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INCOME TAX (INTERNATIONAL AGREEMENTS) AMENDMENT ACT 1980 No. 23 of 1980 - SCHEDULE 2
SCHEDULE 2 Section
8
SCHEDULES TO BE ADDED AT THE END OF THE
PRINCIPAL ACT
SCHEDULE 14 Section
3
AGREEMENT
BETWEEN
THE GOVERNMENT OF AUSTRALIA
AND
THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES
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 Republic of the
Philippines,
Desiring to conclude an Agreement for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income,
Have agreed as follows:
Chapter 1
SCOPE OF THE AGREEMENT
ARTICLE 1
Personal Scope
(1) This Agreement shall apply to persons who are residents of one or both of
the Contracting States.
(2) However, nothing in this Agreement shall prevent the Philippines from
taxing its own citizens, who are not residents of the Philippines, in
accordance with Philippine law.
ARTICLE 2
Taxes Covered
(1) The existing taxes to which this Agreement shall apply are-
(a) in Australia: the Australian income tax, including the additional tax
upon the undistributed amount of the distributable income of a private
company;
(b) in the Philippines: the income taxes imposed by the Government of the
Republic of the Philippines.
(2) This Agreement shall also apply to any identical or substantially similar
taxes which are imposed by either Contracting State after the date of
signature of this Agreement in addition to, or in place of, the existing
taxes. At the end of each calendar year, the competent authority of each
Contracting State shall notify the competent authority of the other
Contracting State of any substantial changes which have been made in the laws
of his State relating to the taxes to which this Agreement applies.
Chapter II
DEFINITIONS
ARTICLE 3
General Definitions
(1) In this Agreement, unless the context otherwise requires-
(a) the term "Australia" means the Commonwealth of Australia and, when
used in a geo- graphical sense, includes-
(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 Coral Sea Islands Territory; and
(vi) any area adjacent to the territorial limits of Australia or of
the said Territories in respect of which there is for the time
being in force a law of Australia or of a State or part of
Australia or of a Territory aforesaid dealing with the
exploitation of any of the natural resources of the sea-bed and
subsoil of the continental shelf;
(b) the term "Philippines" means the Republic of the Philippines and when
used in a geographical sense means the national territory comprising
the Republic of the Philippines;
(c) the terms "Contracting State", "one of the Contracting States" and
"other Contracting State" mean Australia or the Philippines, as the
context requires;
(d) the term "person" means an individual, an estate, a trust, a company
and any other body of persons;
(e) the term "company" means any body corporate or any entity which is
treated as a company or a body corporate for tax purposes;
(f) the terms "enterprise of one of the Contracting States" and
"enterprise of the other Contracting State" mean an enterprise carried
on by a resident of Australia or an enterprise carried on by a
resident of the Philippines, as the context requires;
(g) the term "tax" means Australian tax or Philippine tax, as the context
requires;
(h) the term "Australian tax" means tax imposed by Australia, being tax to
which this Agreement applies by virtue of Article 2;
(i) the term "Philippine tax" means tax imposed by the Philippines, being
tax to which this Agreement applies by virtue of Article 2;
(j) the term "competent authority" means, in the case of Australia, the
Commissioner of Taxation or his authorized representative, and, in the
case of the Philippines, the Minister of Finance or his authorized
representative;
(k) the term "international traffic", in relation to the operation of
ships or aircraft by a resident of one of the Contracting States,
means operations of ships or aircraft other than operations of ships
or aircraft confined solely to places in the other Contracting State.
(2) In this Agreement, the terms "Australian tax" and "Philippine tax" do not
include any penalty or interest imposed under the law of either Contracting
State relating to the taxes to which this Agreement applies by virtue of
Article 2.
(3) For the purposes of this Agreement, the carriage of passengers, livestock,
mail, goods or merchandise shipped in one of the Contracting States for
discharge at another place in that State shall be treated as operations of
ships or aircraft confined solely to places in that State.
(4) In the application of this Agreement by a Contracting State, any term not
defined in this Agreement shall, unless the context otherwise requires, have
the meaning which it has under the laws of that Contracting State relating to
the taxes to which this Agreement applies.
ARTICLE 4
Residence
(1) For the purposes of this Agreement, a person is a resident of one of the
Contracting States-
(a) in the case of Australia, subject to paragraph (2), if the person is a
resident of Australia for the purposes of Australian tax;
(b) in the case of the Philippines-
(i) if the person is a company or an entity which is incorporated,
created or organized in the Philippines or under its laws and
is treated as a body corporate for purposes of Philippine tax;
(ii) if the person, not being a company or an entity treated as a
company or body corporate for the purposes of Philippine tax,
is a resident of the Philippines for the purposes of Philippine
tax.
(2) In relation to income from sources in the Philippines, a person who is
subject to Australian tax on income which is from sources in Australia shall
not be treated as a resident of Australia unless the income from sources in
the Philippines is subject to Australian tax or, if that income is exempt from
Australian tax, it is so exempt solely because it is subject to Philippine
tax.
(3) Where by reason of the preceding provisions of this Article an individual
is a resident of both Contracting States, then his status shall be determined
in accordance with the following rules-
(a) he shall be deemed to be a resident solely of the Contracting State in
which he has a permanent home available to him;
(b) if he has a permanent home available to him in both Contracting
States, or if he does not have a permanent home available to him in
either of them, he shall be deemed to be a resident solely of the
Contracting State with which his personal and economic relations are
the closer.
(4) For the purposes of the last preceding paragraph, an individual's
citizenship of a Contracting State shall be a factor in determining the degree
of his 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 solely of the Contracting State in which it is incorporated,
created or organized.
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" shall include especially-
(a) a place of management;
(b) a branch;
(c) an office;
(d) a factory;
(e) a workshop;
(f) a mine, oil or gas well, quarry or other place of extraction of
natural resources;
(g) an agricultural, pastoral or forestry property;
(h) a building site or construction, installation or assembly project, or
supervisory activities in connection therewith where such site,
project or activity continues for more than six months;
(i) premises used as a sales outlet;
(j) a warehouse, in relation to a person providing storage facilities for
others;
(k) a place in one of the Contracting States through which an enterprise
of the other Contracting State furnishes services, including
consultancy services, for a period or periods aggregating more than
six months in any taxable year or year of income, as the case may be,
in relation to a particular project, or to any project connected
therewith.
(3) 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 for collecting information, for
the enterprise;
(e) the maintenance of a fixed place of business solely for the purpose of
activities which have a preparatory or auxiliary character for the
enterprise, such as advertising or scientific research.
(4) An enterprise shall be deemed to have a permanent establishment in one of
the Contracting States and to carry on business through that permanent
establishment if substantial equipment is being used in that State for more
than six months by, for or under contract with the enterprise.
(5) A person acting in one of the Contracting States on behalf of an
enterprise of the other Contracting State-other than an agent of an
independent status to whom paragraph (6) applies- shall be deemed to be a
permanent establishment of that enterprise in the first-mentioned State if-
(a) he has, and habitually exercises in that State, an authority to
conclude contracts on behalf of the enterprise, unless his activities
are limited to the purchase of goods or merchandise for the
enterprise; or
(b) he has no such authority, but habitually maintains on behalf of the
enterprise in the first- mentioned State a stock of goods or
merchandise from which on behalf of the enterprise he regularly
delivers goods or merchandise for use or consumption in that State; or
(c) in so acting, he manufactures or processes in that State for the
enterprise goods or merchandise belonging to the enterprise.
(6) An enterprise of one of the Contracting States shall not be deemed to have
a permanent establishment in the other 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, where that person is acting
in the ordinary course of his business as such a broker or agent.
However, when the activities of such an agent are devoted wholly or almost
wholly on behalf of the enterprise, he shall not be considered to be an agent
of independent status within the meaning of this paragraph if it is shown that
the transactions between the agent and the enterprise were not made under
arms-length conditions. In such a case, the provisions of paragraph (5) shall
apply.
(7) The fact that a company which is a resident of one of the Contracting
States 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.
Chapter III
TAXATION OF INCOME
ARTICLE 6
Income from Real Property
(1) Income 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
laws in force in the Contracting State in which the property in question is
situated. The term shall in any case include rights to royalties and other
payments in respect of the operation of mines, oil or gas wells, or quarries
or in respect of the exploitation of any natural resource and those rights
shall be regarded as situated where the mines, oil or gas wells, quarries or
natural resources are situated. Ships or aircraft shall not be regarded as
real property.
(3) Income from a lease of land and income from any other direct interest in
or over land, whether or not improved, shall be regarded as income from real
property situated where the land to which the lease or other direct interest
relates is situated.
(4) The provisions of paragraphs (1) and (3) shall also apply to income from
real property of an enterprise and to income from real property used for the
performance of professional services.
ARTICLE 7
Business Profits
(1) The profits of an enterprise of one of the Contracting States shall be
taxable only in that State unless the enterprise carries on business in the
other Contracting State through a permanent establishment situated therein. If
the enterprise carries on business as aforesaid, 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 within that other Contracting State of goods or merchandise of
the same or a similar kind as those sold, or other business activities
of the same or a similar kind as those carried on through that
permanent establishment if the sale or the business activities had
been made or carried on in that way with a view to avoiding taxation
in that other State.
(2) Subject to the provisions of paragraph (3), where an enterprise of one of
the Contracting States carries on business in the other Contracting State
through a permanent establishment situated therein, 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 with which it deals.
(3) In the determination of 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.
(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) If the information available to the competent authority of a Contracting
State is inadequate to determine the profits to be attributed to the permanent
establishment of an enterprise, nothing in this Article shall affect the
application of any law of that State relating to the determination of the tax
liability of a person provided that that law shall be applied, so far as the
information available to the competent authority permits, in accordance with
the principles of this Article.
(6) For the purposes of this Article, the profits of an enterprise do not
include income from the operation of aircraft in international traffic and,
except as provided in the Articles referred to in this paragraph, do not
include items of income dealt with in Articles 6, 8, 10, 11, 12, 13, 14, 16
and 17.
(7) The profits of an enterprise of one of the Contracting States from the
carrying on in the other Contracting State of a business of any form of
insurance other than life insurance may be taxed in the other Contracting
State in accordance with the law of that other State relating specifically to
the taxation of any person who carries on such business, and Article 24 shall
apply for the elimination of double taxation as if the profits so taxed were
attributable to a permanent establishment of the enterprise in the State
imposing the tax.
ARTICLE 8
Shipping
(1) The tax payable in a Contracting State by a resident of the other
Contracting State in respect of profits from the operation of ships in
international traffic shall not exceed the lesser of-
(a) one and one-half per cent of the gross revenues derived from sources
in that State; and
(b) the lowest rate of Philippine tax that may be imposed on profits of
the same kind derived under similar circumstances by a resident of a
third State.
(2) Paragraph (1) shall apply in relation to the share of the profits from the
operation of ships derived by a resident of one of the Contracting States
through participation in a pool service, in a joint transport operating
organization or in an international operating agency.
ARTICLE 9
Associated Enterprises
(1) Where-
(a) an enterprise of one of the Contracting States 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 one of the Contracting States
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, but for those conditions,
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) If the information available to the competent authority of a Contracting
State is inadequate to determine the profits to be attributed to an
enterprise, nothing in this Article shall affect the application of any law of
that State relating to the determination of the tax liability of a person,
provided that that law shall be applied, so far as the information available
to the competent authority permits, in accordance with the principles of this
Article.
(3) Where profits on which an enterprise of one of the Contracting States has
been charged to tax in that State are also included, by virtue of paragraph
(1) or (2), in the profits of an enterprise of the other Contracting State and
taxed accordingly, 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 charged on those profits in the
first-mentioned State. In determining such an adjustment, due regard shall be
had to the other provisions of this Agreement in relation to the nature of the
income, and for this purpose the competent authorities of the Contracting
States shall, if necessary, consult each other.
ARTICLE 10
Dividends
(1) Dividends paid by a company which is a resident of one of the Contracting
States for the purposes of its tax, being dividends to which a resident of the
other Contracting State is beneficially entitled, may be taxed in that other
State.
(2) Such dividends may 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 so charged shall-
(a) in the case of dividends derived by a company, not exceed 15 per cent
of the gross amount of the dividends where relief, either by way of
rebate or credit as described in paragraph (2) of Article 24 or relief
by way of credit as described in the second sentence of paragraph (4)
of Article 24, is given to the beneficial owner of the dividends; and
(b) in any other case, not exceed 25 per cent of the gross amount of the
dividends. Nothing in this paragraph shall affect the taxation of a
company in respect of profits out of which dividends are paid.
(3) The term "dividends" in this Article means income from shares and other
income assimilated to income from shares by the taxation law of the
Contracting State of which the company making the distribution is a resident.
(4) The provisions of paragraphs (1) and (2) shall not apply if the person
beneficially entitled to the dividends, being a resident of one of the
Contracting States, carries on business in the other Contracting State of
which the company paying the dividends is a resident through a permanent
establishment situated therein or performs in that other State independent
personal services from a fixed base situated therein, and the holding in
respect of which the dividends are paid is effectively connected with that
permanent establishment or fixed base. In such a case, the provisions of
Article 7 or Article 14, as the case may be, shall apply.
(5) Dividends paid by a company which is a resident of one of the Contracting
States, being dividends to which a person who is not a resident of the other
Contracting State is beneficially entitled, shall be exempt from tax in that
other State except insofar as the holding in respect of which the dividends
are paid is effectively connected with a permanent establishment or fixed base
situated in that other State. Provided that this paragraph shall not apply in
relation to dividends paid by a company which is a resident of Australia for
the purposes of Australian tax and which is also a resident of the Philippines
for the purposes of Philippine tax.
(6) The Philippines may impose in accordance with its domestic law, apart from
the corporate income tax, a tax on remittances of profits by a branch to its
Head Office provided that the tax so imposed shall not exceed 15 per cent of
the amount remitted.
(7) Australia may impose an income tax (in this paragraph called a "branch
profits tax") on the reduced taxable income of a company that is a resident of
the Philippines in addition to the income tax (in this paragraph called "the
general income tax") payable by the company in respect of its taxable income;
provided that any branch profits tax so imposed in respect of a year of income
shall not exceed 15 per cent of the amount by which the reduced taxable income
of that year of income exceeds the general income tax payable in respect of
the reduced taxable income of that year of income.
ARTICLE 11
Interest
(1) Interest arising in one of the Contracting States, being interest to which
a resident of the other Contracting State is beneficially entitled, may be
taxed in that other State.
(2) Such interest may 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 15 per cent of the gross amount of the interest.
(3) The term "interest" in this Article includes interest from Government
securities or from bonds or debentures and interest from any other form of
indebtedness (whether or not secured by mortgage and whether or not carrying a
right to participate in profits) as well as all other income assimilated to
interest by the taxation law of the Contracting State in which the income
arises.
(4) The provisions of paragraphs (1) and (2) shall not apply if the person
beneficially entitled to the interest, being a resident of one of the
Contracting States, carries on business in the other Contracting State in
which the interest arises through a permanent establishment situated therein,
or performs in that other State independent personal services from a fixed
base situated therein, and the indebtedness giving rise to the interest is
effectively connected with that permanent establishment or fixed base. In such
a case, the provisions of Article 7 or Article 14, as the case may be, shall
apply.
(5) Interest shall be deemed to arise in a Contracting State when the payer is
that State itself or a political subdivision of that State or a local
authority of that State or a person who is a resident of that State for the
purposes of its tax. Where, however, the person paying the interest, whether
he is a resident of one of the Contracting States 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 the interest is borne by the permanent establishment or
fixed base, then the interest shall be deemed to arise where the permanent
establishment or fixed base is situated.
(6) Where, owing to 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, having regard to the indebtedness for
which it is paid, exceeds the amount which 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
last-mentioned amount. In that case, the excess part of the amount of the
interest paid shall remain taxable according to the law of each Contracting
State, but subject to the other provisions of this Agreement.
(7) Interest derived by the Government of a Contracting State, or by any other
body exercising governmental functions in, or in a part of, a Contracting
State, or by a bank performing central banking functions in a Contracting
State, shall be exempt from tax in the other Contracting State.
(8) The Philippine tax on interest arising in the Philippines in respect of
public issues of bonds, debentures or similar obligations and paid by a
company which is a resident of the Philippines to a resident of Australia
shall not exceed 10 per cent of the gross amount of the interest.
(9) The principles set forth in paragraphs (1) to (7) inclusive of Article 5
shall be applied in determining for the purposes of this Article 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 one of the Contracting States.
ARTICLE 12
Royalties
(1) Royalties arising in one of the Contracting States, being royalties to
which a resident of the other Contracting State is beneficially entitled, may
be taxed in that other State.
(2) Such royalties may also be taxed in the Contracting State in which they
arise, and according to the law of that State. However, the tax so charged
shall not exceed-
(a) 15 per cent of the gross amount of the royalties where the royalties
are paid by an enterprise registered with the Philippine Board of
Investments and engaged in preferred areas of activities; and
(b) in all other cases, 25 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 use of, or the right to use, any industrial, commercial or
scientific equipment;
(c) the supply of scientific, technical, industrial or commercial
knowledge or information;
(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 paragraph (a), any such
equipment as is mentioned in paragraph (b) or any such knowledge or
information as is mentioned in paragraph (c);
(e) the use of, or the right to use-
(i) motion picture films;
(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 of a property or
right referred to in this paragraph.
(4) The provisions of paragraphs (1) and (2) shall not apply if the person
beneficially entitled to the royalties, being a resident of one of the
Contracting States, carries on business in the other Contracting State in
which the royalties arise through a permanent establishment situated therein,
or performs in that other State independent personal services from a fixed
base situated therein, and the asset giving rise to the royalties is
effectively connected with that permanent establishment or fixed base. In such
a case, the provisions of Article 7 or Article 14, as the case may be, shall
apply.
(5) Royalties shall be deemed to arise in a Contracting State when the payer
is that Contracting State itself or a political sub-division of that State or
a local authority of that State or a person who is a resident of that State
for purposes of its tax. Where, however, the person paying the royalties,
whether he is a resident of one of the Contracting States or not, has in the
other 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 where
the permanent establishment or fixed base is situated.
(6) 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, having regard to what they are paid
for, exceeds the amount which 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
last-mentioned amount. In that case, the excess part of the amount of the
royalties paid shall remain taxable according to the law of each Contracting
State, but subject to the other provisions of this Agreement.
(7) The principles set forth in paragraphs (1) to (7) inclusive of Article 5
shall be applied in determining for the purposes of this Article 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 one of the Contracting States.
ARTICLE 13
Alienation of Property
(1) Income from the alienation of real property may be taxed in the
Contracting State in which that property is situated.
(2) For the purposes of this Article-
(a) the term "real property" shall have the meaning which it has under the
laws in force in the Contracting State in which the property in
question is situated and shall include-
(i) a lease of land or any other direct interest in or over land;
(ii) rights to exploit, or to explore for, natural resources; and
(iii) shares or comparable interests in a company, the assets of
which consist wholly or principally of direct interests in or
over land in one of the Contracting States or of rights to
exploit, or to explore for, natural resources in one of the
Contracting States;
(b) real property shall be deemed to be situated-
(i) where it consists of direct interests in or over land-in the
Contracting State in which the land is situated;
(ii) where it consists of rights to exploit, or to explore for,
natural resources-in the Contracting State in which the natural
resources are situated or the exploration may take place; and
(iii) where it consists of shares or comparable interests in a
company, the assets of which consist wholly or principally of
direct interests in or over land in one of the Contracting
States or of rights to exploit, or to explore for, natural
resources in one of the Contracting States-in the Contracting
State in which the assets or the principal assets of the
company are situated.
(3) Subject to the provisions of paragraph (1), income from the alienation of
capital assets of an enterprise of one of the Contracting States or available
to a resident of one of the Contracting States for the purpose of performing
professional services or other independent activities shall be taxable only in
that Contracting State, but, where those assets form part of the business
property of a permanent establishment or fixed base situated in the other
Contracting State, such income may be taxed in that other State.
ARTICLE 14
Independent Personal Services
(1) Income derived by an individual who is a resident of one of the
Contracting States in respect of professional services or other independent
activities of a similar character shall be taxable only in that State.
However, if such an individual-
(a) has a fixed base regularly available to him in the other Contracting
State for the purpose of performing his activities; or
(b) in a year of income or taxable year, as the case may be, stays in the
other Contracting State for a period or periods aggregating 183 days
for the purpose of performing his activities; or
(c) derives, in a year of income or taxable year, as the case may be, from
residents of the other Contracting State gross remuneration in that
State exceeding ten thousand Australian dollars or its equivalent in
Philippine pesos from performing his activities, so much of the income
derived by him as is attributable to activities so performed may be
taxed in the other State.
(2) The Treasurer of Australia and the Minister of Finance of the Philippines
may agree in letters exchanged for the purpose to variations in the amount
specified in sub-paragraph (c) of paragraph (1) and any variations so agreed
shall have effect according to the tenor of the letters.
(3) 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 independent activities of
physicians, lawyers, engineers, architects, dentists and accountants.
ARTICLE 15
Dependent Personal Services
(1) Subject to the provisions of Articles 16, 18, 19 and 20, salaries, wages
and other similar remuneration derived by an individual who is a resident of
one of the Contracting States 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 one of the Contracting States 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 that other State for a period or periods
not exceeding in the aggregate 183 days in the year of income or
taxable year, as the case may be, of that other State; and
(b) the remuneration is paid by, or on behalf of, an employer who is not a
resident of that other 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 in
respect of an employment exercised aboard a ship or aircraft operated in
international traffic by a resident of one of the Contracting States may be
taxed in that Contracting State.
ARTICLE 16
Directors' Fees
Directors' fees and similar payments derived by a resident of one of the
Contracting States in his capacity as a member of the board of directors of a
company which is a resident of the other Contracting State may be taxed in
that other State. In relation to remuneration of a director of a company
derived from the company in respect of the discharge of day-to-day functions
of a managerial or technical nature, the provisions of Article 15 shall apply
as if the remuneration were remuneration of an employee in respect of an
employment and as if references to "employer" were references to the company.
ARTICLE 17
Entertainers
(1) Notwithstanding the provisions of Articles 14 and 15, income derived by
entertainers (such as theatrical, motion picture, radio or television artistes
and musicians and athletes) from their personal activities as such may be
taxed in the Contracting State in which these activities are exercised.
(2) Where income in respect of the personal activities of an entertainer as
such accrues not to that entertainer 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 are exercised.
(3) Notwithstanding the provisions of paragraph (1) and Articles 14 and 15,
income derived from activities performed in a Contracting State by
entertainers shall be exempt from tax in that Contracting State if the visit
to that State is substantially supported or sponsored by the other Contracting
State and the entertainer is certified as qualifying under this provision by
the competent authority of that other State.
ARTICLE 18
Pensions and Annuities
(1) Pensions (including government pensions) and annuities paid to a resident
of one of the Contracting States shall be taxable only in that State. However,
pensions paid by a Philippine enterprise under a pension plan not registered
under Philippine law may be taxed in the Philippines.
(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.
ARTICLE 19
Government Service
(1) Remuneration (other than a pension) paid by a Contracting State or a
political sub-division of that State or a local authority of that State to any
individual in respect of services rendered in the discharge of governmental
functions shall be taxable only in that State. However , such remuneration
shall be taxable only in the other Contracting State if the services are
rendered in that State and the recipient is a resident of that 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
performing the services.
(2) The provisions of paragraph (1) shall not apply to remuneration in respect
of services rendered in connection with any trade or business carried on by
one of the Contracting States or a political sub-division of one of the States
or a local authority of one of the States. In such a case the provisions of
Articles 15 and 16 shall apply.
ARTICLE 20
Professors and Teachers
(1) Remuneration which a professor or teacher who is a resident of one of the
Contracting States and who visits the other Contracting State for a period not
exceeding two years for the purpose of teaching or carrying out advanced study
or research at a university, college, school or other educational institution
receives for those activities shall be taxable only in the first-mentioned
State.
(2) This Article shall not apply to remuneration which a professor or teacher
receives for conducting research if the research is undertaken primarily for
the private benefit of a specific person or persons.
(3) For the purposes of paragraph (1), the term "remuneration" shall include
remittances from sources outside the other State sent to enable the professor
or teacher to carry out the purposes referred to in paragraph (1).
ARTICLE 21
Students and Trainees
Where a student or trainee, who is a resident of one of the Contracting States
or who was a resident of that State immediately before visiting the other
Contracting State and who is temporarily present in the other State solely for
the purpose of his education or training, receives remittances from sources
outside the other State for the purpose of his maintenance or education, those
payments shall be exempt from tax in the other State.
ARTICLE 22
Income of Dual Resident
Where a person who by reason of the provisions of paragraph (1) of Article 4
is a resident of both Contracting States but by reason of the provisions of
paragraph (3) or (5) of that Article is deemed for the purposes of this
Agreement to be a resident solely of one of the Contracting States derives
income from sources in that Contracting State or from sources outside both
Contracting States, that income shall be taxable only in that Contracting
State.
ARTICLE 23
Source of Income
Income derived by a resident of one of the Contracting States which, under any
one or more of Articles 6 to 8 and 10 to 17 may be taxed in the other
Contracting State, shall, for the purposes of Article 24 and of the income tax
law of that other State, be deemed to be income from sources in that other
State.
Chapter IV
METHODS OF ELIMINATION OF DOUBLE TAXATION
ARTICLE 24
(1) 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 hereof), Philippine tax paid, whether directly or by deduction, in
respect of income derived by a person who is a resident of Australia from
sources in the Philippines (excluding, in the case of dividends, tax paid in
respect of the profits out of which the dividends are paid except to the
extent that the provisions of paragraph (2) may permit that tax to be
included) shall be allowed as a credit against Australian tax payable in
respect of that income.
(2) A company which is a resident of Australia is, in accordance with the
provisions of the taxation law of Australia in force at the date of signature
of this Agreement, entitled to a rebate in its assessment at the average rate
of tax payable by the company in respect of dividends that are included in its
taxable income and are received from a company that is a resident of the
Philippines. However, should the law so in force be amended so that the rebate
in relation to the dividends ceases to be allowable under that law, credit
shall be allowed to the first-mentioned company under paragraph (1) for the
Philippine tax paid on the profits out of which the dividends are paid, but
only if that company beneficially owns at least 10 per cent of the paid-up
share capital of the second- mentioned company.
(3) For the purposes of paragraph (1) and of the income tax law of Australia-
(a) a resident of Australia deriving income from sources in the
Philippines, consisting of royalties to which sub-paragraph (a) of
paragraph (2) of Article 12 applies, shall be deemed to have paid, in
addition to any Philippine tax actually paid, Philippine tax in an
amount equal to 5% of the gross amount of the royalties; and
(b) the amount of the said royalties shall be deemed to be the amount that
would have been the amount of the royalties if no Philippine tax had
been paid, increased by 5%.
(4) In accordance with the provisions and subject to the limitations of the
law of the Philippines (as it may be amended from time to time without
changing the general principle hereof), the Philipines shall allow to a
resident of the Philippines as a credit against the Philippine tax the
appropriate amount of taxes paid or accrued to Australia. In the case of a
Philippine corporation owning more than 50 per cent of the voting stock of an
Australian corporation from which it receives dividends in any taxable year,
the Philippines shall also allow credit for the appropriate amount of taxes
paid or accrued to Australia by an Australian corporation paying such
dividends with respect to the profits out of which such dividends are paid.
Such appropriate amount shall be based upon the amount of tax paid or accrued
to Australia, but the credit shall not exceed the limitations (for the purpose
of limiting the credit to the Philippine tax on income from sources within
Australia, and on income from sources outside the Philippines) provided by
Philippine law for the taxable year.
Chapter V
SPECIAL PROVISIONS
ARTICLE 25
Mutual Agreement Procedure
(1) Where a resident of one of the Contracting States considers that the
actions of the competent authority of one or both of the Contracting States
result or will result for him in taxation not in accordance with this
Agreement, he may, notwithstanding the remedies provided by the national laws
of those States, present his case to the competent authority of the
Contracting State of which he is a resident. The case must be presented in
writing within two years from the first notification of the action.
(2) The competent authority shall endeavour, if the taxpayer's claim appears
to it to be justified and if it is not itself able to arrive at an appropriate
solution, to resolve the case with the competent authority of the other
Contracting State, with a view to the avoidance of taxation not in accordance
with this Agreement.
(3) The competent authorities of the Contracting States shall jointly
endeavour to resolve any difficulties or doubts arising as to the application
of 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.
ARTICLE 26
Exchange of Information
(1) The competent authorities of the Contracting States shall exchange such
information as is necessary for the carrying out of this Agreement or of the
domestic laws of the Contracting States concerning the taxes to which this
Agreement applies insofar as the taxation thereunder is not contrary to this
Agreement. The exchange of information is not restricted by Article 1. Any
information received by the competent authority of a Contracting State shall
be treated as secret in the same manner as information obtained under the
domestic laws of that State and shall be disclosed only to persons or
authorities (including courts and administrative bodies) concerned with the
assessment or collection of, enforcement or prosecution in repec of, or the
determination of appeals in relation to, the taxes to which this Agreement
applies and shall be used only for such purposes.
(2) In no case shall the provisions of paragraph (1) 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 particulars which are not obtainable under the laws or in
the normal course of the administration of that or of the other
Contracting State;
(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 27
Diplomatic and Consular Officials
Nothing in this Agreement shall affect the fiscal privileges of diplomatic or
consular officials under the general rules of international law or under the
provisions of special agreements.
ARTICLE 28
Miscellaneous
If, under any Agreement or Convention concluded by the Philippines, a resident
of any otehr country is exempt from-
(a) the Philippine income tax on gross billings relating to the operation
of aircraft in international traffic; or
(b) the Philippine business tax on gross receipts relating to the
operation of
ships or aircraft in international traffic, the Philippines will grant a
corresponding exemption to residents of Australia and Australia will grant a
corresponding exemption to residents of the Philippines.
Chapter VI
FINAL PROVISIONS
ARTICLE 29
Entry into Force
(1) This Agreement shall be ratified and the instruments of ratification shall
be exchanged at Canberra, Australia as soon as possible.
(2) The Agreement shall enter into force upon the date of exchange of the
instruments of ratification and its provisions shall have effect:
(a) in Australia-
(i) with respect to 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 in which the exchange of
instruments of ratification takes place;
(ii) with respect to other Australian tax, in relation to income of
any year of income beginning on or after 1 July in that
calendar year;
(b) in the Philippines-
(i) in respect of tax withheld at the source on amounts paid to
non-residents on or after the first day of January in the
calendar year in which the exchange of instruments of
ratification takes place; and
(ii) in respect of other taxes for taxable years beginning on or
after the first day of January in that calendar year.
ARTICLE 30
Termination
This Agreement shall continue in effect indefinitely but either Contracting
State may, on or before June 30 in any calendar year after the fifth year
following the exchange of the instruments of ratification, give to the other
Contracting State, through the diplomatic channel, written notice of
termination and in such event the Agreement shall cease to have effect:
(a) in Australia-
(i) with respect to 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
written notice of termination takes place;
(ii) with respect to other Australian tax, in relation to income of
any year of income beginning on or after 1 July in the next
following calendar year;
(b) in the Philippines-
(i) in respect of tax withheld at the source on amounts paid to
non-residents on or after the first day of January in the
calendar year next following that in which the written notice
of termination takes place; and
(ii) in respect of other taxes for taxable years beginning on or
after the first day of January in the next following calendar
year.
IN WITNESS WHEREOF the undersigned, duly authorized thereto, have signed this
Agreement.
DONE in duplicate at Manila this 11th day of May One thousand nine hundred an
seventy nine in the English language.
R. V. GARLAND CESAR VIRATA
FOR THE GOVERNMENT FOR THE
GOVERNMENT OF AUSTRALIA OF
THE REPUBLIC OF
THE PHILIPPINES
-----------
SCHEDULE 15 Section
3
AGREEMENT BETWEEN AUSTRALIA
AND SWITZERLAND
FOR
THE AVOIDANCE OF DOUBLE TAXATION
WITH RESPECT TO TAXES ON INCOME
The Government of Australia and the Swiss Federal Council,
Desiring to conclude an Agreement for the avoidance of double taxation with
respect to taxes on income,
Have agreed as follows:
Chapter I
SCOPE OF THE AGREEMENT
ARTICLE 1
Personal Scope
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 Australia: The Australian income tax, including the additional tax
upon the undistributed amount of the distributable income of a private
company and also income tax upon the reduced taxable income of a
non-resident company;
(b) in Switzerland: The Federal, cantonal and communal taxes on income
(total income, earned income, income from capital, industrial and
commercial profits and other items of income).
(2) This Agreement shall also apply to any identical or substantially similar
taxes which are imposed after the date of signature of this Agreement in
addition to, or in place of, the existing taxes. At the end of each calendar
year, the competent authority of each Contracting State shall notify the
competent authority of the other Contracting State of any substantial changes
which have been made in the laws of his State relating to the taxes to which
this Agreement applies.
(3) In this Agreement, the term "Australian tax" means tax imposed by
Australia, being tax to which this Agreement applies; the term "Swiss tax"
means tax imposed in Switzerland, being tax to which this Agreement applies;
and the term "tax" means Australian tax or Swiss tax, as the context requires;
but the terms "Australian tax" and "Swiss tax" do not include any penalty or
interest imposed under the law in force in either Contracting State relating
to the taxes to which this Agreement applies.
(4) This Agreement shall not apply to Federal anticipatory tax withheld in
Switzerland at the source on prizes in a lottery.
Chapter II
DEFINITIONS
ARTICLE 3
General Definitions
(1) In this Agreement, unless the context otherwise requires-
(a) the term "Australia" means the Commonwealth of Australia and, when
used in a geographical sense, includes-
(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 Coral Sea Islands Territory; and
(vi) any area adjacent to the territorial limits of Australia or of
the said Territories in respect of which there is for the time
being in force, consistently with international law, a law of
Australia or of a State or part of Australia or of a Territory
aforesaid dealing with the exploitation of any of the natural
resources of the sea-bed and subsoil of the continental shelf;
(b) the term "Switzerland" means the Swiss Confederation;
(c) the terms "Contracting State", "one of the Contracting States" and
"other Contracting State" mean Australia or Switzerland, as the
context requires;
(d) the term "person" includes an individual, a company and any other body
of persons;
(e) the term "company" includes any body or association corporate or
unincorporate which is treated as a company or body corporate for tax
purposes;
(f) the terms "enterprise of one of the Contracting States" and
"enterprise of the other Contracting State" mean an enterprise carried
on by a resident of Australia or an enterprise carried on by a
resident of Switzerland, as the context requires;
(g) the term "competent authority" means, in the case of Australia, the
Commissioner of Taxation or his authorized representative, and in the
case of Switzerland, the Director of the Federal Tax Administration or
his authorized representative.
(2) In the application of this Agreement by one of the Contracting States, any
term not otherwise defined shall, unless the context otherwise requires, have
the meaning which it has under the laws of that Contracting State relating to
the taxes to which this Agreement applies.
ARTICLE 4
Residence
(1) (a) For the purposes of this Agreement, a person is a resident of
Australia if the person is a resident of Australia for purposes of Australian
tax. However, in relation to income from sources in Switzerland, a person who
is subject to Australian tax on income which is from sources in Australia
shall not be treated as a resident of Australia unless the income from sources
in Switzerland is subject to Australian tax or, if that income is exempt from
Australian tax, it is so exempt solely because it is subject to Swiss tax.
(b) For the purposes of this Agreement, a person is a resident of
Switzerland if the person is subject to unlimited tax liability in
Switzerland.
(2) Where by reason of the preceding provisions of this Article an individual
is a resident of both Contracting States, then his status shall be determined
in accordance with the following rules;
(a) he shall be deemed to be a resident solely of the Contracting State in
which he has a permanent home available to him;
(b) if he has a permanent home available to him in both Contracting
States, or if he does not have a permanent home available to him in
either of them, he shall be deemed to be a resident solely of the
Contracting State with which his personal and economic relations are
the closer.
(3) 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 solely of the Contracting 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" shall include especially-
(a) a place of management;
(b) a branch;
(c) an office;
(d) a factory;
(e) a workshop;
(f) a mine, quarry or other place of extraction of natural resources;
(g) an agricultural, pastoral or forestry property;
(h) a building site or construction, installation or assembly project
which exists for more than twelve months.
(3) 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 for collecting information, for
the enterprise;
(e) the maintenance of a fixed place of business solely for the purpose of
activities which have a preparatory or auxiliary character for the
enterprise, such as advertising or scientific research.
(4) An enterprise shall be deemed to have a permanent establishment in one of
the Contracting States and to carry on business through that permanent
establishment if-
(a) it carries on supervisory activities in that State for more than
twelve months in connection with a building site, or a construction,
installation or assembly project which is being undertaken in that
State; or
(b) substantial equipment is being used in that State for more than twelve
months by, for or under contract with the enterprise in exploration
for, or the exploitation of, natural resources, or in activities
connected with such exploration or exploitation.
(5) A person acting in one of the Contracting States on behalf of an
enterprise of the other Contracting State-other than an agent of an
independent status to whom paragraph (6) applies- shall be deemed to be a
permanent establishment of that enterprise in the first- mentioned State if-
(a) he has, and habitually exercises in that State, an authority to
conclude contracts on behalf of the enterprise, unless his activities
are limited to the purchase of goods or merchandise for the
enterprise; or
(b) in so acting, he manufactures or processes in that State for the
enterprise goods or merchandise belonging to the enterprise, provided
that this provision shall apply only in relation to the goods or
merchandise so manufactured or processed.
(6) An enterprise of one of the Contracting States shall not be deemed to have
a permanent establishment in the other 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, where that person is acting
in the ordinary course of his business as such a broker or agent.
(7) The fact that a company which is a resident of one of the Contracting
States 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.
(8) The principles set forth in paragraphs (1) to (7) inclusive shall be
applied in determining for the purposes of this Agreement whether an
enterprise, not being an enterprise of one of the Con- tracting States, has a
permanent establishment in one of the Contracting States.
Chapter III
TAXATION OF INCOME
ARTICLE 6
Income from Real Property
(1) Income 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
laws in force in the Contracting State in which the property in question is
situated. The term shall in any case include rights to royalties and other
payments in respect of the operation of mines or quarries or of the
exploitation of any natural resource, which rights shall be regarded as
situated where the mines, quarries or natural resource are situated. Ships,
boats or aircraft shall not be
regarded as real property.
(3) The provisions of paragraph (1) shall apply to income derived from the
direct use, letting, or use in any other form of real property.
(4) Income from a lease of land and income from any other direct interest in
or over land, whether or not improved, shall be regarded as income from real
property situated where the land is situated.
(5) The provisions of paragraphs (1), (3) and (4) shall also apply to the
income from real property of an enterprise and to income from real property
used for the performance of independent personal services.
ARTICLE 7
Business Profits
(1) The profits of an enterprise of one of the Contracting States shall be
taxable only in that State unless the enterprise carries on business in the
other Contracting State through a permanent establishment situated therein. If
the enterprise carries on business as aforesaid, 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), where an enterprise of one of
the Contracting States carries on business in the other Contracting State
through a permanent establishment situated therein, 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 with which it deals.
(3) In the determination of 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.
(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 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.
ARTICLE 8
Shipping and Air Transport
(1) Profits from the operation of ships or aircraft derived by a resident of
one of the Contracting States shall be taxable only in that State.
(2) Notwithstanding the provisions of paragraph (1), such profits may be taxed
in the other Contracting State where they are profits from operations of ships
or aircraft confined solely to places in that other State.
(3) The provisions of paragraphs (1) and (2) shall apply in relation to the
share of the profits from the operation of ships or aircraft derived by a
resident of one of the Contracting States through participation in a pool
service, in a joint transport operating organization or in an international
operating agency.
(4) For the purposes of this Article, profits derived from the carriage by
ships or aircraft of passengers, livestock, mail, goods or merchandise shipped
in one of the Contracting States for discharge at another place in that State
shall be treated as profits from operations of ships or aircraft confined
solely to places in that State.
(5) The amount which shall be charged to tax in one of the Contracting States
as profits from the operation of ships or aircraft in respect of which a
resident of the other Contracting State may be taxed in the first-mentioned
State under paragraph (2) or (3) shall not exceed 5 per cent of the amount
paid or payable (net of rebates) in respect of carriage in such operations.
(6) Paragraph (5) shall not apply to profits derived from the operation of
ships or aircraft by a resident of one of the Contracting States whose
principal place of business is in the other Contracting State, nor shall it
apply to profits derived from the operation of ships or aircraft by a resident
of one of the Contracting States if those profits are derived otherwise than
from the carriage of passengers, livestock, mails, goods or merchandise. In
such cases, the provisions of Article 7 shall apply.
ARTICLE 9
Associated Enterprises Where-
(a) an enterprise of one of the Contracting States 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 one of the Contracting States
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, but for those conditions,
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 .
ARTICLE 10
Dividends
(1) Dividends paid by a company which is a resident of one of the Contracting
States for the purposes of its tax, being dividends to which a resident of the
other Contracting State is beneficially entitled, may be taxed in that other
State.
(2) Such dividends may 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 so charged shall not exceed 15 per cent
of the gross amount of the dividends.
(3) The term "dividends" in this Article means income from shares and other
income assimilated to income from shares by the taxation law of the
Contracting State of which the company making the distribution is a resident.
(4) The provisions of paragraphs (1) and (2) shall not apply if the person
beneficially entitled to the dividends, being a resident of one of the
Contracting States, carries on business in the other Contracting State, being
the State of which the company paying the dividends is a resident, through a
permanent establishment situated therein or performs in that other State
independent personal services from a fixed base situated therein and the
holding in respect of which the dividends are paid is effectively connected
with such permanent establishment or fixed base. In any such case, the
provisions of Article 7 or Article 14, as the case may be, shall apply.
(5) Dividends paid by a company which is a resident of one of the Contracting
States, being dividends to which a person who is not a resident of the other
Contracting State is beneficially entitled, shall be exempt from tax in that
other State except insofar as the holding in respect of which the dividends
are paid is effectively connected with a permanent establishment situated in
that other State. Provided that 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 Switzerland for for
the purposes of Swiss tax.
ARTICLE 11
Interest
(1) Interest arising in one of the Contracting States, being interest to which
a resident of the other Contracting State is beneficially entitled, may be
taxed in that other State.
(2) Such interest may 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) 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, and interest from
any other form of indebtedness as well as all other income assimilated to
interest by the taxation law of the Contracting State in which the income
arises.
(4) The provisions of paragraphs (1) and (2) shall not apply if the person
beneficially entitled to the interest, being a resident of one of the
Contracting States, carries on business in the other Contracting State, being
the State in which the interest arises, through a permanent establishment
situated therein or performs in that other State independent personal services
from a fixed base situated therein and the indebtedness giving rise to the
interest is effectively
connected with the permanent establishment or fixed base. In any such case,
the provisions of Article 7 or Article 14, as the case may be, shall apply.
(5) Interest shall be deemed to arise in one of the Contracting States when
the payer is that Contracting State itself or a political sub-division of that
State or a local authority of that State or a person who is a resident of that
State for the purposes of its tax. Where, however, the person paying the
interest, whether he is a resident of one of the Contracting States or not,
has in one of the Contracting States a permanent establishment or a fixed base
in connection with which the indebtedness on which the interest is paid was
incurred, and such interest is borne by such permanent establish- ment or
fixed base, then such interest shall be deemed to arise in the State in which
the permanent establishment or fixed base is situated.
(6) Where, owing to 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, having regard to the indebtedness for
which it is paid, exceeds the amount which
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 last- mentioned amount. In that case, the excess part of the amount of
the interest paid shall remain taxable according to the law of each
Contracting State, but subject to the other provisions of this Agreement.
ARTICLE 12
Royalties
(1) Royalties arising in one of the Contracting States being royalties to
which a resident of the other Contracting State is beneficially entitled, may
be taxed in that other State.
(2) Such royalties may 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 (including credits),
whether periodical or not and however described or computed, to the extent to
which they are consideration for the use of, or the right to use, any
copyright, patent, design or model, plan, secret formula or process, trade-
mark, or other like property or right, or industrial, commercial or scientific
equipment, or for the supply of scientific, technical, industrial or
commercial knowledge or information, or any assistance of an ancillary and
subsidiary nature furnished as a means of enabling the application or
enjoyment of such knowledge or information or any other property or right to
which this Article applies, or for the use of, or the right to use, motion
picture films, films or video tapes for use in connection with television or
tapes for use in connection with radio broadcasting, or for total or partial
forbearance in respect of the use of a property or right referred to in this
paragraph.
(4) The provisions of paragraphs (1) and (2) shall not apply if the person
beneficially entitled to the royalties, being a resident of one of the
Contracting States, carries on business in the other Contracting State, being
the State in which the royalties arise, through a permanent establishment
situated therein or performs in that other State independent personal services
from a fixed base situated therein and the asset giving rise to the royalties
is effectively connected with that permanent establishment or fixed base. In
any such case, the provisions of Article 7 or Article 14, as the case may be,
shall apply.
(5) Royalties shall be deemed to arise in one of the Contracting States when
the payer is that Contracting State itself or a political sub-division of that
State or a local authority of that State or a person who is a resident of that
State for the purposes of its tax. Where, however, the person paying the
royalties, whether he is a resident of one of the Contracting States or not,
has in one of the Contracting States a permanent establishment or a fixed base
in connection with which the obligation to pay the royalties was incurred, and
such royalties are borne by such permanent establishment or fixed base, then
such royalties shall be deemed to arise in the State in which the permanent
establishment or fixed base is situated.
(6) 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, having regard to what they are paid
for, exceeds the amount which 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
last-mentioned amount. In that case, the excess part of the amount of the
royalties paid shall remain taxable according to the law of each Contracting
State, but subject to the other provisions of this Agreement.
ARTICLE 13
Alienation of Property
(1) Income or gains from the alienation of real property or of a direct
interest in or over land or of a right to exploit, or to explore for, a
natural resource may be taxed in the Contracting State in which the real
property, the land or the natural resource is situated.
(2) For the purposes of this Article, shares or comparable interests in a
company, the assets of which consist wholly or principally of real property or
of direct interests in or over land in one of the Contracting States or of
rights to exploit, or to explore for, natural resources in one of the
Contracting States, shall be deemed to be real property situated in the
Contracting State in which the land or the natural resources are situated or
in which the exploration may take place.
(3) Subject to the provisions of paragraphs (1) and (2), income from the
alienation of capital assets of an enterprise of one of the Contracting States
shall be taxable only in that Contracting State, but, where those assets form
part of the business property of a permanent establishment situated in the
other Contracting State, such income may be taxed in that other State.
ARTICLE 14
Independent Personal Services
(1) Income derived by an individual who is a resident of one of the
Contracting States in respect of professional services or other independent
activities of a similar character shall be taxable only in that State unless
he has a fixed base regularly available to him in the other Contracting State
for the purpose of performing his activities. If he has such a fixed base, the
income may be taxed in the other State but only so much of it as is
attributable to activities exercised from that fixed base.
(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 one
of the Contracting States 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 one of the Contracting States 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 that other State for a period or periods
not exceeding in the aggregate 183 days in the year of income or the
fiscal year as the case may be, of that other State; and
(b) the remuneration is paid by, or on behalf of, an employer who is not a
resident of that other 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 in
respect of an employment exercised aboard a ship or aircraft operated in
international traffic by a resident of one of the Contracting States may be
taxed in that Contracting State.
ARTICLE 16
Directors' Fees
Directors' fees and similar payments derived by a resident of one of the
Contracting States in his capacity as a member of the board of directors of a
company which is a resident of the other Contracting State may be taxed in
that other State.
ARTICLE 17
Entertainers
(1) Notwithstanding the provisions of Articles 14 and 15, income derived by
entertainers (such as theatrical, motion picture, radio or television artistes
and musicians and athletes) from their personal activities as such may be
taxed in the Contracting State in which these activities are exercised.
(2) Where income in respect of the personal activities of an entertainer as
such accrues not to that entertainer 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 are exercised.
(3) The provisions of paragraph (2) shall not apply if it is established that
neither the entertainer nor persons related to the entertainer participate
directly or indirectly in the profits of the person referred to in that
paragraph.
ARTICLE 18
Pensions and Annuities
(1) Pensions (including government pensions) and annuities paid to a resident
of one of the Contracting States 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) Notwithstanding anything in this Agreement-
(a) the pensions and other payments referred to in paragraphs (a) and (b)
of sub-section 23AD(3) of the Australian
Income Tax Assessment Act 1936, as amended, where they are paid by
Australia, shall be exempt from Swiss tax as long as they are exempt
from Australian tax;
(b) the pensions and other payments received from Switzerland under the
legislation concerning Military Insurance shall be exempt from
Australian tax as long as they are exempt from Swiss tax.
ARTICLE 19
Government Service
(1) Remuneration (other than a pension or annuity) paid by one of the
Contracting States or a political sub-division of that State or a local
authority of that State to any individual in respect of services rendered in
the discharge of governmental functions shall be taxable only in that State.
However, such 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
performing the services.
(2) The provisions of paragraph (1) shall not apply to remuneration in respect
of services rendered in connection with any trade or business carried on by
one of the Contracting States or a political sub-division of one of the States
or a local authority of one of the States. In such a case the provisions of
Articles 15 and 16 shall apply.
ARTICLE 20
Students
Where a student, who is a resident of one of the Contracting States or who was
a resident of that State immediately before visiting the other Contracting
State and who is temporarily present in the other State solely for the purpose
of his education, receives payments from sources outside the other State for
the purpose of his maintenance or education, those payments shall be exempt
from tax in the other State.
ARTICLE 21
Income of Dual Resident
Where a person, who by reason of the provisions of paragraph (1) of Article 4
is a resident of both Contracting States but by reason of the provisions of
paragraph (2) or (3) of that Article is deemed for the purposes of this
Agreement to be a resident solely of one of the Contracting
States, derives income from sources in that Contracting State or from sources
outside both Contracting States, that income shall be taxable only in that
Contracting State.
Chapter IV
METHODS OF ELIMINATION OF DOUBLE TAXATION
ARTICLE 22
(1) 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 hereof), Swiss tax paid, whether directly or by
deduction, in respect of income derived by a resident of Australia from
sources in Switzerland (not including, in the case of a dividend, tax paid in
respect of the profits out of which the dividend is paid) shall be allowed as
a credit against Australian tax payable in respect of that income.
(2) Where a resident of Switzerland derives income dealt with in this
Agreement and which, in accordance with the provisions of this Agreement, may
be taxed in Australia, Switzerland shall, subject to the provisions of
paragraph (3), exempt such income from Swiss tax but may, in calculating tax
on the remaining income of that person, apply the rate of tax which would have
been applicable if the exempted income had not been so exempted. Provided,
however, that the exemption shall apply to gains from the alienation of
property referred to in paragraph (2) of Article 13 only if taxation of such
gains by Australia is demonstrated.
(3) Where a resident of Switzerland derives dividends, interest or royalties
which, in accordance with the provisions of Articles 10, 11 and 12, may be
taxed in Australia, Switzerland shall allow, upon request, relief to that
person. The relief may consist of:
(a) a deduction from the Swiss tax on the income of that person of an
amount equal to the tax levied in Australia in accordance with the
provisions of Articles 10, 11 and 12; such deduction shall not,
however, exceed that part of the Swiss tax, as computed before the
deduction is given, which is attributable to the income which may be
taxed in Australia, or
(b) a lump sum reduction of the Swiss tax determined by standardised
formulae which have regard to the general principles of the relief
referred to in sub-paragraph (a), or
(c) a partial exemption of such dividends, interest or royalties from
Swiss tax, in any case consisting at least of the deduction of the tax
levied in Australia from the gross amount of the dividends, interest
or royalties. Switzerland shall determine the applicable relief and
regulate the procedure in accordance with the Swiss provisions
relating to the carrying out of international conventions of the Swiss
Confederation for the avoidance of double taxation.
(4) A company which is a resident of Switzerland and which derives dividends
from a company which is a resident of Australia shall be entitled, for the
purposes of Swiss tax with respect to such dividends, to the same relief which
would be granted if the company paying the dividends were a resident of
Switzerland.
Chapter V
SPECIAL PROVISIONS
ARTICLE 23
Mutual Agreement Procedure
(1) Where a resident of one of the Contracting States considers that the
actions of tax authorities in one or both of the Contracting States result or
will result for him in taxation not in accordance with this Agreement, he may,
notwithstanding the remedies provided by the national laws of those States,
present his case to the competent authority of the Contracting State of which
he is a resident.
(2) The competent authority shall endeavour, if the taxpayer's claim appears
to it to be justified and if it is not itself able to arrive at an appropriate
solution, to resolve the case with the competent authority of the other
Contracting State, with a view to the avoidance of taxation not in accordance
with this Agreement.
(3) The competent authorities of the Contracting States shall jointly
endeavour to resolve any difficulties or doubts arising as to the application
of 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.
ARTICLE 24
Exchange of Information
(1) The competent authorities of the Contracting States shall exchange such
information (being information which is at their disposal under their
respective taxation laws in the normal course of administration) as is
necessary for carrying out the provisions of this Agreement in relation to the
taxes which are the subject of this Agreement. Any information so exchanged
shall be treated as secret and shall not be disclosed to any persons other
than those concerned with the assessment and collection of the taxes which are
the subject of this Agreement. No information as aforesaid shall be exchanged
which would disclose any trade, business, industrial or professional secret or
trade process.
(2) In no case shall the provisions of this Article be construed as imposing
upon either of the Contracting States the obligation to carry out
administrative measures at variance with the regulations and practice of
either Contracting State or which would be contrary to its sovereignty,
security or public policy or to supply particulars which are not procurable
under its own legislation or that of the State making application.
ARTICLE 25
Source of Income Income derived by a resident of one of the Contracting States
which, under any one or more of Articles 6 to 8 and 10 to 17 may be taxed in
the other Contracting State, shall for the purposes of Article 22, and of the
income tax law of that other State, be deemed to be income from sources in
that other State.
ARTICLE 26
Diplomatic and Consular Officials
(1) Nothing in this Agreement shall affect the fiscal privileges of diplomatic
or consular officials under the general rules of international law or under
the provisions of special agreements.
(2) For the purposes of this Agreement, an individual who is a member of a
diplomatic mission, consular post or permanent mission of one of the
Contracting States which is situated in the other Contracting State or in a
third State shall be deemed to be a resident of the sending Contracting State
if:
(a) in accordance with international law he is not liable to tax in the
receiving Contracting State in respect of income from sources outside
that Contracting State, and
(b) he is liable in the sending Contracting State to the same obligations
in relation to tax on his total income as are residents of that
Contracting State.
(3) This Agreement shall not apply to international organisations, to organs
or officials thereof or to persons who are members of a diplomatic mission,
consular post or permanent mission of a third State, being present in one of
the Contracting States and not treated in either Contracting State as
residents in respect of taxes on income.
Chapter VI
FINAL PROVISIONS
ARTICLE 27
Entry into Force
This Agreement shall come into force on the date on which the Government of
Australia and the Swiss Federal Council exchange notes through the diplomatic
channel notifying each other that the last of such things has been done as is
necessary to give this Agreement the force of law in Australia and in
Switzerland, as the case may be, and thereupon this Agreement shall have
effect-
(a) in Australia-
(i) in respect of withholding tax on income that is derived by a
non-resident, in respect of income derived on or after 1
January 1979;
(ii) in respect of other Australian tax for any year of income
beginning on or after 1 July 1979;
(b) in Switzerland- for any taxable year beginning on or after 1 January
1979.
ARTICLE 28
Termination
This Agreement shall continue in effect indefinitely, but the Government of
Australia or the Swiss Federal Council may on or before 30 June in any
calendar year give to the other through the diplomatic channel written notice
of termination and, in that event this Agreement shall cease to be effective-
(a) in Australia-
(i) in respect of withholding tax on income that is derived by a
non-resident, in respect of 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 other Australian tax, for 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 Switzerland- for any taxable year beginning on or after 1 January
in the calendar year next following that in which the notice of
termination is given. IN WITNESS WHEREOF the undersigned, duly
authorized thereto, have signed this Agreement. DONE in duplicate at
Canberra this 28th day of February One thousand nine hundred and
eighty in the English and German languages, both texts being equally
authoritative.
JOHN HOWARD HENRI ROSSI FOR
THE GOVERNMENT FOR THE SWISS FEDERAL
OF AUSTRALIA COUNCIL
PROTOCOL
The Government of Australia and
the Swiss Federal Council
Have agreed at the signing of the Agreement between the two States for the
avoidance of double taxation with respect to taxes on income upon the
following provisions which shall form an integral part of the said Agreement.
(1) With reference to Article 2, the provisions of the Australian law relating
specifically to the income tax upon the reduced taxable income of a
non-resident company in existence at the date of signature of this Agreement
are to be applied in ascertaining the income subject to that tax or, if those
provisions are amended so as to make more favourable to the company the
ascertainment of that income, those provisions as so amended are to be so
applied.
(2) With reference to Article 7,
(a) insofar as it has been customary in one of the Contracting States to
determine the profits to be attributed to a permanent establishment on
the basis of an apportionment of the total profits of the enterprise
to its various parts, nothing in paragraph (2) of Article 7 shall
preclude that Contracting State from determining the profits to be
taxed by such an apportionment as may be customary; the method of
apportionment adopted shall, however, be such that the result shall be
in accordance with the principles contained in that Article;
(b) for the purposes of (a) and of paragraphs (1) to (4) of Article 7, the
profits to be attributed to the permanent establishment shall be
determined by the same method year by year unless there is good and
sufficient reason to the contrary;
(c) Article 7 of the Agreement shall not apply to profits of an enterprise
from carrying on a business of any form of insurance, other than life
insurance.
(3) With reference to Articles 7 and 9, where the information available to the
competent authority of one of the Contracting States is inadequate to
determine the profits of an enterprise on which tax may be imposed in that
State in accordance with Article 7 or Article 9 of the Agreement, nothing in
those Articles shall affect the application of any law of that State relating
to the determination of the tax liability of an enterprise in special
circumstances, provided that that law shall be applied, so far as the
information available to the competent authority permits, in accordance with
the principles of those Articles.
(4) With reference to Articles 10, 11 and 12, if, in an Agreement for the
avoidance of double taxation that is subsequently made between Australia and a
third State being a State that at the date of signature of this Protocol is a
member of the Organisation for Economic Cooperationl 175800 and Development,
Australia shall agree to limit the rate of its taxation-
(a) on dividends paid by a company which is a resident of Australia for
the purposes of Australian tax to which a company that is a resident
of the third State is entitled, to a rate less than that provided in
paragraph (2) of Article 10; or
(b) on interest arising in Australia to which a resident of the third
State is entitled, to a rate less than that provided in paragraph (2)
of Article 11; or
(c) on royalties arising in Australia to which a resident of the third
State is entitled, to a rate less than that provided in paragraph (2)
of Article 12, the Government of Australia shall immediately inform
the Swiss Federal Council in writing through the diplomatic channel
and shall enter into negotiations with the Swiss Federal Council to
review the provisions specified in (a), (b) and (c) above in order to
provide the same treatment for Switzerland as that provided for the third
State.
DONE in duplicate at Canberra this twenty-eighth day of February, One thousand
nine hundred and eighty, in the English and German languages, both texts being
equally authoritative.
JOHN HOWARD HENRI ROSSI FOR THE
GOVERNMENT OF FOR THE SWISS FEDERAL
AUSTRALIA COUNCIL
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