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ARTICLE 9

U.S. Income Tax Treaty — australia tax treaty documents: austtech.pdf · 2026-10-03 edition · updated 2026-10-04 · United States

Associated Enterprises

This Article provides that, where related persons engage in transactions which are not at arm’s length, the Contracting States may make appropriate adjustments to their taxable income and tax liability.

Paragraph 1 states the general rule that where an enterprise of one Contracting State and an enterprise of the other Contracting State are related through management, control, or capital and their commercial or financial relations differ from those which would prevail between independent enterprises, the profits of the enterprises may be adjusted to reflect the profits which would have accrued if the two enterprises had been independent.

Paragraph 2 provides that where one of the Contracting States has increased the profits of an enterprise of that State to reflect the amount that would have accrued to the enterprise had it been independent of an enterprise in the other Contracting State, the second State shall make an appropriate adjustment, decreasing the amount of tax which it has imposed on those profits. In determining such adjustments, due regard is to be had to the other provisions of the Convention. The competent authorities of the two States shall consult each other if necessary in implementing this provision.

Paragraph 3 clarifies that each Contracting State may apply its internal law in determining liability for its tax. For example, although paragraphs 1 and 2 refer to allocations of “profits” and “taxes,” it is understood that such terms also include the components of the tax base and of the tax liability, such as income, deductions, credits, and allowances. The United States will apply its rules and procedures under section 482 of the Internal Revenue Code. Australia will apply the provisions of its income tax legislation, particularly with respect to the determination of taxable income in cases where the information available is inadequate to measure net income under the ordinary rules. Such determinations must be consistent in each case with the principles of arm’s length transactions.

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▸Contents — U.S. Income Tax Treaty — australia tax treaty documents: austtech.pdf
U.S. Income Tax Treaty — australia tax treaty documents: austtech.pdf

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