We now have the judgement of the High Court of Australia (HCA) in BHP Billiton Ltd v Commissioner of Taxation, David Bloom QC appearing for the appellant. This is the first case to consider a Dual Listed Company (DLC) in the context of Australia’s CFC rules.
Prior to the formation of the DLC , BHP Billiton Marketing AG (BMAG), a Swiss company, through its Singapore branch bought product from Australian subsidiaries which it marketed in the Far East. BMAG’s profits were not taxable in Australia. After the DLC , BMAG became a CFC of BHP Billiton Ltd (BHP) which included in its own income that proportion of BMAG’s income which related to BMAG’s purchases from BHP subsidiaries in Australia.
The Australian Revenue – unsuccessful at first instance, but successful by a 2:1 majority in the Full Federal Court- successfully argued in the HCA that the DLC rules had the result that BHP and Billiton were “ associates” within the CFC rules so that all of BMAG’s profits were taxable in BHP’s hands in Australia. The reasons differed from those of the majority below and are purely concerned with the DLC .
In particular it is hard to discern a test which might be applied to determining whether entities are “associates” , a pity given that the same definition appears some 160 times throughout the Income Tax Assessment Acts.