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Glencore Wins AUD92m Transfer Pricing Case In Australia

Thursday, September 5, 2019

Australia's Federal Court issued a decision in favor of mining company Glencore on September 3, 2019. The case centered on whether dealings between Swiss parent Glencore International AG and an Australian subsidiary breached transfer pricing rules in relation to the sale and purchase of copper concentrate in the 2007-09 years.

The Australian Taxation Office has said it is considering whether it should appeal. The case considered transfer pricing rules contained in Subdivision 815-A, the object of which is to ensure related Australian and non-resident entities are taxed consistent with the arm's length principle.

The ATO noted that the Commissioner had argued before the Court that amendments made to an agreement between Glencore International AG and its Australian subsidiary were not made at arm's length – that is, that they were not in line with what would be agreed between unconnected parties. The Commissioner had issued Glencore with three sets of amended assessments that arose as a consequence of this, but the Court quashed these.

The ATO acknowledged that the court rejected aspects of the Commissioner's interpretation of the relevant transfer pricing rules. In doing so, the ATO said, the court found that the terms operating between the Australian copper mine and its Swiss trader parent to calculate the price at which the mine sold its entire copper concentrate production were within an arm's length range.

The ruling was released in Glencore Investment Pty Ltd v. Commissioner of Taxation of the Commonwealth of Australia ([2019] FCA 1432). The decision is worth some AUD92.6m (USD62.5m) for the group.