Income Tax (International Agreements) Amendment Act 1980

1

1. (1) This Act may be cited as the Income Tax (International Agreements) Amendment Act 1980.

(2) The Income Tax (International Agreements) Act 1953 is in this Act referred to as the Principal Act.

2 Commencement

2. This Act shall come into operation on the day on which it receives the Royal Assent.

3 Interpretation

3. Section 3 of the Principal Act is amended—

(a) by inserting in sub-section (1), after the definition of “the New Zealand agreement”, the following definition:

“‘the Philippine agreement’ means the 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, being the agreement a copy of which is set out in Schedule 14;”;

(b) by inserting in sub-section (1), after the definition of “the Singapore agreement”, the following definition:

“‘the Swiss agreement’ means the Agreement between the Government of Australia and the Swiss Federal Council for the avoidance of double taxation with respect to taxes on income and the protocol to that agreement, being the agreement and protocol a copy of each of which in the English language is set out in Schedule 15;”; and

(c) by omitting from sub-section (1) the definition of “the United Kingdom agreement” and substituting the following definitions:

“‘the United Kingdom agreement’ means the Agreement between the Government of the Commonwealth of Australia and the Government of the United Kingdom for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains (being the agreement a copy of which is set out in Schedule 1), as amended by the United Kingdom protocol;

“‘the United Kingdom protocol’ means the Protocol between the Government of the Commonwealth of Australia and the Government of the United Kingdom amending the agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains, being the protocol a copy of which is set out in Schedule 1a;”.

4. After section 5 of the Principal Act the following section is inserted:

Protocol with the Government of the United Kingdom

“5a. (1) Subject to this Act, on and after the date of entry into force of the United Kingdom protocol, the provisions of the protocol, so far as those provisions affect Australian tax, have, and shall be deemed to have had, the force of law.

“(2) As soon as practicable after the entry into force of the United Kingdom protocol in accordance with Article III of the protocol, the Treasurer shall cause to be published in the Gazette a notice specifying the date on which the protocol entered into force, and the date so notified shall, for the purposes, of this Act, be conclusively presumed to be the date of entry into force of the protocol.

“(3) Where an amount of tax credit is to be treated as assessable income of a taxpayer in accordance with paragraph (2) of Article 8 of the United Kingdom agreement—

(a) the amount of the tax credit shall be included in the assessable income of the taxpayer of the year of income in which the dividend to which the tax credit relates is paid; and

(b) the amount of the tax credit shall be added to the amount of the dividend to which the tax credit relates and the sum of the two amounts shall be deemed to be one dividend for the purposes of this Act and the Assessment Act.”.

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5. (1) After section 11c of the Principal Act the following sections are inserted:

Agreement with the Republic of the Philippines

“11d. (1) Subject to this Act, on and after the date of entry into force of the Philippine agreement, the provisions of the agreement, so far as those provisions affect Australian tax, have, and shall be deemed to have had, the force of law—

(a) in relation to withholding tax—in respect of dividends or interest derived on or after 1 January in the calendar year in which the agreement enters into force and in relation to which the agreement remains effective; and

(b) in relation to tax other than withholding tax—in respect of income of any year of income commencing on or after 1 July in the calendar year in which the agreement enters into force and in relation to which the agreement remains effective.

“(2) As soon as practicable after instruments of ratification have been exchanged in accordance with Article 29 of the Philippine agreement, the Treasurer shall cause to be published in the Gazette a notice specifying the date of the exchange of instruments of ratification and the date so notified shall, for the purposes of this Act, be conclusively presumed to be the date of entry into force of the agreement.

Agreement with the Swiss Federal Council

“11e. (1) Subject to this Act, on and after the date of entry into force of the Swiss agreement, the provisions of the agreement, so far as those provisions affect Australian tax, have, and shall be deemed to have had, the force of law—

(a) in relation to withholding tax—in respect of dividends or interest derived on or after 1 January 1979 and in relation to which the agreement remains effective; and

(b) in relation to tax other than withholding tax—in respect of income of the year of income that commenced on 1 July 1979 and of a subsequent year of income in relation to which the agreement remains effective.

“(2) As soon as practicable after the date of entry into force of the Swiss agreement in accordance with Article 27 of the agreement, the Treasurer shall cause to be published in the Gazette a notice specifying the date on which the agreement entered into force, and the date so notified shall, for the purposes of this Act, be conclusively presumed to be the date of entry into force of the agreement.”.

(2) The Commissioner may amend an assessment made before the date of entry into force of the Philippine agreement for the purpose of giving effect to sub-section 11d(1) of the Principal Act, as amended by this Act.

(3) The provisions of the Swiss agreement shall not have the effect of subjecting to Australian tax interest or royalties paid by a resident of Australia to a resident of Switzerland that, but for that agreement, would not be subject to Australian tax.

(4) The Commissioner may amend an assessment made before the date of entry into force of the Swiss agreement for the purpose of giving effect to sub-section 11e(1) of the Principal Act, as amended by this Act (including that section as affected by sub-section (3) of this section).

Provisions relating to certain income derived from sources in certain countries

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6. (1) Section 12 of the Principal Act is amended—

(a) by omitting from paragraph (ag) of sub-section (1) “or” (last occurring); and

(b) by inserting after paragraph (ag) of sub-section (1) the following paragraphs:

“(ah) income being interest or royalties to which paragraph (1) of Article 11 or paragraph (1) of Article 12 of the Philippine agreement applies, where the income is derived, in the year of income beginning on 1 July in the calendar year in which the agreement enters into force, or a subsequent year of income, from sources in the Philippines;

“(ai) income being interest or royalties to which paragraph (1) of Article 11 or paragraph (1) of Article 12 of the Swiss agreement applies, where the income was derived in the year of income that commenced on 1 July 1979, or a subsequent year of income, from sources in Switzerland; or”.

(2) If a taxpayer derived, on or before 28 February 1980, income to which paragraph 12(1)(ai) of the Principal Act, as amended by this Act, applies, that paragraph in its application in relation to that income shall not operate to increase the Australian tax payable by the taxpayer in respect of the year of income unless there is a decrease, by virtue of the Swiss agreement, in the tax payable under the law of Switzerland in respect of that income and, where there is such a decrease, the amount of the increase shall not exceed the amount of the decrease expressed in Australian currency.

(3) The Commissioner may amend an assessment made before the date of entry into force of the Swiss agreement for the purpose of giving effect to paragraph 12(1)(ai) of the Principal Act, as amended by this Act (including that paragraph as affected by sub-section (2) of this section).

7 Deductions for United Kingdom tax not to be taken into account in calculating amount of dividend, interest or royalty

7. Section 13 of the Principal Act is amended—

(a) by inserting after sub-section (1) the following sub-section:

“(1a) Sub-section (1) does not apply in relation to dividends to which Article 8 of the United Kingdom agreement applies, being dividends derived on or after 6 April 1977 and in relation to which that agreement remains effective.”; and

(b) by omitting from sub-section (2) “the last preceding sub-section” and substituting “sub-section (1)”.

8 Schedules 1a, 14 and 15

8. The Principal Act is amended—

(a) by inserting after Schedule 1 the Schedule set out in Schedule 1 to this Act; and

(b) by adding at the end thereof the Schedules set out in Schedule 2 to this Act.

Transitional provisions with respect to the protocol with the Government of the United Kingdom

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9. (1) In this section, “amendments to which this section applies” means the amendments made by paragraph 3(c) and section 4.

(2) The amendments to which this section applies do not affect the operation of the Income Tax (International Agreements) Act 1953 with respect to any Australian tax, other than tax in respect of—

(a) remuneration to which paragraph (3)(a) of Article 2 of the United Kingdom agreement applies, being income of the year of income that commences on 1 July 1980 and of a subsequent year of income in relation to which the United Kingdom agreement remains effective; or

(b) dividends to which Article 8 of the United Kingdom agreement applies, being dividends derived on or after 6 April 1977 and in relation to which the United Kingdom agreement remains effective.

(3) Where a taxpayer derived, on or after 6 April 1977 but before 30 January 1980, a dividend in respect of which he is entitled to a tax credit under paragraph (2) of Article 8 of the United Kingdom agreement, the amendments to which this section applies shall not operate to increase the Australian tax payable by the taxpayer in respect of the year of income in which the dividend is derived.

(4) The Commissioner may amend an assessment made before the date of entry into force of the United Kingdom protocol for the purpose of giving effect to the amendments to which this section applies (including those amendments as affected by sub-section (3) of this section).

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SCHEDULE 1 Section 8

SCHEDULE TO BE INSERTED AFTER SCHEDULE 1 TO THE PRINCIPAL ACT

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SCHEDULE 1a Section 3

PROTOCOL BETWEEN THE GOVERNMENT OF THE COMMONWEALTH OF AUSTRALIA AND THE GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND AMENDING THE AGREEMENT FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL GAINS, SIGNED AT CANBERRA ON 7 DECEMBER 1967

The Government of the Commonwealth of Australia and the Government of the United Kingdom of Great Britain and Northern Ireland;

Desiring to conclude a Protocol to amend the Agreement between the Contracting Governments for the Avoidance of Double Taxation and the prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains signed at Canberra on 7 December 1967 (hereinafter referred to as “the Agreement”); Have agreed as follows:

ARTICLE I

The following paragraph shall be added after paragraph (3) of Article 2 of the Agreement.

“(3) (a) Where under the law in force in one of the territories an individual’s remuneration from an employment is reduced in charging it to tax in consequence of a period or periods of absence by the individual from that territory, or of the place where the employment is exercised, or of the domicile of the individual, by deducting either the whole or a fixed proportion of the amount arising, then

(a) where under this Agreement that remuneration would otherwise be relieved from tax in the other territory, the relief shall not extend to the amount so deducted; and

(b) the amount so deducted shall be regarded as income in respect of which the individual is exempt from and not subject to tax in the first-mentioned territory.”

ARTICLE II

Article 8 of the Agreement shall be deleted and replaced by the following:

“ARTICLE 8

(a) Dividends derived from a company which is resident in the United Kingdom by an Australian resident may be taxed in Australia.

(b) Where an Australian resident is entitled to a tax credit in respect of such a dividend under paragraph (2) of this Article tax may also be charged in the United Kingdom and according to the laws of the United Kingdom on the aggregate of the amount or value of that dividend and the amount of that tax credit at a rate not exceeding 15 per cent.

(c) Except as aforesaid dividends derived from a company which is resident in the United Kingdom and which are beneficially owned by an Australian resident shall be exempt from any tax in the United Kingdom which is chargeable on dividends.

An Australian resident individual who receives dividends from a company which is resident in the United Kingdom shall, provided he is the beneficial owner of the dividends, be entitled to the tax credit in respect thereof to which an individual resident in the United Kingdom would have been entitled had he received those dividends, and to the payment of any excess of such credit over his liability to United Kingdom tax. Any such credit shall be treated for the purposes of Australian tax as assessable income from sources in the United Kingdom.

Dividends derived from a company which is a resident of Australia and which are beneficially owned by a United Kingdom resident may be taxed in the United Kingdom. Such dividends may also

SCHEDULE 1a—continued

be taxed in Australia but the tax so charged shall not exceed 15 per cent of the gross amount of the dividends.

The term “dividends” as used in this Article includes any item (other than interest or royalties relieved from tax under Article 9 or Article 10 of this Agreement) which—

(a) in the case of the United Kingdom is, under the law of the United Kingdom, a distribution of a company;

(b) in the case of Australia is, or is deemed to be, under the laws in force in Australia relating to Australian tax, a dividend.

If the beneficial owner of dividends being an Australian resident owns 10 per cent or more of the class of shares in respect of which the dividends are paid then paragraphs (1) and (2) of this Article shall not apply to the dividends to the extent that they can have been paid only out of profits which the company paying the dividends earned or other income which it received in a period ending 12 months or more before the relevant date. For the purpose of this paragraph the term “relevant date” means the date on which the beneficial owner of the dividends became the owner of 10 per cent or more of the class of shares in question.

Provided that this paragraph shall apply only if the shares were acquired primarily for the purpose of securing the benefit of this Article and not for bona fide commercial reasons.

The provisions of paragraphs (1) and (2) or, as the case may be, paragraph (3) of this Article shall not apply where a resident of one of the territories has in the other territory a permanent establishment and the holding by virtue of which the dividends are paid is effectively connected with the trade or business carried on through such permanent establishment.

Dividends paid by a company which is a resident of one of the territories and which are beneficially owned by a person who is not a resident of the other territory shall be exempt from tax in that other territory except insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment situated in that other territory. Provided that this paragraph shall not apply in relation to any United Kingdom company which is also a resident of Australia or any Australian company which is also resident in the United Kingdom.

The Government of one of the territories shall not impose on a company which is a resident of the other territory any tax in the nature of an undistributed profits tax on undistributed profits of the company on a basis that is less favourable than that applicable in the case of a company which is a resident of the first-mentioned territory.”

ARTICLE III

This Protocol, which shall form an integral part of the Agreement, shall enter into force on the date when the last of all such things shall have been done in the United Kingdom and Australia as are necessary to give the Protocol the force of law in the United Kingdom and Australia respectively, and shall thereupon have effect:

(a) in the United Kingdom:

(i) as regards Article I, for any year of assessment beginning on or after 6 April 1980;

(ii) in relation to any dividend paid on or after 6 April 1977;

(b) in Australia:

(i) as regards Article I, for any year of income beginning on or after 1 July 1980;

(ii) in relation to any dividend paid on or after 6 April 1977.

In witness whereof the undersigned, duly authorized thereto by their respective Governments, have signed this Protocol.

Done in duplicate at Canberra this twenty-ninth day of January, One thousand nine hundred and eighty.

SCHEDULE 2 Sections 8

SCHEDULES TO BE ADDED AT THE END OF THE PRINCIPAL ACT

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SCHEDULE 14 Sections 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: