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Enron Mail |
David and Heidi,
Hope you enjoyed your Easter holiday and your Anzac holiday! With respect to your question of whether the financial trader services can = be=20 charged at cost or must have a 7.5% mark-up, I received advice from Chris= =20 Catt at PWC-Sydney last summer that there needed to be a mark-up for these= =20 services. Given the skills required by the financial trader and the risk= =20 associated with the transactions, Chris advised that there needed to be a= =20 mark-up over cost based on a recent ruling by the ATO. The ATO issued TR 1999/1 in January 1999, which provides a safe-harbor for = de=20 minimis services that are provided by an Australian company and meet certai= n=20 monetary limitations. Under the de miminis safe harbor, where the costs=20 associated with all services provided by Enron Australia Pty Limited to=20 offshore affiliates do not exceed A$500,000 in a year, the safe harbor=20 mark-up of 7.5% may be available. Paragraph 86 of the ruling sets forth th= e=20 requirements as follows: "As mentioned in paragraph 77, the Commissioner will apply a similar=20 administrative practice in de minimis cases where the total direct and=20 indirect costs of supplying services to Australian or foreign associated=20 enterprises, as appropriate, is not more than $500,000 in a year. The=20 practice applies to all intra-group services supplied or acquired where the= =20 relevant cost limit is not exceeded. Therefore, in some cases, it might be= =20 applicable to all intra-groups services both supplied and acquired. The=20 transfer prices that must be used, and the conditions for their use, are th= e=20 same as those specified in paragraphs 82 to 84. As for the practice in=20 relation to non-core services, all taxpayers in a group must use the same= =20 mark-up, for incoming and outgoing services, in respect of each foreign=20 jurisdiction, but the mark-up may vary from country to country, within the= =20 limits described above. Example An Australian subsidiary of a foreign based multinational group receives=20 marketing and technical assistance from a foreign associate. No other=20 services are acquired by any Australian member of the group from its foreig= n=20 associated enterprises. The total direct and indirect costs of providing t= he=20 services to the Australian subsidiary for the year are $200,000. As long a= s=20 the amount actually charged for the services is not more than $215,000 (or= =20 $220,000 in the circumstances outlined in paragraph 83), the Commissioner= =20 would not require the taxpayer to establish an arm=01,s length price for th= e=20 services." Based on discussions we had late last summer, we thought that the A$500,000= =20 threshold could be met. To my knowledge, the recent changes and proposed changes to the Australian= =20 tax rules would not affect TR 1999/1. Please let me know if you have seen= =20 anything to the contrary. Consequently, to my knowledge, we are still unde= r=20 these guidelines. I=01,m not sure, David, what you mean by 100% being curr= ent=20 practice as stated in your April 18th e-mail. I am guessing that you are= =20 referring to the services provided under the cost sharing agreement. Under= =20 that agreement, office costs are being shared by Enron Australia Pty Limite= d=20 and 3 other Australian entities. Here, services are being provided to an= =20 off-shore affiliate. As a result, it appears that TR 1999/1 would require = a=20 mark-up. I will be happy to discuss this with you both at your convenience. Best regards, Susan David Minns 04/18/2000 12:22 AM To: Susan Musch/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT cc: Heidi Mason/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Shari Stack@ECT=20 Subject: Re: Revised Australian Services Agreement =20 I've checked my notes and spoken to Heidi and it appears the delay was=20 settling the mark up (107.5%) in the Agreement. Heidi believes that this=20 figure can be reduced to 100% (which is current practice). If everyone is= =20 agreeable I will arrange execution. =20 David Minns 04/18/2000 02:35 PM To: Susan Musch/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT cc: Heidi Mason/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT=20 Subject: Re: Revised Australian Services Agreement =20 Susan this is the latest version of the Services re ENA/EAPL. There is a no= te=20 on my file that the percentage uplift.=20 Shari Stack@ECT 09/18/99 06:32 AM To: Susan Musch/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT cc: Alan Aronowitz@ECT, Gary Hickerson@ECT, Harry Arora@ECT, Colin=20 Jackson@ECT, Paul Quilkey/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, David=20 Minns/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Heidi=20 Mason/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Barbara Lewis/HOU/ECT@ECT=20 Subject: Revised Australian Services Agreement Attached please find my mark-up of the Australian Services Agreement. I hav= e=20 attached a blacklined version for ease of reference.=20 Apart from changing the name from ECT to ENA, I have modified clause 1 in= =20 Schedule 1 to more accurately reflect the intended products. Please call me if any questions.=20 Many thanks,=20 Shari =20 ---------------------- Forwarded by Shari Stack/HOU/ECT on 09/17/99 02:25 P= M=20 --------------------------- Susan Musch@ENRON_DEVELOPMENT 09/15/99 07:30 PM To: Shari Stack@ENRON_DEVELOPMENT, Alan Aronowitz@ECT, Gary Hickerson@ECT,= =20 Harry Arora@ECT, Colin Jackson@ECT, Paul=20 Quilkey/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, David=20 Minns/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Heidi=20 Mason/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT cc: =20 Subject: Draft of Australian Services Agreement Attached is a draft of the services agreement for the financial trading=20 services to be provided by the Australian trading office for ECT-Houston. = =20 Please review the agreement and let me know if you have any questions,=20 comments or revisions. Best regards, Susan
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