Bills Digest 21 1996-97 Taxation Laws Amendment (International Tax Agreements) Bill 1996


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WARNING:
This Digest is prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments.

This Digest was available from 21 August 1996.

CONTENTS

Passage History

Taxation Laws Amendment (International Tax Agreements) Bill 1996

Date Introduced: 27 June 1996
House: House of Representatives
Portfolio: Treasury
Commencement: Royal Assent

Purpose

To provide legislative force for the double taxation agreement entered into between the Australian Commerce and Industry Office and the Taipei Economic and Cultural Office.

Background

Australia is a party to approximately 35 bilateral agreements and conventions which are commonly known as double taxation agreements which aim to minimise the double taxation of income and other receipts. Double taxation can arise where there is a connection in more than one country with the income or other receipt and the taxpayer. the main methods used to limit double taxation are to reserve the right to tax certain income for the country of which the taxpayer is a resident and to allow either country to tax other income at its source with the country of residence allowing a credit for any tax paid in the other country.

In relation to the main categories of income and other receipts, the general rules are:

  • business profits: if the profits arise from the operation of a permanent establishment, they may be taxed by the country in which the permanent establishment is established to the extent that the profits are attributable to the permanent establishment;
  • income from real property: may be taxed by the country in which the property is situated; and
  • dividends, interest and royalties: such income may be taxed in the country where the taxpayer resides and in the country from which they are sourced up to the maximum rate specified in the agreement (generally 10% - 15%).

As well, recent agreements contain 'sweeper clauses' that determine the taxation liability for classes on income and capital gains that are not specifically dealt with elsewhere in the agreement.

While known as double taxation agreements, they also contain provisions to prevent evasion of tax between the two countries.

The agreements are generally between governments, this is not the case with the Taiwan agreement as Australia does not recognise Taiwan as an independent country. For this reason the agreement, which was signed in Canberra on 29 may 1996, is expressed to be between The Australian Commerce and Industry Office and the Taipei Economic and Cultural office.

Main Provisions

The agreement reflects the current range of double taxation agreements as outlined above. The most important aspects of the Billprovide for:

  • taxation rates in relation to dividends, interest and royalties will be within the general 10% to 15% rates noted above; and
  • the agreement contains general 'sweeper' provisions in relation to capital gains (Article 13) and other income (Article 21).

Contact Officer and Copyright Details

Chris Field Ph. 06 277 2439
16 August 1996
Bills Digest Service
Parliamentary Research Service

This Digest does not have any official legal status. Other sources should be consulted to determine whether the Bill has been enacted and, if so, whether the subsequent Act reflects further amendments.

PRS staff are available to discuss the paper's contents with Senators and Members and their staff but not with members of the public.

ISSN 1323-9032
© Commonwealth of Australia 1996

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 1996.

This page was prepared by the Parliamentary Library, Commonwealth of Australia
Last updated: 20 August 1996

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