Rio Tinto faces $406m tax bill in new row
Rio Tinto has been hit with a fresh $406.5m bill from the Australian Taxation Office.
Rio Tinto has been hit with a fresh $406.5m bill from the Australian Taxation Office, amid a dispute over whether it should be able to deduct interest payments on Australian tax assessments on money Rio borrowed from itself to pay dividends to its UK arm.
Rio said late on Tuesday that the ATO had issued an amended assessment for its tax payments, including $359.4m of primary tax and $47.1m of interest, related to the “denial of interest deductions on an isolated borrowing used to pay an intragroup dividend in 2015”.
The company’s dual-listed structure requires the company to pay equal dividends to shareholders in both its Australian and London-listed arms. That means Rio’s Australian arm — which controls the company’s most lucrative assets — pays its UK-listed body an annual dividend, which is then distributed to foreign shareholders.
It is understood the latest ATO dispute relates to money borrowed by Rio’s ASX-listed entity, from its London arm, to pay that dividend and whether interest charged on that loan should qualify as a deduction under Australian tax laws.
“This borrowing was repaid in 2018. Borrowing to fund the payment of a dividend is a normal commercial practice. Rio Tinto is confident of its position and will dispute the assessments,” the company said.
Rio said it had paid $8.4bn in Australian taxes during the “relevant period”.
In 2014, Rio booked annual profits of $US6.53bn and lifted dividend payments to shareholders by 12 per cent, its annual report says, paying a total dividend for the full year of $US2.15 a share and launching a $US2bn share buyback program as part of a promise to increase returns to shareholders.
The new ATO claim is separate from a long-running dispute between Rio and Australian tax authorities over use of its controversial Singapore marketing hub, where the company is still fighting more than $US447m worth of transfer pricing claims by the ATO over iron ore sales, first disclosed in 2017 but dating back some years before that.
Those claims are being dealt with between Australian and Singaporean tax authorities, Rio has said, under the Australia-Singapore double tax treaty, and will go to arbitration if a negotiated outcome is not reached.
Rio is also fighting similar claims over pricing of its Australian aluminium products to the Singapore hub, announced in April 2020, worth about $86m.
The mining giant is also facing claims from Mongolia’s tax authority that the Rio-dominated subsidiary that controls the giant Oyu Tolgoi copper mine in the country has underpaid taxes worth about $US443m ($572m).
Mongolian tax authorities lodged a fresh claim worth $US228m in December last year, disclosures show, adding to an existing $US155m dispute over tax payments from the mine that is already heading to United Nations arbitration.
Rio shares closed down 52c, or 0.4 per cent, on Tuesday, at $127.18, before news of the latest tax dispute.
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