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This is a Bill, not an Act. For current law, see the Acts databases.
2002-2003
The Parliament of
the
Commonwealth of
Australia
THE HOUSE OF
REPRESENTATIVES
Presented and read a first
time
International
Tax Agreements Amendment Bill 2003
No.
, 2003
(Treasury)
A
Bill for an Act to amend the International Tax Agreements Act 1953, and
for related purposes
Contents
International Tax Agreements Act
1953 3
International Tax Agreements Act
1953 70
Income Tax Assessment Act
1936 104
International Tax Agreements Act
1953 104
Taxation (Interest on Overpayments and Early Payments) Act
1983 104
A Bill for an Act to amend the International Tax
Agreements Act 1953, and for related purposes
The Parliament of Australia enacts:
This Act may be cited as the International Tax Agreements Amendment
Act 2003.
This Act commences on the day on which it receives the Royal
Assent.
Each Act that is specified in a Schedule to this Act is amended or
repealed as set out in the applicable items in the Schedule concerned, and any
other item in a Schedule to this Act has effect according to its
terms.
International Tax
Agreements Act 1953
1 Subsection 3(1) (paragraph (b) of the
definition of agreement)
Repeal the paragraph, substitute:
(b) the 1946 United Kingdom agreement;
(ba) the 1967 United Kingdom agreement;
(bb) the 1967 United Kingdom agreement as amended by the 1980 Protocol to
the 1967 United Kingdom agreement;
2 Subsection 3(1) (definition of the previous
United Kingdom agreement)
Repeal the definition.
3 Subsection 3(1) (definition of the United
Kingdom)
Repeal the definition.
4 Subsection 3(1) (definition of the United
Kingdom agreement)
Repeal the definition.
5 Subsection 3(1) (definition of the United
Kingdom protocol)
Repeal the definition.
6 Subsection 3(1) (definition of United Kingdom
tax)
Repeal the definition.
7 Subsection 3(1)
Insert:
the 1946 United Kingdom agreement means the Agreement between
the Government of Australia and the Government of the United Kingdom for the
avoidance of double taxation and the prevention of fiscal evasion with respect
to taxes on income that was signed at London on 29 October 1946.
8 Subsection 3(1)
Insert:
the 1967 United Kingdom agreement means the Agreement between
the Government of the Commonwealth of Australia and the Government of the United
Kingdom of Great Britain and Northern Ireland for the avoidance of double
taxation and the prevention of fiscal evasion with respect to taxes on income
and capital gains that was signed at Canberra on 7 December 1967.
9 Subsection 3(1)
Insert:
the 1980 Protocol to the 1967 United Kingdom agreement means
the Protocol, signed at Canberra on 29 January 1980, between the Government
of the Commonwealth of Australia and the Government of the United Kingdom of
Great Britain and Northern Ireland amending the 1967 United Kingdom
agreement.
10 Subsection 3(1)
Insert:
the 2003 United Kingdom convention means the Convention
between the Government of Australia and the Government of the United Kingdom of
Great Britain and Northern Ireland for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income and on capital
gains, as affected by the 2003 United Kingdom notes. A copy of the convention
and of the notes is set out in Schedule 1.
11 Subsection 3(1)
Insert:
the 2003 United Kingdom notes means the exchange of notes
between the Government of Australia and the Government of the United Kingdom of
Great Britain and Northern Ireland in connection with the 2003 United Kingdom
convention that was carried out at Canberra on 21 August 2003. A copy of
the notes is set out in Schedule 1.
12 Sections 5 and 5A
Repeal the sections, substitute:
Subject to this Act, on and after the date of entry into force of the
2003 United Kingdom convention, the provisions of the convention, so far as
those provisions affect Australian tax, have the force of law according to their
tenor.
The provisions of:
(a) the 1946 United Kingdom agreement; and
(b) the 1967 United Kingdom agreement; and
(c) the 1967 United Kingdom agreement as amended by the 1980 Protocol to
the 1967 United Kingdom agreement;
so far as those provisions affect Australian tax, continue to have the
force of law for tax in respect of income in relation to which the agreements
remain effective.
Note 1: Paragraph 3 of Article 29 of the 2003 United Kingdom
convention preserves the operation of Article 16 of the 1967 United Kingdom
agreement (which exempts from tax the income of visiting professors and
teachers). This applies to individuals who are entitled to the exemption at the
time when the 2003 United Kingdom convention enters into force. The exemption is
preserved until the individual concerned would have ceased to be entitled to it
under the 1967 United Kingdom agreement.
Note 2: Article 16 of the 1967 United Kingdom agreement is
affected by Article I of the 1980 Protocol to the 1967 United Kingdom
agreement.
13 Section 17B
Repeal the section.
14 Schedules 1 and 1A
Repeal the Schedules, substitute:
Note: See section 3.
CONVENTION BETWEEN THE GOVERNMENT OF
AUSTRALIA AND THE GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN
IRELAND FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL
EVASION WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL GAINS
The Government of Australia and the Government of the United Kingdom
of Great Britain and Northern Ireland,
Desiring to conclude a Convention
for the avoidance of double taxation and the prevention of fiscal evasion with
respect to taxes on income and on capital gains,
Have agreed as
follows:
This Convention shall apply to persons who are residents of one or
both of the Contracting States.
1 The existing taxes to which this Convention shall apply
are:
(a) in the case of the United Kingdom:
(i) the income
tax;
(ii) the corporation tax; and
(iii) the capital gains
tax;
(b) in the case of Australia:
the income tax, the resource
rent tax in respect of offshore projects relating to exploration for or
exploitation of petroleum resources, and the fringe benefits tax, imposed under
the federal law of Australia.
2 This Convention shall also apply to any
identical or substantially similar taxes which are imposed under the federal law
of Australia or the law of the United Kingdom after the date of signature of
this Convention in addition to, or in place of, the existing taxes. The
competent authorities of the Contracting States shall notify each other of any
substantial changes that have been made in the law of their respective States
relating to the taxes to which this Convention applies within a reasonable
period of time after those changes.
1 For the purposes of this Convention, unless the context otherwise
requires:
(a) the term “United Kingdom” means Great Britain
and Northern Ireland, including any area outside the territorial sea of the
United Kingdom which in accordance with international law has been or may
hereafter be designated, under the laws of the United Kingdom concerning the
Continental Shelf, as an area within which the rights of the United Kingdom with
respect to the seabed and subsoil and their natural resources may be
exercised;
(b) the term “Australia”, when used in a
geographical sense, excludes all external territories other than:
(i) the
Territory of Norfolk Island;
(ii) the Territory of Christmas
Island;
(iii) the Territory of Cocos (Keeling) Islands;
(iv) the
Territory of Ashmore and Cartier Islands;
(v) the Territory of Heard
Island and McDonald Islands; and
(vi) the Coral Sea Islands
Territory,
and includes any area adjacent to the territorial limits of
Australia (including the Territories specified in this subparagraph) in respect
of which there is for the time being in force, consistently with international
law, a law of Australia dealing with the exploration for or exploitation of any
of the natural resources of the seabed and subsoil of the Continental
Shelf;
(c) the term “Australian tax” means tax imposed by
Australia, being tax to which this Convention applies by virtue of Article
2;
(d) the term “United Kingdom tax” means tax imposed by
the United Kingdom, being tax to which this Convention applies by virtue of
Article 2;
(e) the terms “a Contracting State” and
“the other Contracting State” mean the United Kingdom or Australia,
as the context requires;
(f) the term “person” includes an
individual, a company and any other body of persons, but subject to paragraph 2
of this Article does not include a partnership;
(g) the term
“company” means any body corporate or anything that is treated as a
company or body corporate for tax purposes;
(h) the term
“enterprise” applies to the carrying on of any
business;
(i) the terms “enterprise of a Contracting State”
and “enterprise of the other Contracting State” mean respectively an
enterprise carried on by a resident of a Contracting State and an enterprise
carried on by a resident of the other Contracting State;
(j) the term
“international traffic” means any transport by a ship or aircraft
operated by an enterprise of a Contracting State, except when the ship or
aircraft is operated solely from a place or between places in the other
Contracting State;
(k) the term “competent authority”
means:
(i) in the case of the United Kingdom, the Commissioners of Inland
Revenue or their authorised representative;
(ii) in the case of
Australia, the Commissioner of Taxation or an authorised representative of the
Commissioner;
(l) the term “national” means:
(i) in
relation to the United Kingdom, any British citizen, or any British subject not
possessing the citizenship of any other Commonwealth country or territory,
provided that individual has the right of abode in the United Kingdom; and any
company deriving its status as such from the law in force in the United
Kingdom;
(ii) in relation to Australia, an Australian citizen or an
individual not possessing citizenship who has been granted permanent residency
status; and any company deriving its status as such from the law in force in
Australia;
(m) the term “business” includes the performance
of professional services and of other activities of an independent
character;
(n) the term “tax” means Australian tax or United
Kingdom tax as the context requires, but does not include any penalty or
interest imposed under the law of either Contracting State relating to its
tax;
(o) the term “recognised stock exchange”
means:
(i) the Australian Stock Exchange and any other Australian stock
exchange recognised as such under Australian law;
(ii) the London Stock
Exchange and any other United Kingdom investment exchange recognised under
United Kingdom law; or
(iii) any other stock exchange agreed upon by the
competent authorities.
2 A partnership deriving its status from
Australian law as a limited partnership which is treated as a taxable unit under
the law of Australia shall be treated as a person for the purposes of this
Convention.
3 As regards the application of this Convention at any time
by a Contracting State, any term not defined therein shall, unless the context
otherwise requires, have the meaning that it has at that time under the laws of
that State for the purposes of the taxes to which this Convention applies, any
meaning under the applicable tax laws of that State prevailing over a meaning
given to the term under other laws of that State.
1 For the purposes of this Convention, a person is a resident of a
Contracting State:
(a) in the case of the United Kingdom, if the person
is a resident of the United Kingdom for the purposes of United Kingdom tax;
and
(b) in the case of Australia, if the person is a resident of
Australia for the purposes of Australian tax.
A Contracting State or a
political subdivision or local authority of that State is also a resident of
that State for the purposes of this Convention.
2 A person is not a
resident of a Contracting State for the purposes of this Convention if that
person is liable to tax in that State in respect only of income or gains from
sources in that State.
3 The status of an individual who, by reason of
the preceding provisions of this Article is a resident of both Contracting
States, shall be determined as follows:
(a) that individual shall be
deemed to be a resident only of the Contracting State in which a permanent home
is available to that individual; but if a permanent home is available in both
States, or in neither of them, that individual shall be deemed to be a resident
only of the State with which the individual’s personal and economic
relations are closer (centre of vital interests);
(b) if the Contracting
State in which the centre of vital interests is situated cannot be determined,
the individual shall be deemed to be a resident only of the State of which that
individual is a national;
(c) if the individual is a national of both
Contracting States or of neither of them, the competent authorities of the
Contracting States shall endeavour to resolve the question by mutual
agreement.
4 Where by reason of the preceding provisions of this Article
a person other than an individual is a resident of both Contracting States, then
it shall be deemed to be a resident only of the State in which its place of
effective management is situated.
5 Notwithstanding paragraph 4 of this
Article, where by reason of paragraph 1 of this Article a company, which is a
participant in a dual listed company arrangement, is a resident of both
Contracting States then it shall be deemed to be a resident only of the
Contracting State in which it is incorporated, provided it has its primary stock
exchange listing in that State.
6 The term “dual listed company
arrangement” as used in this Article means an arrangement pursuant to
which two publicly listed companies, while maintaining their separate legal
entity status, shareholdings and listings, align their strategic directions and
the economic interests of their respective shareholders through:
(a) the
appointment of common (or almost identical) boards of
directors;
(b) management of the operations of the two companies on a
unified basis;
(c) equalised distributions to shareholders in accordance
with an equalisation ratio applying between the two companies, including in the
event of a winding up of one or both of the companies;
(d) the
shareholders of both companies voting in effect as a single decision-making body
on substantial issues affecting their combined interests;
and
(e) cross-guarantees as to, or similar financial support for, each
other’s material obligations or operations, except where the effect of the
relevant regulatory requirements prevents such guarantees or financial
support.
ARTICLE 5
Permanent establishment
1 For the purposes of this Convention, the term “permanent
establishment” means a fixed place of business through which the business
of an enterprise is wholly or partly carried on.
2 The term
“permanent establishment” includes especially:
(a) a place
of management;
(b) a branch;
(c) an office;
(d) a
factory;
(e) a workshop;
(f) a mine, an oil or gas well, a
quarry or any other place relating to the exploration for or exploitation of
natural resources; and
(g) an agricultural, pastoral or forestry
property.
3 An enterprise shall be deemed to have a permanent
establishment in a Contracting State and to carry on business through that
permanent establishment if:
(a) it has a building site or construction or
installation project in that State, or it undertakes a supervisory or
consultancy activity in that State connected with such a site or project, but
only if that site, project or activity lasts more than 12 months;
(b) it
maintains substantial equipment for rental or other purposes within that other
State (excluding equipment let under a hire-purchase agreement) for a period of
more than 12 months; or
(c) a person acting in a Contracting State on
behalf of an enterprise of the other Contracting State manufactures or processes
in the first-mentioned State for the enterprise goods or merchandise belonging
to the enterprise.
4 (a) The duration of activities under
subparagraph (a) of paragraph 3 will be determined by aggregating the
periods during which activities are carried on in a Contracting State by
associated enterprises provided that the activities of the enterprise in that
State are connected with the activities carried on in that State by its
associate.
(b) The period during which two or more associated
enterprises are carrying on concurrent activities will be counted only once for
the purpose of determining the duration of activities.
(c) Under this
Article, an enterprise shall be deemed to be associated with another enterprise
if:
(i) one is controlled directly or indirectly by the other;
or
(ii) both are controlled directly or indirectly by a third person or
persons.
5 Notwithstanding the preceding provisions of this Article, an
enterprise shall not be deemed to have a permanent establishment merely by
reason of:
(a) the use of facilities solely for the purpose of storage,
display or delivery of goods or merchandise belonging to the
enterprise;
(b) the maintenance of a stock of goods or merchandise
belonging to the enterprise solely for the purpose of storage, display or
delivery;
(c) the maintenance of a stock of goods or merchandise
belonging to the enterprise solely for the purpose of processing by another
enterprise;
(d) the maintenance of a fixed place of business solely for
the purpose of purchasing goods or merchandise, or collecting information, for
the enterprise; or
(e) the maintenance of a fixed place of business
solely for the purpose of carrying on, for the enterprise, any other activity of
a preparatory or auxiliary character.
6 Notwithstanding the provisions of
paragraphs 1 and 2 of this Article, where a person - other than an agent of an
independent status to whom paragraph 7 of this Article applies - is acting on
behalf of an enterprise and has, and habitually exercises, in a Contracting
State an authority to conclude contracts on behalf of the enterprise, that
enterprise shall be deemed to have a permanent establishment in that State in
respect of any activities which that person undertakes for that enterprise
unless the activities of such person are limited to those mentioned in paragraph
5 of this Article which, if exercised through a fixed place of business, would
not make this fixed place of business a permanent establishment under the
provisions of that paragraph.
7 An enterprise shall not be deemed to have
a permanent establishment in a Contracting State merely because it carries on
business in that State through a broker, general commission agent or any other
agent of an independent status, provided that such brokers or agents are acting
in the ordinary course of their business as such.
8 The fact that a
company which is a resident of a Contracting State controls or is controlled by
a company which is a resident of the other Contracting State, or which carries
on business in that other State (whether through a permanent establishment or
otherwise), shall not of itself make either company a permanent establishment of
the other.
ARTICLE 6
Income
from real property
1 Income derived by a resident of a Contracting State from real property
may be taxed in the Contracting State in which the real property is
situated.
2 The term “real property” shall have the meaning
which it has under the law of the Contracting State in which the property is
situated. The term shall in any case include:
(a) a lease of land or
any other interest in or over land;
(b) property accessory to real
property;
(c) livestock and equipment used in agriculture and
forestry;
(d) usufruct of real property;
(e) a right to explore
for mineral, oil or gas deposits or other natural resources, and a right to mine
those deposits or resources; and
(f) a right to receive variable or
fixed payments either as consideration for or in respect of the exploitation of,
or the right to explore or exploit, mineral, oil or gas deposits, quarries or
other places of extraction or exploitation of natural resources.
Ships
and aircraft shall not be regarded as real property.
3 Any interest or
right referred to in paragraph 2 shall be regarded as situated where the land,
mineral, oil or gas deposits, quarries or natural resources, as the case may be,
are situated or where the exploration may take place.
4 The provisions of
paragraph 1 of this Article shall apply to income derived from the direct use,
letting, or use in any other form of real property.
5 The provisions of
paragraphs 1, 3 and 4 of this Article shall also apply to the income from real
property of an enterprise.
1 The profits of an enterprise of a Contracting State shall be taxable only
in that State unless the enterprise carries on business in the other Contracting
State through a permanent establishment situated in that other State. If the
enterprise carries on business in that manner, the profits of the enterprise may
be taxed in the other State but only so much of them as is attributable to that
permanent establishment.
2 Subject to the provisions of paragraph 3 of
this Article, where an enterprise of a Contracting State carries on business in
the other Contracting State through a permanent establishment situated in that
other State, there shall in each Contracting State be attributed to that
permanent establishment the profits which it might be expected to make if it
were a distinct and separate enterprise engaged in the same or similar
activities under the same or similar conditions and dealing wholly independently
with the enterprise of which it is a permanent establishment or with other
enterprises.
3 In determining the profits of a permanent establishment,
there shall be allowed as deductions expenses of the enterprise, being expenses
which are incurred for the purposes of the permanent establishment, including
executive and general administrative expenses so incurred, whether in the
Contracting State in which the permanent establishment is situated or
elsewhere.
4 Nothing in this Article shall affect the application of any
law of a Contracting State relating to the determination of the tax liability of
a person in cases where the information available to the competent authority of
that State is inadequate to determine the profits to be attributed to a
permanent establishment. In such cases that law shall be applied, having regard
to the information that is available, consistently with the principles of this
Article.
5 No profits shall be attributed to a permanent establishment by
reason of the mere purchase by that permanent establishment of goods or
merchandise for the enterprise.
6 Where profits include items of income
or gains which are dealt with separately in other Articles of this Convention,
then the provisions of those Articles shall not be affected by the provisions of
this Article.
7 Nothing in this Article shall affect the operation of any
law of a Contracting State relating to tax imposed on profits from insurance
with non-residents provided that if the relevant law in force in either
Contracting State at the date of signature of this Convention is varied
(otherwise than in minor respects so as not to affect its general character) the
Contracting States shall consult with each other with a view to agreeing to any
amendment of this paragraph that may be appropriate.
ARTICLE
8
Shipping and air
transport
1 Profits of an enterprise of a Contracting State from the operation of
ships or aircraft in international traffic shall be taxable only in that
State.
2 Notwithstanding the provisions of paragraph 1 of this Article,
profits of an enterprise of a Contracting State from the operation of ships or
aircraft may be taxed in the other Contracting State to the extent that they are
profits derived from ship or aircraft operations confined solely to places in
that other State.
3 For the purposes of this Article, profits from the
operation of ships or aircraft in international traffic
include:
(a) profits from the rental on a bareboat basis of ships or
aircraft; and
(b) profits from the use, maintenance or rental of
containers (including trailers and related equipment for the transport of
containers) used for the transport of goods or merchandise;
provided such
rental or such use, maintenance or rental, as the case may be, is directly
connected or ancillary to the operation of ships or aircraft in international
traffic.
4 The provisions of paragraphs 1 and 2 of this Article shall
also apply to profits from the participation in a pool, a joint business or an
international operating agency, but only to so much of the profits so derived as
is attributable to the participant in proportion to its share in the joint
operation.
5 For the purposes of this Article, profits derived
from:
(a) the carriage by ships or aircraft of passengers, livestock,
mail, goods or merchandise which are shipped in a Contracting State and are
discharged at the same or another place in that State; or
(b) the use of
a ship or aircraft for haulage, survey or dredging activities, or for
exploration or extraction activities in relation to natural resources, where
such activities are undertaken in a Contracting State;
shall be treated
as profits from ship or aircraft operations confined solely to places in that
State.
ARTICLE 9
Associated
enterprises
1 Where:
(a) an enterprise of a Contracting State participates
directly or indirectly in the management, control or capital of an enterprise of
the other Contracting State; or
(b) the same persons participate
directly or indirectly in the management, control or capital of an enterprise of
a Contracting State and an enterprise of the other Contracting State;
and
in either case conditions operate between the two enterprises in their
commercial or financial relations which differ from those which might be
expected to operate between independent enterprises dealing wholly independently
with one another, then any profits which might, but for those conditions, have
been expected to accrue to one of the enterprises, but, by reason of those
conditions, have not so accrued, may be included in the profits of that
enterprise and taxed accordingly.
2 Nothing in this Article shall affect
the application of any law of a Contracting State relating to the determination
of the tax liability of a person in cases where the information available to the
competent authority of that State is inadequate to determine the profits
accruing to an enterprise. In such cases that law shall be applied, having
regard to the information that is available, consistently with the principles of
this Article.
3 Where profits on which an enterprise of a Contracting
State has been charged to tax in that State are also included, by virtue of the
provisions of paragraphs 1 or 2, in the profits of an enterprise of the other
Contracting State and charged to tax in that other State, and the profits so
included are profits which might have been expected to have accrued to that
enterprise of the other State if the conditions operative between the
enterprises had been those which might have been expected to have operated
between independent enterprises dealing wholly independently with one another,
then the first-mentioned State shall make an appropriate adjustment to the
amount of tax it has charged on those profits. In determining such adjustment,
due regard shall be had to the other provisions of this Convention and the
competent authorities of the Contracting States shall if necessary consult each
other.
1 Dividends paid by a company which is a resident of a Contracting State
for the purposes of its tax, being dividends beneficially owned by a resident of
the other Contracting State, may be taxed in that other State.
2 However,
such dividends may also be taxed in the Contracting State of which the company
paying the dividends is a resident for the purposes of its tax, and according to
the law of that State, but the tax charged shall not exceed:
(a) 5 per
cent of the gross amount of the dividends, if the beneficial owner of the
dividends is a company which holds directly at least 10 per cent of the voting
power in the company paying the dividends; and
(b) 15 per cent of the
gross amount of the dividends in all other cases.
3 Notwithstanding the
provisions of paragraph 2 of this Article, dividends shall not be taxed in the
Contracting State of which the company paying the dividends is a resident if the
beneficial owner of the dividends is a company that is a resident of the other
Contracting State that has owned shares representing 80 per cent or more of the
voting power of the company paying the dividends for a 12 month period ending on
the date the dividend is declared and the company that is the beneficial owner
of the dividends:
(a) has its principal class of shares listed on a
recognised stock exchange specified in subparagraph (i) or (ii) of
subparagraph (o) of paragraph 1 of Article 3 and regularly traded on one or
more recognised stock exchanges;
(b) is owned directly or indirectly by
one or more companies whose principal class of shares is listed on a recognised
stock exchange specified in subparagraph (i) or (ii) of
subparagraph (o) of paragraph 1 of Article 3 and regularly traded on one or
more recognised stock exchanges; or
(c) does not meet the requirements of
subparagraphs (a) or (b) of this paragraph but the competent authority of
the first-mentioned Contracting State determines, in accordance with the law of
that State, that the establishment, acquisition or maintenance of the company
that is the beneficial owner of the dividends and the conduct of its operations
did not have as one of its principal purposes the obtaining of benefits under
this Convention. The competent authority of the first-mentioned Contracting
State shall consult the competent authority of the other Contracting State
before refusing to grant benefits of this Convention under this
subparagraph.
4 The term “dividends” as used in this Article
means income from shares or other rights, not being debt-claims, participating
in profits, as well as income from other corporate rights which is subjected to
the same taxation treatment as income from shares by the laws of the State of
which the company making the distribution is a resident and also includes any
other item which, under the laws of the Contracting State of which the company
paying the dividend is a resident, is treated as a dividend or distribution of a
company.
5 The provisions of paragraphs 1, 2 and 3 of this Article shall
not apply if the beneficial owner of the dividends, being a resident of a
Contracting State, carries on business in the other Contracting State of which
the company paying the dividends is a resident, through a permanent
establishment situated in that other State and the holding in respect of which
the dividends are paid is effectively connected with such permanent
establishment. In such case the provisions of Article 7 of this Convention
shall apply.
6 Where a company which is a resident of a Contracting State
derives profits or income from the other Contracting State, that other State may
not impose any tax on the dividends paid by the company, being dividends
beneficially owned by a person who is not a resident of the other Contracting
State, except insofar as the holding in respect of which such dividends are paid
is effectively connected with a permanent establishment situated in that other
State, nor subject the company’s undistributed profits to a tax on
undistributed profits, even if the dividends paid or the undistributed profits
consist wholly or partly of profits or income arising in such other State. This
paragraph shall not apply in relation to dividends paid by any company which is
a resident of Australia for the purposes of Australian tax and which is also a
resident of the United Kingdom for the purposes of United Kingdom
tax.
7 No relief shall be available under this Article if it was the main
purpose or one of the main purposes of any person concerned with the creation or
assignment of the shares or other rights in respect of which the dividend is
paid to take advantage of this Article by means of that creation or
assignment.
8 For the purposes of paragraph 3 of this Article, the term
“principal class of shares” means the ordinary or common shares of
the company, provided that such class of shares represents the majority of the
voting power and value of the company. If no single class of ordinary or common
shares represents the majority of the voting power and value of the company, the
“principal class of shares” is that class or those classes that in
the aggregate represent a majority of the voting power and value of the
company.
ARTICLE 11
Interest
1 Interest arising in a Contracting State and beneficially owned by a
resident of the other Contracting State may be taxed in that other
State.
2 However, that interest may also be taxed in the Contracting
State in which it arises, and according to the law of that State, but the tax so
charged shall not exceed 10 per cent of the gross amount of the
interest.
3 Notwithstanding paragraph 2, interest arising in a
Contracting State and beneficially owned by a resident of the other Contracting
State may not be taxed in the first-mentioned State if:
(a) the interest
is derived by a Contracting State or by a political or administrative
sub-division or a local authority thereof, or by any other body exercising
governmental functions in a Contracting State, or by a bank performing central
banking functions in a Contracting State; or
(b) the interest is derived
by a financial institution which is unrelated to and dealing wholly
independently with the payer. For the purposes of this Article, the term
“financial institution” means a bank or other enterprise
substantially deriving its profits by raising debt finance in the financial
markets or by taking deposits at interest and using those funds in carrying on a
business of providing finance.
4 Notwithstanding paragraph 3, interest
referred to in subparagraph (b) of that paragraph may be taxed in the State
in which it arises at a rate not exceeding 10 per cent of the gross amount of
the interest if the interest is paid as part of an arrangement involving
back-to-back loans or other arrangement that is economically equivalent and
intended to have a similar effect to back-to-back loans.
5 The term
“interest” as used in this Article means income from debt-claims of
every kind, whether or not secured by mortgage and whether or not carrying a
right to participate in the debtor’s profits, and in particular, income
from government securities and income from bonds or debentures, and income from
any other form of indebtedness. The term “interest” also includes
income which is subjected to the same taxation treatment as income from money
lent by the law of the Contracting State in which the income arises. The term
“interest” shall not include any item which is treated as a dividend
under the provisions of Article 10 of this Convention.
6 The provisions
of paragraphs 1 and 2, subparagraph (b) of paragraph 3 and paragraph 4 of
this Article shall not apply if the beneficial owner of the interest, being a
resident of a Contracting State, carries on business in the other Contracting
State, in which the interest arises, through a permanent establishment situated
in that other State and the indebtedness in respect of which the interest is
paid or credited is effectively connected with such permanent establishment. In
such case, the provisions of Article 7 of this Convention shall
apply.
7 Interest shall be deemed to arise in a Contracting State when
the payer is a resident of that State for the purposes of its tax. Where,
however, the person paying the interest, whether the person is a resident of a
Contracting State or not, has in a Contracting State a permanent establishment
in connection with which the indebtedness on which the interest is paid was
incurred, and that interest is borne by that permanent establishment, then the
interest shall be deemed to arise in the State in which the permanent
establishment is situated.
8 Where, by reason of a special relationship
between the payer and the beneficial owner of the interest, or between both of
them and some other person, the amount of the interest paid or credited exceeds,
for whatever reason, the amount which might reasonably have been expected to
have been agreed upon by the payer and the beneficial owner in the absence of
such relationship, the provisions of this Article shall apply only to the
last-mentioned amount. In such case, the excess part of the amount of the
interest paid or credited shall remain taxable according to the laws of each
Contracting State, due regard being had to the other provisions of this
Convention.
9 No relief shall be available under this Article if it was
the main purpose or one of the main purposes of any person concerned with the
creation or assignment of the debt-claim in respect of which the interest is
paid to take advantage of this Article by means of that creation or
assignment.
ARTICLE 12
Royalties
1 Royalties arising in a Contracting State and beneficially owned by a
resident of the other Contracting State may be taxed in that other
State.
2 However, those royalties may also be taxed in the Contracting
State in which they arise, and according to the law of that State, but the tax
so charged shall not exceed 5 per cent of the gross amount of the
royalties.
3 The term “royalties” in this Article means
payments or credits, whether periodical or not, and however described or
computed, to the extent to which they are made as consideration
for:
(a) the use of, or the right to use, any copyright, patent, design
or model, plan, secret formula or process, trademark or other like property or
right;
(b) the supply of scientific, technical, industrial or commercial
knowledge or information;
(c) the supply of any ancillary and subsidiary
assistance that is furnished as a means of enabling the application or enjoyment
of any such item as is mentioned in subparagraph (a) or (b) of this
paragraph;
(d) the use of or the right to use:
(i) motion
picture films; or
(ii) films or audio or video tapes or disks, or any
other means of image or sound reproduction or transmission for use in connection
with television, radio or other broadcasting; or
(e) total or partial
forbearance in respect of the use or supply of any property or right referred to
in this paragraph.
4 The provisions of paragraphs 1 and 2 of this Article
shall not apply if the beneficial owner of the royalties, being a resident of a
Contracting State, carries on business in the other Contracting State, in which
the royalties arise, through a permanent establishment situated in that other
State, and the right or property in respect of which the royalties are paid or
credited is effectively connected with that permanent establishment. In that
case the provisions of Article 7 of this Convention shall
apply.
5 Royalties shall be deemed to arise in a Contracting State when
the payer is a resident of that State for the purposes of its tax. Where,
however, the person paying the royalties, whether the person is a resident of a
Contracting State or not, has in a Contracting State a permanent establishment
in connection with which the liability to pay the royalties was incurred, and
the royalties are borne by the permanent establishment, then the royalties shall
be deemed to arise in the State in which the permanent establishment is
situated.
6 Where, by reason of a special relationship between the payer
and the beneficial owner of the royalties, or between both of them and some
other person, the amount of the royalties paid or credited exceeds, for whatever
reason, the amount which might reasonably have been expected to have been agreed
upon by the payer and the beneficial owner in the absence of such relationship,
the provisions of this Article shall apply only to the last-mentioned amount.
In such case, the excess paid or credited shall remain taxable according to the
laws of each Contracting State, due regard being had to the other provisions of
this Convention.
7 The provisions of this Article shall not apply if it
was the main purpose or one of the main purposes of any person concerned with
the creation or assignment of the rights in respect of which the royalties are
paid to take advantage of this Article by means of that creation or
assignment.
ARTICLE 13
Alienation of property
1 Income or gains derived by a resident of a Contracting State from the
alienation of real property situated in the other Contracting State may be taxed
in that other State.
2 Income or gains from the alienation of property,
other than real property, forming part of the business property of a permanent
establishment which an enterprise of a Contracting State has in the other
Contracting State, including such income or gains from the alienation of such a
permanent establishment (alone or with the whole enterprise), may be taxed in
that other State.
3 Income or gains derived by a resident of a
Contracting State from the alienation of ships or aircraft operated in
international traffic, or of property (other than real property) pertaining to
the operation of those ships or aircraft, shall be taxable only in that
Contracting State.
4 Income or gains derived by a resident of a
Contracting State from the alienation of any shares or other interests in a
company, or of an interest of any kind in a partnership, trust or other entity,
where the value of the assets of such entity, whether they are held directly or
indirectly (including through one or more interposed entities, such as, for
example, through a chain of companies), is principally attributable to real
property situated in the other Contracting State, may be taxed in that other
State.
5 An individual who elects, under the taxation law of a
Contracting State, to defer taxation on income or gains relating to property
which would otherwise be taxed in that State upon the individual ceasing to be a
resident of that State for the purposes of its tax, shall, if the individual is
a resident of the other State, be taxable on income or gains from the subsequent
alienation of that property only in that other State.
6 Nothing in this
Convention affects the application of a law of a Contracting State relating to
the taxation of gains of a capital nature derived from the alienation of any
property other than that to which any of the preceding paragraphs of this
Article apply.
7 In this Article, the term “real property”
has the same meaning as it has in Article 6.
8 The situation of interests
or rights referred to in paragraph 2 of Article 6 shall be determined for the
purposes of this Article in accordance with paragraph 3 of Article 6.
9 The provisions of this Article shall not affect the right of the
United Kingdom to levy according to its laws a tax chargeable in respect of
income or gains from the alienation of any property on a person who is a
resident of the United Kingdom at any time during the fiscal year in which the
property is alienated, or has been so resident at any time during the 6 years
immediately preceding that year.
ARTICLE 14
Income from employment
1 Subject to the provisions of Articles 17 and 18 of this Convention,
salaries, wages and other similar remuneration derived by a resident of a
Contracting State in respect of an employment shall be taxable only in that
State unless the employment is exercised in the other Contracting State. If the
employment is so exercised, such remuneration as is derived from that exercise
may be taxed in that other State.
2 Notwithstanding the provisions of
paragraph 1 of this Article, remuneration derived by a resident of a Contracting
State in respect of an employment exercised in the other Contracting State shall
be taxable only in the first-mentioned State if:
(a) the recipient is
present in the other State for a period or periods not exceeding in the
aggregate 183 days in any twelve month period commencing or ending in the fiscal
year or year of income of that other State; and
(b) the remuneration is
paid by, or on behalf of, an employer who is not a resident of the other State;
and
(c) the remuneration is not deductible in determining taxable
profits of a permanent establishment which the employer has in the other
State.
3 Notwithstanding the preceding provisions of this Article,
remuneration derived in respect of an employment exercised aboard a ship or
aircraft operated in international traffic may be taxed in the Contracting State
of which the enterprise operating the ship or aircraft is a
resident.
4 In relation to remuneration of a director of a company
derived from the company the preceding provisions of this Article shall apply as
if the remuneration were remuneration of an employee in respect of an employment
and as if the references to an employer were references to the
company.
ARTICLE 15
Fringe benefits
1 Where, except for the application of this Article, a fringe benefit is
taxable in both Contracting States the benefit will be taxable only in the
Contracting State which would have the primary taxing right over that benefit if
the value of the benefit were paid to the employee as ordinary employment
income.
2. For the purposes of this Article:
(a) “fringe
benefit” has the meaning it has under Australia’s Fringe Benefits
Tax Assessment Act 1986 (Commonwealth), as it may be amended from
time to time, and does not include a benefit arising from the acquisition of an
option over shares under an employee share scheme;
(b) a Contracting
State has a “primary taxing right” to the extent that it has a
taxing right under this Convention in respect of the remuneration for the
relevant employment and the other Contracting State is required under this
Convention to allow relief for any taxes imposed in respect of such remuneration
by the first-mentioned Contracting State.
ARTICLE 16
Entertainers and
sportspersons
1 Notwithstanding the provisions of Articles 7 and 14 of this Convention,
income derived by a resident of a Contracting State as an entertainer, such as a
theatre, motion picture, radio or television artiste, or a musician, or as a
sportsperson, from that person’s personal activities as such exercised in
the other Contracting State, may be taxed in that other State.
2 Where
income in respect of personal activities exercised by an entertainer or a
sportsperson in that person’s capacity as such accrues not to that person
but to another person, that income may, notwithstanding the provisions of
Articles 7 and 14 of this Convention, be taxed in the Contracting State in which
the activities of the entertainer or sportsperson are exercised.
ARTICLE 17
Pensions and annuities
1 Pensions (including government pensions) and annuities paid to a
resident of a Contracting State shall be taxable only in that
State.
2 The term “annuity” means a stated sum payable
periodically to an individual at stated times during life or during a specified
or ascertainable period of time under an obligation to make the payments in
return for adequate and full consideration in money or money’s
worth.
ARTICLE 18
Government service
1 Salaries, wages and other similar remuneration, other than a pension
or annuity, paid by a Contracting State or a political subdivision or local
authority of that State to an individual in respect of services rendered in the
discharge of governmental functions shall be taxable only in that State.
However, such salaries, wages and other similar remuneration shall be taxable
only in the other Contracting State if the services are rendered in that other
State and the recipient is a resident of that other State who:
(a) is a
national of that State; or
(b) did not become a resident of that State
solely for the purpose of rendering the services.
2 The provisions of
paragraph 1 of this Article shall not apply to salaries, wages and other similar
remuneration in respect of services rendered in connection with any trade or
business carried on by a Contracting State or a political subdivision or local
authority of that State. In that case, the provisions of Article 14, 15 or 16,
as the case may be, shall apply.
ARTICLE 19
Students
Where a student, who is a resident of a Contracting State or who was a
resident of that State immediately before visiting the other Contracting State
and who is temporarily present in that other State solely for the purpose of the
student’s education, receives payments from sources outside that other
State for the purpose of the student’s maintenance or education, those
payments shall be exempt from tax in that other State.
ARTICLE 20
Other income
1 Items of income beneficially owned by a resident of a Contracting State,
wherever arising, not dealt with in the foregoing Articles of this Convention
shall be taxable only in that State.
2 The provisions of paragraph 1 of
this Article shall not apply to income, other than income from real property as
defined in paragraph 2 of Article 6 of this Convention, derived by a resident of
a Contracting State who carries on business in the other Contracting State
through a permanent establishment situated therein and the right or property in
respect of which the income is paid is effectively connected with such permanent
establishment. In that case the provisions of Article 7 of this Convention
shall apply.
3 Notwithstanding the provisions of paragraphs 1 and 2 of
this Article, items of income of a resident of a Contracting State not dealt
with in the foregoing Articles of this Convention from sources in the other
Contracting State may also be taxed in the other Contracting
State.
4 Where, by reason of a special relationship between the person
referred to in paragraph 1 of this Article and some other person, or between
both of them and some third person, the amount of the income referred to in that
paragraph exceeds the amount (if any) which might reasonably have been expected
to have been agreed upon between them in the absence of such a relationship, the
provisions of this Article shall apply only to the last-mentioned amount. In
such a case, the excess part of the income shall remain taxable according to the
laws of each Contracting State, due regard being had to the other applicable
provisions of this Convention.
5 A person may not rely on this Article to
obtain relief from taxation if it was the main purpose or one of the main
purposes of any person concerned with the creation or assignment of the rights
in respect of which the income is derived to take advantage of this Article by
means of that creation or assignment.
ARTICLE 21
Source of income
Income or gains derived by a resident of the United Kingdom which, under
any one or more of Articles 6 to 8 and 10 to 16 and 18, may be taxed in
Australia shall for the purposes of the laws of Australia relating to its tax be
deemed to arise from sources in Australia.
ARTICLE 22
Elimination of double
taxation
1 Subject to the provisions of the laws of Australia from time to time in
force which relate to the allowance of a credit against Australian tax of tax
paid in a country outside Australia (which shall not affect the general
principle of this Article):
(a) United Kingdom tax paid under the laws of
the United Kingdom and in accordance with this Convention, whether directly or
by deduction, in respect of income or gains derived by a person who is a
resident of Australia from sources in the United Kingdom shall be allowed as a
credit against Australian tax payable in respect of that
income;
(b) Where a company which is a resident of the United Kingdom and
is not a resident of Australia for the purposes of Australian tax pays a
dividend to a company which is a resident of Australia and which controls
directly or indirectly at least 10 per cent of the voting power of the
first-mentioned company, the credit shall include the United Kingdom tax paid by
that first-mentioned company in respect of that portion of its profits out of
which the dividend is paid.
2 Subject to the provisions of the law of the
United Kingdom regarding the allowance as a credit against United Kingdom tax of
tax payable in a territory outside the United Kingdom (which shall not affect
the general principle hereof):
(a) Australian tax payable under the laws
of Australia and in accordance with this Convention, whether directly or by
deduction, on income or chargeable gains from sources within Australia
(excluding in the case of a dividend, tax payable in respect of the profits out
of which the dividend is paid) shall be allowed as a credit against any United
Kingdom tax computed by reference to the same income or chargeable gains by
reference to which the Australian tax is computed;
(b) in the case of a
dividend paid by a company which is a resident of Australia to a company which
is a resident of the United Kingdom and which controls directly or indirectly at
least 10 per cent of the voting power in the company paying the dividend, the
credit shall take into account (in addition to any Australian tax for which
credit may be allowed under the provisions of subparagraph (a) of this
paragraph) the Australian tax payable by the company in respect of the profits
out of which such dividend is paid.
3 For the purposes of paragraph 1 and
2 of this Article, income or gains owned by a resident of a Contracting State
which may be taxed in the other Contracting State in accordance with this
Convention shall be deemed to arise from sources in that other Contracting
State.
ARTICLE 23
Limitation of relief
1 Where under this Convention any income or gains are relieved from tax in
a Contracting State and, under the law in force in the other Contracting State,
a person in respect of that income or those gains is taxed by reference to the
amount thereof which is remitted to or received in that other State and not by
reference to the full amount thereof, then the relief to be allowed under this
Convention in the first-mentioned State shall apply only to so much of the
income or gains as is taxed in the other State.
2 Where under this
Convention any income or gains are relieved from tax in a Contracting State and,
under the law in force in the other Contracting State, an individual in respect
of that income or those gains is exempt from tax by virtue of being a temporary
resident of the other State within the meaning of the applicable tax laws of
that other State, then the relief to be allowed under this Convention in the
first-mentioned State shall not apply to the extent that that income or those
gains are exempt from tax in the other State.
ARTICLE 24
Partnerships
Where a partnership is treated as a taxable unit under the law of a
Contracting State and under any provision of this Convention is entitled, as a
resident of that State, to relief from tax in the other Contracting State on any
income or gains, that provision shall not be construed as restricting the right
of that other State to tax any member of the partnership who is a resident of
that other State on that member’s share of such income or gains; but any
such income or gains shall be treated for the purposes of Article 22 of this
Convention as income or gains from sources in the first-mentioned
State.
ARTICLE 25
Non-discrimination
1 Nationals of a Contracting State shall not be subjected in the other
Contracting State to any taxation or any requirement connected therewith, which
is other or more burdensome than the taxation and connected requirements to
which nationals of that other State in the same circumstances, in particular
with respect to residence, are or may be subjected.
2 The taxation on a
permanent establishment which an enterprise of a Contracting State has in the
other Contracting State shall not be less favourably levied in that other State
than the taxation levied on enterprises of that other State carrying on the same
activities in similar circumstances.
3 Except where the provisions of
paragraph 1 of Article 9, paragraph 8 or 9 of Article 11, paragraph 6 or 7 of
Article 12, or paragraph 4 or 5 of Article 20 of this Convention apply,
interest, royalties and other disbursements paid by an enterprise of a
Contracting State to a resident of the other Contracting State shall for the
purpose of determining the taxable profits of such enterprise, be deductible
under the same conditions as if they had been paid to a resident of the
first-mentioned State.
4 Enterprises of a Contracting State, the capital
of which is wholly or partly owned or controlled, directly or indirectly, by one
or more residents of the other Contracting State, shall not be subjected in the
first-mentioned State to any taxation or any requirement connected therewith
which is other or more burdensome than the taxation and connected requirements
to which other similar enterprises of the first-mentioned State in similar
circumstances are or may be subjected.
5 Nothing contained in this
Article shall be construed as obliging a Contracting State to grant to
individuals who are residents of the other Contracting State any of the personal
allowances, reliefs and reductions for tax purposes which are granted to
individuals so resident.
6 This Article shall not apply to any provision
of the laws of a Contracting State which:
(a) is designed to prevent the
avoidance or evasion of taxes;
(b) does not permit the deferral of tax
arising on the transfer of an asset where the subsequent transfer of the asset
by the transferee would be beyond the taxing jurisdiction of the Contracting
State under its laws;
(c) provides for consolidation of group entities
for treatment as a single entity for tax purposes provided that Australian
resident companies that are owned directly or indirectly by residents of the
United Kingdom can access such consolidation treatment on the same terms and
conditions as other Australian resident companies;
(d) provides
deductions to eligible taxpayers for expenditure on research and development;
or
(e) is otherwise agreed to be unaffected by this Article in an
Exchange of Notes between the Government of Australia and the Government of the
United Kingdom.
7 The provisions of this Article shall apply to the taxes
which are the subject of this Convention.
ARTICLE 26
Mutual agreement
procedure
1 Where a person who is a resident of a Contracting State considers that
the actions of one or both of the Contracting States result or will result for
that person in taxation not in accordance with this Convention, that person may,
irrespective of the remedies provided by the domestic law of those States
concerning taxes to which this Convention applies, present a case to the
competent authority of the Contracting State of which that person is a resident
or, if the case comes under paragraph 1 of Article 25 of this Convention, to
that of the Contracting State of which that person is a national.
2 The
competent authority shall endeavour, if the case appears to it to be justified
and if it is not itself able to arrive at a satisfactory solution, to resolve
the case by mutual agreement with the competent authority of the other
Contracting State, with a view to the avoidance of taxation which is not in
accordance with this Convention.
3 The competent authorities of the
Contracting States shall jointly endeavour to resolve by mutual agreement any
difficulties or doubts arising as to the interpretation or application of this
Convention. They may also consult together for the elimination of double
taxation in cases not provided for in this Convention.
4 The competent
authorities of the Contracting States may communicate with each other directly
for the purpose of reaching an agreement in the sense of the preceding
paragraphs.
5 For the purposes of paragraph 3 of Article XXII
(Consultation) of the General Agreement on Trade in Services, the Contracting
States agree that, notwithstanding that paragraph, any dispute between them as
to whether a measure falls within the scope of this Convention may be brought
before the Council for Trade in Services, as provided by that paragraph, only
with the consent of both Contracting States. Any doubt as to the interpretation
of this paragraph shall be resolved under paragraph 3 of this Article or,
failing agreement under that procedure, pursuant to any other procedure agreed
to by both Contracting States.
ARTICLE 27
Exchange of information
1 The competent authorities of the Contracting States shall exchange such
information as is foreseeably relevant to the administration or enforcement of
the provisions of this Convention or of the domestic laws of the Contracting
States concerning taxes to which this Convention applies insofar as the taxation
under those laws is not contrary to this Convention. The exchange of
information is not restricted by Article 1 of this Convention. Any information
received by a Contracting State shall be treated as secret in the same manner as
information obtained under the domestic law of that State and shall be disclosed
only to persons or authorities (including courts and administrative bodies)
concerned with the assessment or collection of, the enforcement or prosecution
in respect of, or the determination of appeals in relation to, the taxes to
which this Convention applies. Such persons or authorities shall use the
information only for such purposes. They may disclose the information in public
court proceedings or in judicial decisions.
2 If information is requested
by a Contracting State in accordance with this Article, the other Contracting
State shall obtain that information in the same manner and to the same extent as
if the tax of the first-mentioned State were the tax of that other State and
were being imposed by that other State, notwithstanding that the other State may
not, at that time, need such information for the purposes of its own
tax.
3 In no case shall the provisions of paragraphs 1 or 2 of this
Article be construed so as to impose on a Contracting State the
obligation:
(a) to carry out administrative measures at variance with
the laws or the administrative practice of that or of the other Contracting
State;
(b) to supply information which is not obtainable under the laws
or in the normal course of the administration of that or of the other
Contracting State; or
(c) to supply information which would disclose any
trade, business, industrial, commercial or professional secret or trade process,
or to supply information the disclosure of which would be contrary to public
policy.
ARTICLE 28
Members of diplomatic missions or
permanent missions and consular posts
Nothing in this Convention shall affect the fiscal privileges of
members of diplomatic missions or permanent missions or consular posts under the
general rules of international law or under the provisions of special
international agreements.
ARTICLE 29
Entry into force
1 Each of the Contracting States shall notify the other in writing through
the diplomatic channel of the completion of the procedures required by its law
for the entry into force of this Convention. This Convention shall enter into
force on the date of the later notification, and shall thereupon have
effect:
(a) in the case of Australia:
(i) in respect of
withholding tax on income that is derived by a non-resident, in relation to
income derived on or after 1 July next following the date on which this
Convention enters into force;
(ii) in respect of fringe benefits tax,
in relation to fringe benefits provided on or after 1 April next following
the date on which this Convention enters into force;
(iii) in respect
of other Australian tax, in relation to income or gains of any year of income
beginning on or after 1 July next following the date on which this
Convention enters into force;
(b) in the case of the United
Kingdom:
(i) in respect of taxes withheld at source, for amounts paid
or credited on or after 1 July next following the date on which this
Convention enters into force;
(ii) in respect of income tax not
described in clause (i) of this subparagraph and capital gains tax, for any year
of assessment beginning on or after 6 April next following the date on
which this Convention enters into force;
(iii) in respect of
corporation tax, for any financial year beginning on or after 1 April next
following the date on which this Convention enters into force.
2 The
Agreement between the Government of the Commonwealth of Australia and the
Government of the United Kingdom of Great Britain and Northern Ireland signed at
Canberra on 7 December 1967 (as amended by the Protocol signed at Canberra
on 29 January 1980) (“the Agreement”) shall be terminated and
shall cease to have effect in respect of the taxes to which this Convention
applies in accordance with the provisions of paragraph 1 of this Article. In
relation to tax credits in respect of dividends paid by companies which are
residents of the United Kingdom, the Agreement shall be terminated and shall
cease to have effect in respect of dividends paid on or after 1 July next
following the date on which this Convention enters into
force.
3 Notwithstanding the entry into force of this Convention, an
individual who is entitled to the benefits of Article 16 of the Agreement at the
time of the entry into force of this Convention shall continue to be entitled to
such benefits until such time as the individual would have ceased to be entitled
to such benefits if the Agreement had remained in force.
ARTICLE 30
Termination
This Convention shall remain in force until terminated by one of the
Contracting States. Either Contracting State may, on or before 30 June in
any calendar year beginning after the expiration of 5 years from the date of its
entry into force, give written notice of termination through the diplomatic
channel and, in that event, the Convention shall cease to have
effect:
(a) in the case of Australia:
(i) in respect of
withholding tax on income that is derived by a non-resident, in relation to
income derived on or after 1 January in the calendar year next following
that in which the notice of termination is given;
(ii) in respect of
fringe benefits tax, in relation to fringe benefits provided on or after
1 April in the calendar year next following that in which the notice of
termination is given;
(iii) in respect of other Australian tax, in
relation to income or gains of any year of income beginning on or after
1 July in the calendar year next following that in which the notice of
termination is given;
(b) in the case of the United
Kingdom:
(i) in respect of taxes withheld at source, for amounts paid
or credited on or after 1 January in the calendar year next following that
in which the notice of termination is given;
(ii) in respect of income
tax not described in clause (i) of this subparagraph and capital gains tax, for
any year of assessment beginning on or after 6 April in the calendar year
next following that in which the notice of termination is
given;
(iii) in respect of corporation tax, for any financial year
beginning on or after 1 April in the calendar year next following that in
which the notice of termination is given.
IN WITNESS WHEREOF the
undersigned, duly authorised thereto by their respective Governments, have
signed this Convention.
DONE in duplicate at Canberra this 21st day
of August 2003
FOR THE GOVERNMENT OF FOR THE GOVERNMENT OF
AUSTRALIA THE UNITED KINGDOM OF
GREAT BRITAIN AND
NORTHERN
IRELAND
PETER COSTELLO ALASTAIR GOODLAD
[Signatures
omitted]
2003 UNITED KINGDOM NOTES
No LGB 03/170
The
Department of Foreign Affairs and Trade presents its compliments to the British
High Commission to Australia and has the honour to refer to the Convention
between the Government of the United Kingdom of Great Britain and Northern
Ireland and the Government of Australia for the Avoidance of Double Taxation and
the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital
Gains which has been signed today (the “Convention”).
The
Department has the honour to make the following proposals on behalf of the
Government of Australia:
1. With reference generally to the
application of the Convention (including these Notes),
the
Contracting States agree that:
(a) the term “income or gains”
includes “profits”;
(b) the term “laws” includes
the full body of law, and is not limited to statutory law;
(c) the terms
“paid or credited” and “payments or credits” shall not
include the recording of internal transactions between a permanent establishment
and another part of the same enterprise;
(d) the expression “any
provision of the laws of a Contracting State which is designed to prevent the
avoidance or evasion of taxes” includes:
(i) measures designed to
address thin capitalisation, dividend stripping and transfer
pricing;
(ii) controlled foreign company, transferor trust and foreign
investment fund rules;
(iii) measures designed to ensure that taxes can
be effectively recovered (conservancy measures); and
(e) nothing in the
Convention shall be construed as restricting, in any manner, the application of
any provision of the laws of a Contracting State which is designed to prevent
the avoidance or evasion of taxes.
2. With reference to Article
5 (Permanent establishment),
the Contracting States agree that the
term “permanent establishment” fully encompasses the concept of a
“fixed base” used in other double tax treaties in the context of
independent personal services.
3. With reference to Article 7
(Business profits),
the Contracting States agree
that:
(a) nothing in paragraph 3 of the Article shall permit the
deduction of an expense which would not be deductible if the permanent
establishment were an independent enterprise which incurred the expense;
and
(b) where:
(i) a resident of a Contracting State is
beneficially entitled, whether directly or through one or more interposed trust
estates, to a share of the business profits of an enterprise carried on in the
other Contracting State by the trustee of a trust estate other than a trust
estate which is treated as a company for tax purposes; and
(ii) in
relation to that enterprise, that trustee would, in accordance with the
principles of Article 5, have a permanent establishment in that other
State,
the enterprise carried on by the trustee shall be deemed to be a
business carried on in the other State by that resident through a permanent
establishment situated in that other State and that share of business profits
shall be attributed to that permanent establishment.
4. With reference
to Article 9 (Associated enterprises),
the Contracting States note
that the expression “dealing wholly independently with one another”
is included in paragraph 1 of the Article to conform to Australia’s
consistent treaty practice and to address Australia’s concerns that the
appropriate benchmark for determining the conditions operating between the
associated enterprises should have regard to whether those dealings between the
enterprises occurred on a truly independent basis.
5. With reference
to Article 10 (Dividends),
the Contracting States agree that if the
relevant law in either Contracting State at the date of signature of the
Convention is varied otherwise than in minor respects so as not to affect its
general character, the Contracting States shall consult each other with a view
to agreeing to any amendment of paragraph 2 and 3 of the Article as may be
appropriate.
6. With reference to Article 11
(Interest),
the Contracting States agree that:
(a) the term
“financial institution” shall not include a corporate treasury or a
member of a corporate group performing financing services for the group;
and
(b) nothing in the Convention shall have the effect of subjecting to
tax in a Contracting State any interest paid by a resident of that State to a
resident of the other State where the payer has outside both Contracting States
a permanent establishment in connection with which the indebtedness on which the
interest is paid was incurred, and that interest is borne by that permanent
establishment.
7. With reference to Article 12
(Royalties),
the Contracting States agree that:
(a) the term
“royalties” shall not include payments for the use of spectrum
licences. The provisions of Article 7 of the Convention shall apply to such
payments; and
(b) nothing in the Convention shall have the effect of
subjecting to tax in a Contracting State any royalties paid by a resident of
that State to a resident of the other State where the payer has outside both
Contracting States a permanent establishment in connection with which the
liability to pay the royalties was incurred, and the royalties are borne by the
permanent establishment.
8. With reference to Article 14
(Income from employment),
the Contracting States agree
that:
(a) income or gains derived by employees in relation to share
option schemes shall be treated as “other similar remuneration” for
the purposes of Article 14;
(b) unless the facts otherwise indicate,
the period of employment to which the option relates shall be taken to be the
period between the grant of the option and the date on which all the conditions
for its exercise have been satisfied (the vesting of the option);
and
(c) where a resident of a Contracting State derives such income or
gains, and
(i) the period of employment to which the share option relates
is the period between grant and vesting of the option;
(ii) the employee
remains in that employment at the date of alienation or exercise of the option;
and
(iii) that employment has been exercised by the employee in the other
Contracting State during all or part of the period between grant and vesting of
the option;
the proportion of the income or gain which shall be
attributable to employment exercised in the other Contracting State shall be
determined in accordance with the ratio of the number of days of employment
exercised in that State between grant and vesting of the option to the total
number of days of employment exercised between grant and vesting of the
option.
9. With reference to Article 25
(Non-discrimination),
the Contracting States agree
that:
(a) in relation to paragraph 4 and subparagraph 6(c) of the
Article, the reference to capital being owned or controlled “directly or
indirectly” includes cases where the capital is held through a chain of
companies or other entities; and
(b) nothing in the Article shall be
construed as obliging a Contracting State to allow tax rebates and credits in
relation to dividends received by a person who is a resident of the other
Contracting State.
10. With reference to Article 26 (Mutual agreement
procedure) and Article 27 (Exchange of information),
the Contracting
States agree that the provisions of the Articles shall have effect from the date
of entry into force of the Convention, without regard to the date of the
relevant transactions or the taxable or chargeable period to which the matter
relates.
11. With reference to Article 26 (Mutual agreement
procedure),
the Contracting States agree that in relation to
paragraph 1 of the Article, the applicable time limits in the domestic laws
bearing on the time available for presenting a case to the relevant competent
authority shall apply, whether or not those applicable time limits specifically
refer to the competent authority
process.
12. Miscellaneous
The Contracting States agree
that the two Governments shall consult each other at intervals of not more than
five years regarding the terms, operation and application of the Convention with
a view to ensuring that it continues to serve the purposes of avoiding double
taxation and preventing fiscal evasion. The first such consultation shall take
place no later than the end of the fifth year after the entry into force of the
Convention.
If the foregoing proposals are acceptable to the Government
of the United Kingdom of Great Britain and Northern Ireland, the Department has
the honour to propose that the present Note and the High Commission’s
confirmatory Note in reply shall constitute an Agreement on certain matters
between the Government of the United Kingdom of Great Britain and Northern
Ireland and the Government of Australia for the Avoidance of Double Taxation and
the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital
Gains, which shall enter into force at the same time as the entry into force of
the Convention.
The Department of Foreign Affairs and Trade avails itself of this
opportunity to renew to the British High Commission to Australia the assurances
of its highest consideration.
[Seal
omitted]
CANBERRA
21 August
2003
41/03
The British High Commission to Australia presents its compliments to the
Department of Foreign Affairs and Trade and has the honour to refer to the
Department’s Note No LGB 03/170 of 21 August 2003 which reads as
follows:
“The Department of Foreign Affairs and Trade presents its
compliments to the British High Commission to Australia and has the honour to
refer to the Convention between the Government of the United Kingdom of Great
Britain and Northern Ireland and the Government of Australia for the Avoidance
of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on
Income and on Capital Gains which has been signed today (the
“Convention”).
The Department has the honour to make the
following proposals on behalf of the Government of Australia:
1. With reference generally to the application of the Convention
(including these Notes),
the Contracting States agree that:
(a) the term “income or
gains” includes “profits”;
(b) the term “laws” includes the full body of law, and is
not limited to statutory law;
(c) the terms “paid or credited” and “payments or
credits” shall not include the recording of internal transactions between
a permanent establishment and another part of the same enterprise;
(d) the expression “any provision of the laws of a Contracting
State which is designed to prevent the avoidance or evasion of taxes”
includes:
(i) measures designed to address thin capitalisation, dividend
stripping and transfer pricing;
(ii) controlled foreign company, transferor trust and foreign
investment fund rules;
(iii) measures designed to ensure that taxes can
be effectively recovered (conservancy measures); and
(e) nothing in the
Convention shall be construed as restricting, in any manner, the application of
any provision of the laws of a Contracting State which is designed to prevent
the avoidance or evasion of taxes.
2. With reference to Article 5
(Permanent establishment),
the Contracting States agree that the term
“permanent establishment” fully encompasses the concept of a
“fixed base” used in other double tax treaties in the context of
independent personal services.
3. With reference to Article 7
(Business profits),
the Contracting States agree that:
(a) nothing in paragraph 3 of
the Article shall permit the deduction of an expense which would not be
deductible if the permanent establishment were an independent enterprise which
incurred the expense; and
(b) where:
(i) a resident of a
Contracting State is beneficially entitled, whether directly or through one or
more interposed trust estates, to a share of the business profits of an
enterprise carried on in the other Contracting State by the trustee of a trust
estate other than a trust estate which is treated as a company for tax purposes;
and
(ii) in relation to that enterprise, that trustee would, in
accordance with the principles of Article 5, have a permanent establishment in
that other State,
the enterprise carried on by the trustee shall be
deemed to be a business carried on in the other State by that resident through a
permanent establishment situated in that other State and that share of business
profits shall be attributed to that permanent establishment.
4. With
reference to Article 9 (Associated enterprises),
the Contracting States note that the expression “dealing wholly
independently with one another” is included in paragraph 1 of the Article
to conform to Australia’s consistent treaty practice and to address
Australia’s concerns that the appropriate benchmark for determining the
conditions operating between the associated enterprises should have regard to
whether those dealings between the enterprises occurred on a truly independent
basis.
5. With reference to Article 10 (Dividends),
the
Contracting States agree that if the relevant law in either Contracting State at
the date of signature of the Convention is varied otherwise than in minor
respects so as not to affect its general character, the Contracting States shall
consult each other with a view to agreeing to any amendment of paragraph 2 and 3
of the Article as may be appropriate.
6. With reference to Article 11
(Interest),
the Contracting States agree that:
(a) the term “financial institution” shall not include a
corporate treasury or a member of a corporate group performing financing
services for the group; and
(b) nothing in the Convention shall have the effect of subjecting to
tax in a Contracting State any interest paid by a resident of that State to a
resident of the other State where the payer has outside both Contracting States
a permanent establishment in connection with which the indebtedness on which the
interest is paid was incurred, and that interest is borne by that permanent
establishment.
7. With reference to Article 12
(Royalties),
the Contracting States agree that:
(a) the term
“royalties” shall not include payments for the use of spectrum
licences. The provisions of Article 7 of the Convention shall apply to such
payments; and
(b) nothing in the Convention shall have the effect of subjecting to
tax in a Contracting State any royalties paid by a resident of that State to a
resident of the other State where the payer has outside both Contracting States
a permanent establishment in connection with which the liability to pay the
royalties was incurred, and the royalties are borne by the permanent
establishment.
8. With reference to Article 14 (Income from
employment),
the Contracting States agree that:
(a) income or gains derived
by employees in relation to share option schemes shall be treated as
“other similar remuneration” for the purposes of Article
14;
(b) unless the facts otherwise indicate, the period of employment to
which the option relates shall be taken to be the period between the grant of
the option and the date on which all the conditions for its exercise have been
satisfied (the vesting of the option); and
(c) where a resident of a
Contracting State derives such income or gains, and
(i) the period of employment to which the share option relates is the
period between grant and vesting of the option;
(ii) the employee remains
in that employment at the date of alienation or exercise of the option;
and
(iii) that employment has been exercised by the employee in the other
Contracting State during all or part of the period between grant and vesting of
the option;
the proportion of the income or gain which shall be attributable to
employment exercised in the other Contracting State shall be determined in
accordance with the ratio of the number of days of employment exercised in that
State between grant and vesting of the option to the total number of days of
employment exercised between grant and vesting of the option.
9. With reference to Article 25 (Non-discrimination),
the Contracting States agree that:
(a) in relation to paragraph 4 and subparagraph 6(c) of the Article,
the reference to capital being owned or controlled “directly or
indirectly” includes cases where the capital is held through a chain of
companies or other entities; and
(b) nothing in the Article shall be construed as obliging a Contracting
State to allow tax rebates and credits in relation to dividends received by a
person who is a resident of the other Contracting State.
10. With reference to Article 26 (Mutual agreement procedure) and
Article 27 (Exchange of information),
the Contracting States agree that the provisions of the Articles shall
have effect from the date of entry into force of the Convention, without regard
to the date of the relevant transactions or the taxable or chargeable period to
which the matter relates.
11. With reference to Article 26 (Mutual agreement
procedure),
the Contracting States agree that in relation to paragraph 1 of the
Article, the applicable time limits in the domestic laws bearing on the time
available for presenting a case to the relevant competent authority shall apply,
whether or not those applicable time limits specifically refer to the competent
authority process.
12. Miscellaneous
The Contracting States agree that the two Governments shall consult
each other at intervals of not more than five years regarding the terms,
operation and application of the Convention with a view to ensuring that it
continues to serve the purposes of avoiding double taxation and preventing
fiscal evasion. The first such consultation shall take place no later than the
end of the fifth year after the entry into force of the Convention.
If the foregoing proposals are acceptable to the Government of the
United Kingdom of Great Britain and Northern Ireland, the Department has the
honour to propose that the present Note and the High Commission’s
confirmatory Note in reply shall constitute an Agreement on certain matters
between the Government of the United Kingdom of Great Britain and Northern
Ireland and the Government of Australia for the Avoidance of Double Taxation and
the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital
Gains, which shall enter into force at the same time as the entry into force of
the Convention.
The Department of Foreign Affairs and Trade avails itself of this
opportunity to renew to the British High Commission to Australia the assurances
of its highest consideration.”
The High Commission has the honour to advise that the Department’s
proposals are acceptable to the Government of the United Kingdom of Great
Britain and Northern Ireland and that the Department’s Note and this
confirmatory Note in reply shall constitute an Agreement on certain matters
between the Government of the United Kingdom of Great Britain and Northern
Ireland and the Government of Australia for the Avoidance of Double Taxation and
the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital
Gains, which shall enter into force at the same time as the entry into force of
the Convention.
The British High Commission to Australia avails itself of this opportunity
to renew to the Department of Foreign Affairs and Trade the assurances of its
highest consideration.
[Seal omitted]
CANBERRA
21 August 2003
International Tax
Agreements Act 1953
1 Subsection 3(1)
Insert:
the Mexican agreement means the Agreement between the
Government of Australia and the Government of the United Mexican States for the
avoidance of double taxation and the prevention of fiscal evasion with respect
to taxes on income as affected by the protocol to that agreement. A copy of the
agreement, and of the protocol, in the English language is set out in
Schedule 47.
2 After section 11ZK
Insert:
Subject to this Act, on and after the date of entry into force of the
Mexican agreement, the provisions of the agreement, so far as those provisions
affect Australian tax, have the force of law according to their tenor.
3 At the end of the Act
Add:
Note: See section 3.
AGREEMENT BETWEEN THE GOVERNMENT OF AUSTRALIA AND THE
GOVERNMENT OF THE UNITED MEXICAN STATES FOR THE AVOIDANCE OF DOUBLE TAXATION AND
THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME
The Government of Australia and the Government of the United Mexican
States, desiring to conclude an Agreement for the avoidance of double taxation
and the prevention of fiscal evasion with respect to taxes on income, which
shall hereafter be referred to as the
“Agreement”,
Have agreed as follows:
Article 1
PERSONS COVERED
This Agreement shall apply to persons who are residents of one or both
of the Contracting States.
Article 2
TAXES COVERED
1 The existing taxes to which this Agreement shall apply
are:
(a) in Mexico:
the federal income tax (el impuesto sobre la
renta federal);
(b) in Australia:
the income tax, and the
resource rent tax in respect of offshore projects relating to exploration for or
exploitation of petroleum resources, imposed under the federal law of
Australia.
2 This Agreement shall apply also to any identical or
substantially similar taxes which are imposed under the federal laws of Mexico
and Australia after the date of signature of this Agreement in addition to, or
in place of, the existing taxes. The competent authorities of the Contracting
States shall notify each other of any significant changes which have been made
in the laws of their respective States relating to the taxes to which this
Agreement applies, and to its application, within a reasonable period of time
after those changes.
Article 3
GENERAL DEFINITIONS
1 For the purposes of this Agreement, unless the context otherwise
requires:
(a) the term “Mexico” means the United Mexican
States; when used in a geographical sense, it includes the territory of the
United Mexican States: being the integrated parts of the Federation; the
islands, including the reefs and cays in the adjacent waters; the islands of
Guadalupe and Revillagigedo; the continental shelf and the seabed and submarine
shelves of the islands, cays and reefs, where Mexico may exercise sovereign
rights in accordance with international law; the waters of the territorial seas
to the extent and limits established by international law and the inland waters;
and the airspace of the national territory to the extent and upon the conditions
established by international law; and the exclusive economic zone outside the
territorial sea within which Mexico may exercise sovereign rights in accordance
with its domestic law and international law;
(b) the term
“Australia”, when used in a geographical sense, excludes all
external territories other than:
(i) the Territory of Norfolk
Island;
(ii) the Territory of Christmas Island;
(iii) the
Territory of Cocos (Keeling) Islands;
(iv) the Territory of Ashmore and
Cartier Islands;
(v) the Territory of Heard Island and McDonald Islands;
and
(vi) the Coral Sea Islands Territory,
and includes any area
adjacent to the territorial limits of Australia (including the Territories
specified in this subparagraph) in respect of which there is for the time being
in force, consistently with international law, a law of Australia dealing with
the exploration for or exploitation of any of the natural resources of the
seabed and subsoil of the continental shelf;
(c) the term “Mexican
tax” means the tax imposed by Mexico, being the tax to which this
Agreement applies by virtue of Article 2;
(d) the term “Australian
tax” means the taxes imposed by Australia, being the taxes to which this
Agreement applies by virtue of Article 2;
(e) the term
“company” means any body corporate or any entity which is treated as
a company or body corporate for tax purposes;
(f) the term
“competent authority” means:
(i) in the case of Mexico, the
Ministry of Finance and Public Credit;
(ii) in the case of Australia,
the Commissioner of Taxation or an authorised representative of the
Commissioner;
(g) the terms “a Contracting State” and
“the other Contracting State” mean Mexico or Australia, as the
context requires;
(h) the terms “enterprise of a Contracting
State” and “enterprise of the other Contracting State” mean,
respectively, an enterprise carried on by a resident of a Contracting State and
an enterprise carried on by a resident of the other Contracting
State;
(i) the term “international traffic” means any
transport by a ship or aircraft operated by an enterprise of a Contracting
State, except when the ship or aircraft is operated solely from a place or
between places in the other Contracting State;
(j) the term
“person” includes an individual, a company and any other body of
persons;
(k) the term “tax” means Mexican tax or Australian
tax, as the context requires, but does not include any penalty or interest
imposed under the law of either Contracting State relating to its
tax.
2 As regards the application of this Agreement at any time by a
Contracting State, any term not defined herein shall, unless the context
otherwise requires, have the meaning which it has at that time under the law of
that State concerning the taxes to which this Agreement applies, any meaning
under the applicable tax laws of that State prevailing over a meaning given to
the term under other laws of that State.
Article 4
RESIDENT
1 For the purposes of this Agreement, a person is a resident of a
Contracting State if the person is a resident of that Contracting State for the
purposes of its tax.
2 A person is not a resident of a Contracting State
for the purposes of this Agreement if the person is liable to tax in that State
in respect only of income from sources in that State.
3 A person, who in
relation to any income, is a partnership, an estate of a deceased individual, or
a trust (other than a partnership, an estate of a deceased individual, or a
trust the income of which is exempt from taxation under the law of a Contracting
State relating to its tax) shall not be treated as a resident of a Contracting
State except to the extent that the income is subject to tax in that State as
the income of a resident of that State, either in the hands of that person or in
the hands of a partner or beneficiary, or, if that income is exempt from tax in
that State, it is so exempt solely because it is subject to tax in the other
State.
4 Where by reason of the preceding provisions of this Article an
individual is a resident of both Contracting States, then the status of the
person shall be determined in accordance with the following
rules:
(a) the person shall be deemed to be a resident only of the
Contracting State in which a permanent home is available to the
person;
(b) if a permanent home is available to the person in both
Contracting States, or in neither of them, the person shall be deemed to be a
resident only of the Contracting State with which the person’s economic
and personal relations are closer. For the purpose of this subparagraph, an
individual’s citizenship or nationality of one of the Contracting States
shall be a factor in determining the degree of the individual’s personal
and economic relations with that Contracting State.
5 Where by reason of
the provisions of paragraph 1 a person other than an individual is a resident of
both Contracting States, then it shall be deemed to be a resident only of the
State in which its place of effective management is situated.
Article 5
PERMANENT ESTABLISHMENT
1 For the purposes of this Agreement, the term “permanent
establishment” means a fixed place of business through which the business
of an enterprise is wholly or partly carried on.
2 The term
“permanent establishment” includes:
(a) a place of
management;
(b) a branch;
(c) an office;
(d) a
factory;
(e) a workshop;
(f) a mine, an oil or gas well, a
quarry or any other place of extraction of natural resources; and
(g) an
agricultural, pastoral or forestry property.
3 An enterprise shall be
deemed to have a permanent establishment in a Contracting State and to carry on
business through that permanent establishment if it has a building site or
construction or installation project in that State, or a supervisory or
consultancy activity connected therewith, which lasts more than 6
months.
4 An enterprise shall be deemed to have a permanent establishment
in a Contracting State and to carry on business through that permanent
establishment if:
(a) heavy equipment is being used in that State by,
for or under contract with the enterprise; or
(b) a person manufactures
or processes in that State for the enterprise goods or merchandise belonging to
the enterprise.
5 An enterprise shall not be deemed to have a permanent
establishment merely by reason of:
(a) the use of facilities solely for
the purpose of storage, display or delivery of goods or merchandise belonging to
the enterprise; or
(b) the maintenance of a stock of goods or
merchandise belonging to the enterprise solely for the purpose of storage,
display or delivery; or
(c) the maintenance of a stock of goods or
merchandise belonging to the enterprise solely for the purpose of processing by
another enterprise; or
(d) the maintenance of a fixed place of business
solely for the purpose of purchasing goods or merchandise, or for collecting
information, for the enterprise; or
(e) the maintenance of a fixed place
of business solely for the purpose of advertising, supplying information, or
scientific research or for similar activities which have a preparatory or
auxiliary character for the enterprise; or
(f) the maintenance in Mexico
of a representative office of a bank where the activities of the representative
office are limited by the law of Mexico to activities which are of a preparatory
or auxiliary nature.
6 A person acting in a Contracting State on behalf
of an enterprise of the other Contracting State—other than an agent of an
independent status to whom paragraph 7 applies—shall be deemed to be a
permanent establishment of that enterprise in the firstmentioned State if the
person has, and habitually exercises in that State, an authority to conclude
contracts on behalf of the enterprise, in respect of any activities which that
person undertakes for the enterprise, unless the activities of such person are
limited to those mentioned in paragraph 5 which, if exercised through a fixed
place of business, would not make this fixed place of business a permanent
establishment under the provisions of that paragraph.
7 An enterprise
shall not be deemed to have a permanent establishment in a Contracting State
merely because it carries on business in that other State through a broker,
general commission agent or any other agent of an independent status, provided
that such persons are acting in the ordinary course of their business and that
in their commercial or financial relations with the enterprise, conditions are
not made or imposed that differ from those generally agreed to by independent
agents.
8 The fact that a company which is a resident of a Contracting
State controls or is controlled by a company which is a resident of the other
Contracting State, or which carries on business in that other State (whether
through a permanent establishment or otherwise), shall not of itself make either
company a permanent establishment of the other.
9 The principles set
forth in the preceding paragraphs of this Article shall be applied in
determining for the purposes of paragraph 6 of Article 11 and paragraph 6 of
Article 12 of this Agreement whether there is a permanent establishment outside
both Contracting States, and whether an enterprise, not being an enterprise of
one of the Contracting States, has a permanent establishment in a Contracting
State.
Article 6
INCOME FROM IMMOVABLE (REAL) PROPERTY
1 Income from immovable (real) property may be taxed in the Contracting
State in which the immovable (real) property is situated.
2 In this
Article, the term “immovable (real) property”:
(a) in the
case of Mexico, means immovable property and has the meaning which it has under
the law of Mexico, and shall also include:
(i) property accessory to
immovable property;
(ii) livestock and equipment used in agriculture and
forestry;
(iii) rights to which the provisions of general law respecting
landed property apply;
(iv) usufruct of immovable property;
and
(v) a right to receive variable or fixed payments either as
consideration for or in respect of the exploitation of, or the right to explore
for or exploit, mineral, oil or gas deposits, quarries or other places of
extraction or exploitation of natural resources.
(b) in the case of
Australia, means real property according to the law of Australia, and shall also
include:
(i) a lease of land and any other interest in or over land,
whether improved or not, including a right to explore for mineral, oil or gas
deposits or other natural resources, and a right to mine those deposits or
resources; and
(ii) a right to receive variable or fixed payments either
as consideration for or in respect of the exploitation of, or the right to
explore for or exploit, mineral, oil or gas deposits, quarries or other places
of extraction or exploitation of natural resources.
3 Any interest or
right referred to in paragraph 2 shall be regarded as situated where the land,
mineral, oil or gas deposits, quarries or natural resources, as the case may be,
are situated or where the exploration may take place.
4 The provisions of
paragraph 1 shall apply to income derived from the direct use, letting, or use
in any other form of immovable (real) property.
5 The provisions of
paragraphs 1, 3 and 4 shall also apply to income from immovable (real) property
of an enterprise and to income from immovable (real) property used for the
performance of independent personal services.
Article 7
BUSINESS PROFITS
1 The profits of an enterprise of a Contracting State shall be taxable
only in that State unless the enterprise carries on business in the other
Contracting State through a permanent establishment situated in that other
State. If the enterprise carries on business in that manner, the profits of the
enterprise may be taxed in the other State but only so much of them as is
attributable to:
(a) that permanent establishment; or
(b) sales
in that other State of goods or merchandise of the same or similar kind as the
goods or merchandise sold through that permanent establishment. However, the
profits derived from the sales described in this subparagraph (b) shall not
be taxable in the other State if the enterprise demonstrates that such sales
have been carried out for reasons other than obtaining a benefit under this
Agreement.
2 Subject to the provisions of paragraph 3, where an
enterprise of a Contracting State carries on business in the other Contracting
State through a permanent establishment situated in that other State, there
shall in each Contracting State be attributed to that permanent establishment
the profits which it might reasonably be expected to make if it were a distinct
and separate enterprise engaged in the same or similar activities under the same
or similar conditions and dealing wholly independently with the enterprise of
which it is a permanent establishment or with other enterprises with which it
deals.
3 In determining the profits of a permanent establishment, there
shall be allowed as deductions expenses of the enterprise, being expenses which
are incurred for the purposes of the permanent establishment (including
executive and general administrative expenses so incurred) and which would be
deductible if the permanent establishment were an independent entity which paid
those expenses, whether incurred in the Contracting State in which the permanent
establishment is situated or elsewhere. No such deductions shall be allowed in
respect of such amounts, if any, paid (otherwise than towards reimbursement of
actual expenses) by the permanent establishment to the head office of the
enterprise or any of its other offices, by way of royalties, fees or other
similar payments in return for the use of patents or other rights, by way of
commission, for specific services performed or for management, or, except in the
case of a bank, by way of interest on money lent to the permanent
establishment.
4 No profits shall be attributed to a permanent
establishment by reason of the mere purchase by that permanent establishment of
goods or merchandise for the enterprise.
5 Where profits include items of
income or gains which are dealt with separately in other Articles of this
Agreement, then the provisions of those Articles shall not be affected by the
provisions of this Article.
6 Nothing in this Article shall affect the
operation of any law of a Contracting State relating to tax imposed on profits
from insurance with non-residents provided that if the relevant law in force in
either Contracting State at the date of signature of this Agreement is varied
(otherwise than in minor respects so as not to affect its general character) the
Contracting States shall consult with each other with a view to agreeing to any
amendment of this paragraph that may be appropriate. For the purposes of the
application of this paragraph, an insurance enterprise of Australia shall,
except in regard to reinsurance, be deemed to have a permanent establishment in
Mexico if it collects premiums in Mexico or insures risks situated therein
through a person other than an agent of an independent status to whom paragraph
7 of Article 5 applies.
Article 8
SHIPS AND AIRCRAFT
1 Profits of an enterprise of a Contracting State derived from the
operation of ships or aircraft shall be taxable only in that
State.
2 Notwithstanding the provisions of paragraph 1, such profits may
be taxed in the other Contracting State to the extent that they are profits
derived directly or indirectly from ship or aircraft operations confined solely
to places in that other State.
3 The profits to which the provisions of
paragraphs 1 and 2 apply include profits from the operation of ships or aircraft
derived through participation in a pool service or other profit sharing
arrangement.
4 For the purposes of this Article, profits derived from the
carriage by ships or aircraft of passengers, livestock, mail, goods or
merchandise which are shipped in a Contracting State and are discharged at a
place in that State shall be treated as profits from ship or aircraft operations
confined solely to places in that State.
Article 9
ASSOCIATED ENTERPRISES
1 Where:
(a) an enterprise of a Contracting State participates
directly or indirectly in the management, control or capital of an enterprise of
the other Contracting State; or
(b) the same persons participate
directly or indirectly in the management, control or capital of an enterprise of
a Contracting State and an enterprise of the other Contracting State,
and
in either case conditions operate between the two enterprises in their
commercial or financial relations which differ from those which would operate or
which might be expected to operate between independent enterprises dealing
wholly independently with one another, then any profits which, but for those
conditions, have accrued or might have been expected to accrue to one of the
enterprises but, by reason of those conditions, have not so accrued, may be
included in the profits of that enterprise and taxed
accordingly.
2 Where, by virtue of the provisions of paragraph 1 of this
Article or Item (4) of the Protocol, a Contracting State includes in the profits
of an enterprise of that State, and taxes accordingly, profits on which an
enterprise of the other Contracting State has been charged to tax in that other
State and the profits so included are profits which would have accrued or which
might be expected to have accrued to the enterprise of the firstmentioned State
if the conditions made between the two enterprises had been those which would
have operated or which might be expected to have operated between independent
enterprises dealing wholly independently with one another, then that other State
shall, in accordance with the provisions of Article 24, make an appropriate
adjustment to the amount of tax charged in that State on those profits if it
agrees with the adjustment made by the firstmentioned Contracting State. In
determining such an adjustment, due regard shall be had to the other provisions
of this Agreement and the competent authorities of the Contracting States shall
if necessary consult each other.
3 The provisions of paragraph 2 shall not
apply in the case of fraud.
Article 10
DIVIDENDS
1 Dividends paid by a company which is a resident of a Contracting
State, being dividends to which a resident of the other Contracting State is
beneficially entitled, may be taxed only in that other State.
2 However,
those dividends may also be taxed in the Contracting State of which the company
paying the dividends is a resident, and according to the law of that State, but
the tax so charged shall not exceed:
(a) nil per cent of the
gross amount of so much of the dividends as are paid out of profits that have
borne the normal rate of company tax, if the person beneficially entitled to
those dividends is a company (other than a partnership) which holds directly at
least 10 per cent of the voting power in the company paying the dividends;
and
(b) 15 per cent of the gross amount of the dividends to the extent
to which those dividends are not within paragraph (a),
provided that
if the relevant law in either Contracting State at the date of signature of this
Agreement is varied otherwise than in minor respects so as not to affect its
general character, the Contracting States shall consult each other with a view
to agreeing to any amendment of this paragraph that may be
appropriate.
3 For the purposes of paragraph 2, profits have borne the
normal rate of company tax:
(a) in Mexico, to the extent to which the
dividends have been paid from the net profit account; and
(b) in
Australia, to the extent to which the dividends have been “franked”
in accordance with its law relating to tax.
4 The provisions of paragraph
1 and paragraph 2 shall not affect the taxation of the company in respect of the
profits out of which the dividends are paid.
5 The term
“dividends” in this Article means income from shares and other
income assimilated to income from shares by the law, relating to tax, of the
Contracting State of which the company making the distribution is a
resident.
6 The provisions of paragraphs 1 and 2 shall not apply if the
person beneficially entitled to the dividends, being a resident of a Contracting
State, carries on business in the other Contracting State of which the company
paying the dividends is a resident, through a permanent establishment situated
in that other State, or performs in that other State independent personal
services from a fixed base situated in that other State, and the holding in
respect of which the dividends are paid is effectively connected with that
permanent establishment or fixed base. In that case the provisions of Article 7
or Article 14, as the case may be, shall apply.
7 Where a company which
is a resident of a Contracting State derives profits or income from the other
Contracting State, that other State may not impose any tax on the dividends paid
by the company—being dividends to which a person who is not a resident of
the other Contracting State is beneficially entitled—except insofar as the
holding in respect of which such dividends are paid is effectively connected
with a permanent establishment or a fixed base situated in that other State, nor
subject the company’s undistributed profits to a tax on the
company’s undistributed profits, even if the dividends paid or the
undistributed profits consist wholly or partly of profits or income arising in
such other State.
Article 11
INTEREST
1 Interest arising in a Contracting State, being interest to which a
resident of the other Contracting State is beneficially entitled, may be taxed
in that other State.
2 However, that interest may also be taxed in the
Contracting State in which it arises and according to the law of that State, but
the tax so charged shall not exceed:
(a) 10 per cent of the gross amount
of the interest:
(i) if the person beneficially entitled is a bank or an
insurance company; or
(ii) if derived from bonds and securities that are
regularly and substantially traded on a recognized securities market;
or
(iii) paid by banks except where subparagraphs (i) or (ii)
apply; or
(iv) paid by the purchaser to the seller of machinery and
equipment in connection with a sale on credit; and
(b) 15 per cent of
the gross amount of the interest in all other cases.
3 Notwithstanding
the provisions of paragraph 2, interest derived from the investment of official
foreign exchange reserve assets by the Government of one of the Contracting
States, its monetary institutions or a bank performing central banking functions
in that State shall be exempt from tax in the other Contracting
State.
4 The term “interest” in this Article includes
interest from Government securities or from bonds or debentures, whether or not
secured by mortgage and whether or not carrying a right to participate in
profits, interest from any other form of indebtedness and all other income
assimilated to income from money lent by the law, relating to tax, of the
Contracting State in which the income arises.
5 The provisions of
paragraphs 1 and 2 shall not apply if the person beneficially entitled to the
interest, being a resident of a Contracting State, carries on business in the
other Contracting State, in which the interest arises, through a permanent
establishment situated in that other State, or performs in that other State
independent personal services from a fixed base situated in that other State,
and the indebtedness in respect of which the interest is paid is effectively
connected with that permanent establishment or fixed base. In that case the
provisions of Article 7 or Article 14, as the case may be, shall
apply.
6 Interest shall be deemed to arise in a Contracting State when
the payer is a resident of that State. Where, however, the person paying the
interest, whether the person is a resident of a Contracting State or not, has in
a Contracting State or outside both Contracting States a permanent establishment
or fixed base in connection with which the indebtedness on which the interest is
paid was incurred, and that interest is borne by that permanent establishment or
fixed base, then the interest shall be deemed to arise in the State in which the
permanent establishment or fixed base is situated.
7 Where, by reason of
a special relationship between the payer and the person beneficially entitled to
the interest, or between both of them and some other person, the amount of the
interest paid exceeds, for whatever reason, the amount which would or might have
been expected to have been agreed upon by the payer and the person so entitled
in the absence of that relationship, the provisions of this Article shall apply
only to the lastmentioned amount. In that case, the excess part of the amount
of the interest paid shall remain taxable according to the laws of each
Contracting State, due regard being had to the other provisions of this
Agreement.
8 The provisions of this Article shall not apply if the
indebtedness in respect of which the interest is paid was created or assigned
with the main purpose of taking advantage of this Article and not for bona fide
commercial reasons. In that case the provisions of the domestic law of the
Contracting State in which the interest arises shall apply.
Article 12
ROYALTIES
1 Royalties arising in a Contracting State, being royalties to which a
resident of the other Contracting State is beneficially entitled, may be taxed
in that other State.
2 However, those royalties may also be taxed in the
Contracting State in which they arise, and according to the law of that State,
but the tax so charged shall not exceed 10 per cent of the gross amount of the
royalties.
3 The term “royalties” in this Article means
payments or credits, whether periodical or not, and however described or
computed, to the extent to which they are made as consideration
for:
(a) the use of, or the right to use, any copyright, patent, design
or model, plan, secret formula or process, trademark or other like property or
right; or
(b) the use of, or the right to use, any industrial,
commercial or scientific equipment; or
(c) the supply of scientific,
technical, industrial or commercial knowledge or information; or
(d) the
supply of any assistance that is ancillary and subsidiary to, and is furnished
as a means of enabling the application or enjoyment of, any such property or
right as is mentioned in subparagraph (a), any such equipment as is
mentioned in subparagraph (b) or any such knowledge or information as is
mentioned in subparagraph (c); or
(e) the use of, or the right to
use:
(i) motion picture films; or
(ii) films or video tapes for
use in connection with television; or
(iii) tapes for use in connection
with radio broadcasting; or
(f) total or partial forbearance in respect
of the use or supply of any property or right referred to in this
paragraph.
4 The term “royalties” also includes income,
profits or gains derived from the sale, exchange or other disposition of any
property or right described in this paragraph to the extent to which the amounts
realised on such sale, exchange or other disposition are contingent on the
productivity, use or further disposition of such property or right.
5 The
provisions of paragraphs 1 and 2 shall not apply if the person beneficially
entitled to the royalties, being a resident of a Contracting State, carries on
business in the other Contracting State, in which the royalties arise, through a
permanent establishment situated in that other State, or performs in that other
State independent personal services from a fixed base situated in that other
State, and the property or right in respect of which the royalties are paid or
credited is effectively connected with that permanent establishment or fixed
base. In that case the provisions of Article 7 or Article 14, as the case may
be, shall apply.
6 Royalties shall be deemed to arise in a Contracting
State when the payer is a resident of that State. Where, however, the person
paying the royalties, whether the person is a resident of a Contracting State or
not, has in a Contracting State or outside both Contracting States a permanent
establishment or fixed base in connection with which the liability to pay the
royalties was incurred, and the royalties are borne by the permanent
establishment or fixed base, then the royalties shall be deemed to arise in the
State in which the permanent establishment or fixed base is
situated.
7 Where, owing to a special relationship between the payer and
the person beneficially entitled to the royalties, or between both of them and
some other person, the amount of the royalties paid or credited exceeds, for
whatever reason, the amount which would or might have been expected to have been
agreed upon by the payer and the person so entitled in the absence of such
relationship, the provisions of this Article shall apply only to the
lastmentioned amount. In that case, the excess part of the amount of the
royalties paid or credited shall remain taxable according to the law of each
Contracting State, due regard being had to the other provisions of this
Agreement.
8 The provisions of this Article shall not apply if the rights
or property in respect of which the royalties are paid or credited were created
or assigned with the main purpose of taking advantage of this Article and not
for bona fide commercial reasons. In that case the provisions of the domestic
law of the Contracting State in which the royalties arise shall
apply.
Article 13
ALIENATION OF PROPERTY
1 Income, profits or gains derived by a resident of a Contracting State
from the alienation of immovable (real) property situated in the other
Contracting State may be taxed in that other State.
2 Income, profits or
gains derived by a resident of a Contracting State from the alienation of any
shares or other interests in a company, or of an interest of any kind in a
partnership, trust or other entity, where the value of the assets of such
entity, whether they are held directly or indirectly (including through one or
more interposed entities, such as, for example, through a chain of companies),
is principally attributable to real property situated in the other Contracting
State, may be taxed in that other State.
3 Income, profits or gains from
the alienation of property, other than immovable (real) property, that forms
part of the business property of a permanent establishment which an enterprise
of a Contracting State has in the other Contracting State or pertains to a fixed
base available in that other State to a resident of the firstmentioned State for
the purpose of performing independent personal services, including income,
profits or gains from the alienation of that permanent establishment (alone or
with the whole enterprise) or of that fixed base, may be taxed in that other
State.
4 Income, profits or gains from the alienation of ships or
aircraft operated in international traffic, or property other than immovable
(real) property pertaining to the operation of such ships or aircraft, shall be
taxable only in the Contracting State in which the enterprise alienating those
ships, aircraft or property is a resident.
5 Nothing in this Agreement
affects the application of a law of a Contracting State relating to the taxation
of gains of a capital nature derived from the alienation of any property
(including shares or other rights of a company) other than that to which any of
the preceding paragraphs of this Article apply.
6 In this Article, the
term “immovable (real) property” has the same meaning as it has in
paragraph 2 of Article 6.
7 The situation of immovable (real) property
shall be determined for the purposes of this Article in accordance with
paragraph 3 of Article 6.
8 An individual who elects, under the taxation law of a Contracting State,
to defer taxation on income, profits or gains relating to property which would
otherwise be taxed in that State upon the individual ceasing to be a resident of
that State for the purposes of its tax, shall, if the individual is a resident
of the other Contracting State, be taxable on income, profits or gains from the
subsequent alienation of that property only in that other Contracting
State.
Article 14
INDEPENDENT PERSONAL SERVICES
1 Income derived by an individual who is a resident of a Contracting
State in respect of professional services or other activities of an independent
character shall be taxable only in that State. However, if that
individual:
(a) has a fixed base regularly available in the other
Contracting State for the purpose of performing those activities;
or
(b) is present in the other State for a period or periods exceeding
in the aggregate 183 days in any twelve month period commencing or ending in the
fiscal year or in the year of income concerned, as the case may be of that other
State,
the income may be taxed in that other State, but only so much of
the income as is attributable to services performed from that fixed base or in
that other State during such period or periods.
2 The term
“professional services” includes services performed in the exercise
of independent scientific, literary, artistic, educational or teaching
activities as well as in the exercise of the independent activities of
physicians, lawyers, engineers, architects, dentists and
accountants.
Article 15
DEPENDENT PERSONAL SERVICES
1 Subject to the provisions of Articles 16, 18 and 19, salaries, wages
and other similar remuneration derived by an individual who is a resident of a
Contracting State in respect of an employment shall be taxable only in that
State unless the employment is exercised in the other Contracting State. If the
employment is so exercised, such remuneration as is derived from that exercise
may be taxed in that other State.
2 Notwithstanding the provisions of
paragraph 1, remuneration derived by an individual who is a resident of a
Contracting State in respect of an employment exercised in the other Contracting
State shall be taxable only in the firstmentioned State if:
(a) the
recipient is present in the other State for a period or periods not exceeding in
the aggregate 183 days in any twelve month period commencing or ending in the
fiscal year or in the year of income concerned, as the case may be;
and
(b) the remuneration is paid by, or on behalf of, an employer who is
a resident of the firstmentioned State; and
(c) the remuneration is not
deductible in determining taxable profits of a permanent establishment or a
fixed base which the employer has in that other State.
3 Notwithstanding
the preceding provisions of this Article, remuneration derived in respect of an
employment exercised aboard a ship or aircraft operated in international traffic
by an enterprise of a Contracting State may be taxed in that
State.
Article 16
DIRECTORS’ FEES
Directors’ fees and other similar payments derived by a resident
of a Contracting State in that person’s capacity as a member of the board
of directors and, in the case of Mexico, in that person’s capacity as an
‘‘administrador’’ or a
‘‘comisario’’, of a company which is a resident of the
other Contracting State may be taxed in that other State.
Article 17
ENTERTAINERS AND SPORTSPERSONS
1 Notwithstanding the provisions of Articles 7, 14 and 15, income
derived by entertainers (such as theatrical, motion picture, radio or television
artistes and musicians) and sportspersons from their personal activities as such
may be taxed in the Contracting State in which these activities are exercised.
Income referred to in this paragraph shall include income derived from any
personal activities performed in the other Contracting State by such persons
relating to their reputation as entertainers or sportspersons.
2 Where
income in respect of the personal activities of an entertainer or a sportsperson
as such accrues not to that entertainer or sportsperson but to another person,
that income may, notwithstanding the provisions of Articles 7, 14 and 15, be
taxed in the Contracting State in which the activities of the entertainer or
sportsperson are exercised.
Article 18
PENSIONS AND ANNUITIES
1 Pensions (including government pensions) and annuities paid to a
resident of a Contracting State shall be taxable only in that
State.
2 The term “annuity” means a stated sum payable
periodically at stated times during life or during a specified or ascertainable
period of time under an obligation to make the payments in return for adequate
and full consideration in money or money’s worth.
3 Any alimony or
other like maintenance payment arising in a Contracting State and paid to a
resident of the other Contracting State shall be taxable only in the
firstmentioned State.
Article 19
GOVERNMENT SERVICE
1 Salaries, wages and other similar remuneration, other than a pension
or annuity, paid by a Contracting State or a political subdivision or local
authority of that State to an individual in respect of services rendered in the
discharge of governmental functions shall be taxable only in that State.
However, such salaries, wages and other similar remuneration shall be taxable
only in the other Contracting State if the services are rendered in that other
State and the recipient is a resident of that other State who:
(a) is a
citizen or national of that State; or
(b) did not become a resident of
that State solely for the purpose of rendering the services.
2 The
provisions of paragraph 1 shall not apply to salaries, wages and other similar
remuneration in respect of services rendered in connection with a business
carried on by a Contracting State or a political subdivision or a local
authority thereof. In that case the provisions of Articles 15 or 16, as the
case may be, shall apply.
Article 20
STUDENTS
Payments received by a student who is or was immediately before
visiting a Contracting State a resident of the other Contracting State and who
is present in the firstmentioned State solely for the purpose of the
student’s education, shall be exempt from tax in the firstmentioned State,
provided that such payments were made to the student by persons residing outside
that firstmentioned State for the purposes of the student’s maintenance or
education.
Article 21
OTHER INCOME
1 Items of income of a resident of a Contracting State, wherever
arising, not dealt with in the foregoing Articles of this Agreement shall be
taxable only in that State.
2 The provisions of paragraph 1 shall not
apply to income, other than income from immovable (real) property as defined in
paragraph 2 of Article 6, derived by a resident of a Contracting State where
that income is effectively connected with a permanent establishment or fixed
base situated in the other Contracting State. In that case the provisions of
Article 7 or Article 14, as the case may be, shall
apply.
3 Notwithstanding the provisions of paragraphs 1 and 2, items of
income of a resident of a Contracting State not dealt with in the foregoing
Articles of this Agreement from sources in the other Contracting State may also
be taxed in the other Contracting State.
Article 22
SOURCE OF INCOME
1 Income, profits or gains derived by a resident of a Contracting State
which, under any one or more of Articles 6 to 8 and 10 to 19, may be taxed in
the other Contracting State shall for the purposes of the law of that other
Contracting State relating to its tax be deemed to be income from sources in
that other Contracting State.
2 Income, profits or gains derived by a
resident of a Contracting State which, under any one or more of Articles 6 to 8
and 10 to 19, may be taxed in the other Contracting State shall for the purposes
of Article 23 and of the law of the firstmentioned State relating to its tax be
deemed to be income from sources in the other Contracting
State.
Article 23
METHODS OF ELIMINATION OF DOUBLE TAXATION
1 In accordance with the provisions and subject to the limitations of
the laws of Mexico, as may be amended from time to time without changing the
general principle hereof, Mexico shall allow its residents as a credit against
Mexican tax:
(a) Australian tax paid on income arising in Australia, in
an amount not exceeding the tax payable in Mexico on such income;
and
(b) in the case of a company owning at least 10 per cent of the
capital of a company which is a resident of Australia and from which the
firstmentioned company receives dividends, Australian tax paid by the
distributing company with respect to the profits out of which the dividends are
paid.
2 Subject to the provisions of the law of Australia from time to
time in force which relate to the allowance of a credit against Australian tax
of tax paid in a country outside Australia (which shall not affect the general
principle of this Article):
(a) Mexican tax paid under the law of Mexico
and in accordance with this Agreement, whether directly or by deduction, in
respect of income derived by a person who is a resident of Australia from
sources in Mexico shall be allowed as a credit against Australian tax payable in
respect of that income; and
(b) where a company which is a resident of
Mexico and is not a resident of Australia for the purposes of Australian tax
pays a dividend to a company which is a resident of Australia and which controls
directly or indirectly not less than 10 per cent of the voting power of the
firstmentioned company, the credit referred to in subparagraph (a) shall
include the Mexican tax paid by that firstmentioned company in respect of that
portion of its profits out of which the dividend is paid.
Article 24
MUTUAL AGREEMENT PROCEDURE
1 Where a person considers that the actions of one or both of the
Contracting States result or will result for the person in taxation not in
accordance with the provisions of this Agreement, the person may, irrespective
of the remedies provided by the domestic law of those States concerning taxes to
which this Agreement applies, present a case to the competent authority of the
Contracting State of which the person is a resident. The case must be presented
within 3 years from the first notification of the action resulting in taxation
not in accordance with this Agreement.
2 The competent authority shall
endeavour, if the claim appears to it to be justified and if it is not itself
able to arrive at a satisfactory solution, to resolve the case with the
competent authority of the other Contracting State, with a view to the avoidance
of taxation which is not in accordance with this Agreement, provided that in the
case of Mexico the competent authority is notified of the case within four and a
half years from the due date or the date of filing the return in Mexico,
whichever is later. The solution so reached shall be
implemented:
(a) in the case of Mexico, within ten years from the due
date or the date of filing of the return in Mexico, whichever is later, or a
longer period if permitted under the domestic law of Mexico;
(b) in the
case of Australia, notwithstanding any time limits in the law relating to its
tax.
3 The competent authorities of the Contracting States shall jointly
endeavour to resolve any difficulties or doubts arising as to the interpretation
or application of this Agreement. They may also consult together regarding
cases not provided for in this Agreement.
4 The competent authorities of
the Contracting States may communicate with each other directly for the purpose
of giving effect to the provisions of this Agreement.
5 For the purposes
of paragraph 3 of Article XXII (Consultation) of the General Agreement on Trade
in Services, the Contracting States agree that, notwithstanding that paragraph,
any dispute between them as to whether a measure falls within the scope of this
Agreement may be brought before the Council for Trade in Services, as provided
by that paragraph, only with the consent of both Contracting States. Any doubt
as to the interpretation of this paragraph shall be resolved under paragraph 3
of this Article or failing agreement under that procedure, pursuant to any other
procedure agreed to by both Contracting States.
Article 25
EXCHANGE OF INFORMATION
1 The competent authorities of the Contracting States shall exchange
such information as is necessary for carrying out the provisions of this
Agreement or of the domestic law of the Contracting States concerning taxes to
which this Agreement applies insofar as the taxation under that law is not
contrary to this Agreement. The exchange of information is not restricted by
Article 1. Any information received by a Contracting State shall be treated as
secret in the same manner as information obtained under the domestic law of that
State and shall be disclosed only to persons or authorities (including courts
and administrative bodies) concerned with the assessment or collection of, the
enforcement or prosecution in respect of, or the determination of appeals in
relation to, the taxes to which this Agreement applies. Such persons or
authorities shall use the information only for such purposes. They may disclose
the information in public court proceedings or in judicial
decisions.
2 In no case shall the provisions of paragraph 1 be construed
so as to impose on a Contracting State the obligation to:
(a) carry out
administrative measures at variance with the law or the administrative practice
of that or of the other Contracting State; or
(b) supply information
which is not obtainable under the law or in the normal course of the
administration of that or of the other Contracting State; or
(c) supply
information which would disclose any trade, business, industrial, commercial or
professional secret or trade process, or to supply information the disclosure of
which would be contrary to public policy.
Article 26
MEMBERS OF DIPLOMATIC MISSIONS AND CONSULAR POSTS
Nothing in this Agreement shall affect the fiscal privileges of
members of diplomatic missions and consular posts under the general rules of
international law or under the provisions of special international
agreements.
Article 27
ENTRY INTO FORCE
Both Contracting States shall notify each other in writing through the
diplomatic channel of the completion of their respective statutory and
constitutional procedures required for the entry into force of this Agreement.
This Agreement shall enter into force on the date of the last notification, and
thereupon this Agreement shall have effect:
(a) in respect of taxes
imposed in accordance with Articles 10 (Dividends), 11 (Interest), and 12
(Royalties), for amounts paid or credited on or after the first day of the
second month next following the date on which this Agreement enters into force
if the Agreement enters into force prior to 1 July of that year; otherwise,
on 1 January of the year following the year this Agreement enters into
force.
(b) in respect of other taxes:
(i) in Mexico, on or after
1 July in the calendar year next following that in which this Agreement
enters into force;
(ii) in Australia, in relation to income, profits or
gains of any year of income beginning on or after 1 July in the calendar
year next following that in which this Agreement enters into
force.
Article 28
TERMINATION
This Agreement shall continue in effect indefinitely, but either of
the Contracting States may, on or before 30 June in any calendar year
beginning after the expiration of 5 years from the date of its entry into force,
give to the other Contracting State through the diplomatic channel written
notice of termination and, in that event, this Agreement shall cease to be
effective:
(a) in Mexico:
on or after 1 July in the calendar
year next following that in which the notice is given;
(b) in
Australia:
(i) in respect of withholding tax on income that is derived
by a non-resident, in relation to income derived on or after 1 July in the
calendar year next following that in which the notice of termination is
given;
(ii) in respect of other Australian tax, in relation to income,
profits or gains of any year of income beginning on or after 1 July in the
calendar year next following that in which the notice of termination is
given.
IN WITNESS WHEREOF the undersigned, duly authorised thereto by
their respective Governments, have signed this Agreement.
DONE in
duplicate at Mexico City this ninth day of September 2002, in the Spanish and
English languages, both texts being equally authentic.
FOR THE
GOVERNMENT FOR THE GOVERNMENT
OF AUSTRALIA: OF THE UNITED MEXICAN
STATES:
PETER COSTELLO FRANCISCO GIL DIAZ
Treasurer Minister for
Finance and Public Credit
[Signatures omitted]
PROTOCOL TO THE AGREEMENT BETWEEN
THE GOVERNMENT OF AUSTRALIA AND THE GOVERNMENT OF THE UNITED MEXICAN STATES FOR
THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH
RESPECT TO TAXES ON INCOME
The Government of Australia and the Government of the United
Mexican States,
Having regard to the Agreement between the
Government of Australia and the Government of the United Mexican States for the
avoidance of double taxation and the prevention of fiscal evasion with respect
to taxes on income signed today at Mexico City (in this Protocol called
“the Agreement”),
Have agreed as
follows:
(1) With reference to paragraph 1 of Article 4,
The term
“resident” also includes a Contracting State or a political
subdivision or local authority thereof.
(2) With reference to Article
7,
It is understood that income or profits attributable to a permanent
establishment during its existence will be taxed in the Contracting State in
which the permanent establishment is situated even if the payments are deferred
until the permanent establishment has ceased to exist.
It is further
understood that where:
(a) a resident of a Contracting State is
beneficially entitled, whether directly or through one or more interposed trust
estates, to a share of the business profits of an enterprise carried on in the
other Contracting State by the trustee of a trust estate other than a trust
estate which is treated as a company for tax purposes; and
(b) in
relation to that enterprise, that trustee would, in accordance with the
principles of Article 5, have a permanent establishment in that other
State,
the enterprise carried on by the trustee shall be deemed to be a
business carried on in the other State by that resident through a permanent
establishment situated in that other State and that share of business profits
shall be attributed to that permanent establishment.
It is further
understood that nothing in Article 7 shall affect the application of any law of
a Contracting State relating to the determination of the tax liability of a
person, including determinations in cases where the information available to the
competent authority of that state is inadequate to determine the profits to be
attributed to a permanent establishment, provided that that law shall be
applied, so far as it is practicable to do so, consistently with the principles
of this Article.
(3) With reference to paragraph 1 of Article
8,
Profits referred to in paragraph 1 shall not include profits from the
provision of accommodation or transportation other than from the operation of
ships or aircraft in international traffic.
(4) With reference to Article
9,
It is understood that nothing in Article 9 shall affect the
application of any law of a Contracting State relating to the determination of
the tax liability of a person, including determinations in cases where the
information available to the competent authority of that State is inadequate to
determine the profits to be attributed to an enterprise, provided that that law
shall be applied, so far as it is practicable to do so, consistently with the
principles of this Article.
(5) With reference to paragraph 2 of Article
10,
It is understood that nothing in this paragraph affects the rate of
tax that applies to the company paying the dividends in the Contracting State of
which the company is a resident by reason of distribution of such
dividends.
(6) With reference to paragraph 5 of Article 10,
It is
understood that an issue of bonus shares is included in the term
“dividends”.
(7) With reference to paragraph 2 of Article
11,
(a) The term “recognized securities market”
means:
(i) in the case of Mexico, stock exchanges duly authorized under
the terms of the Stock Market Law (Ley del Mercado de Valores) of
2 January, 1975;
(ii) in the case of Australia, a stock exchange authorized under the laws
of Australia; and
(iii) any other stock exchange agreed upon by the competent authorities of
the Contracting States.
(b) The provisions of this paragraph shall not
apply to interest derived from back-to-back loans. In such case, the interest
shall be taxable in accordance with the domestic law of the State in which it
arises.
(8) With reference to paragraph 6 of Article 11 and paragraph 6
of Article 12,
It is understood that where a loan has been contracted by
an enterprise of a Contracting State and a part only of that loan is attributed
to a permanent establishment or fixed base of that enterprise in the other
Contracting State, or where a contract under which royalties are paid has been
concluded by the enterprise and a part only of such contract is attributed to
such permanent establishment or fixed base, then only that part of the loan or
contract is to be considered as an indebtedness or a contract connected with
that permanent establishment or fixed base.
(9) With reference to Article
12,
It is understood that the definition of “royalties”
includes payments or credits, whether periodical or not, and however described
or computed, to the extent to which they are made as consideration
for:
(a) the reception of, or the right to receive, visual images or
sounds, or both, transmitted to the public by:
(i) satellite;
or
(ii) cable, optic fibre or similar technology; and
(b) the
use in connection with television broadcasting or radio broadcasting, or the
right to use in connection with television broadcasting or radio broadcasting,
visual images or sounds, or both, transmitted by:
(i) satellite;
or
(ii) cable, optic fibre or similar technology; and
(c) the
use of, or the right to use, some or all of the part of the spectrum specified
in a spectrum licence.
(10) With reference to Article 14,
Article
14 shall also apply to income derived by a company which is a resident of
Australia from the furnishing of personal services through a fixed base in
Mexico in accordance with subparagraph (a) of paragraph 1. In that case,
the company may compute the tax on the income from such services on a net basis
as if that income were attributable to a permanent establishment in
Mexico.
(11) In general,
(a) It is understood that the asset tax
imposed by Mexico shall not be applied to residents of Australia that are not
subject to tax under Articles 5 and 7 of the Agreement, except for assets
referred to in paragraphs 3 and 4 of Article 12 that are furnished by such
residents to a resident of Mexico. In the case of assets referred to in
paragraphs 3 and 4 of Article 12, Mexico shall grant a credit against the tax on
such assets in an amount equal to the income tax that would have been imposed
under the Mexican Income Tax Law on the royalties paid instead of the rate
provided in Article 12.
(b) If, in an Agreement for the avoidance of
double taxation that may subsequently be made between Australia and a third
State, there is included a Non-discrimination Article, Australia shall
immediately inform Mexico in writing through the diplomatic channel and shall
enter into negotiations with Mexico in order to provide the same treatment for
Mexico as may be provided for the third State.
(c) If, an Agreement for
the avoidance of double taxation that may subsequently be made between Australia
and a third State, establishes that the Exchange of Information Article may be
used for purposes of value added taxes imposed by the Contracting States, such
clause automatically shall apply for the purposes of the
Agreement.
IN WITNESS WHEREOF the undersigned, being duly authorised
thereto by their respective Governments have signed this
Protocol.
DONE in duplicate at Mexico City this ninth day of
September 2002, in the Spanish and English languages, both texts being equally
authentic.
FOR THE GOVERNMENT FOR THE GOVERNMENT
OF AUSTRALIA: OF THE
UNITED MEXICAN STATES:
PETER COSTELLO FRANCISCO GIL
DIAZ
Treasurer Minister for Finance and Public Credit
[Signatures
omitted]
Income Tax Assessment Act
1936
1 Subsection 170(14) (paragraph (a) of the
definition of relevant provision)
Repeal the paragraph, substitute:
(a) a provision of a double taxation agreement that attributes to a
permanent establishment or to an enterprise the profits it might be expected to
derive if it were independent and dealing at arm’s length; or
2 Subsection 170(14) (definition of the United
Kingdom agreement)
Repeal the definition.
International Tax
Agreements Act 1953
3 After subsection 3(2)
Insert:
(2A) After the commencement of this subsection, a reference in an
agreement to income from shares, or to income from other rights participating in
profits, does not include a reference to a return on a debt interest (as defined
in Subdivision 974-B of the Income Tax Assessment Act
1997).
Taxation (Interest on
Overpayments and Early Payments) Act 1983
4 Subsection 3(1) (definition of double tax
agreement)
Omit “Income Tax (International Agreements) Act 1953”,
substitute “International Tax Agreements Act 1953”.
5 Subsection 3(1) (definition of income tax
crediting amount)
Omit “Income Tax (International Agreements) Act 1953”
(wherever occurring), substitute “International Tax Agreements Act
1953”.