCG is an update of a first version of a draft guideline on the same issues— PCG 2021/D4 which was released in May 2021. The DPCG differs significantly from the earlier draft.

The DPCG focuses on cross-border (i.e. international) arrangements relating to the “development, enhancement, maintenance, protection and exploitation (DEMPE) of intangible assets or the Migration of Intangible Assets”. The DPCG sets out the compliance focus of the ATO, as well as evidence expectations, and provides helpful examples for working through to gauge risks.

The concept of “Migration” of intangible assets is key to understanding compliance risk/requirements under the DPCG. A “Migration” is defined in the DPCG as “ .. any restructure or change associated with your intangible assets that allows an international-related party to access, hold, use, transfer or obtain benefit from the intangible assets ..” It will be appreciated that this is a wide definition, and would appear to cover exclusive and non-exclusive licences, partial and full assignments, licence-back arrangements and other innovative use/revenue sharing arrangements. It is not clear whether constructive trust arrangements, and similar vehicles, are caught by this definition as drafted in the DPCG - the  examples provided do not expressly touch on trusts.

Submissions are due by 16 June 2023.

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