Bills Digest no. 12 2008–09
International Tax Agreements Amendment Bill (No. 1)
2008
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Concluding comments
Contact officer & copyright details
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Abbreviation
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Definition
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Agreements Act 1953
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International Tax Agreements Act 1953 (Cth)
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ATO
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Australian Taxation Office
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Commissioner
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Commissioner of Taxation
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GST
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goods and
services tax
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ITAA
1936
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Income Tax Assessment Act 1936 (Cth)
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ITAA
1997
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Income Tax Assessment Act 1997 (Cth)
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OECD
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Organisation for Economic Co-operation and Development
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OECD
Model
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OECD
Model Tax Convention on Income and on Capital
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the 1969
Japanese agreement (the existing Agreement)
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the
Agreement between the Commonwealth of Australia and Japan for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion
with Respect to Taxes on Income and its associated Protocol, that
were signed in Canberra on 20 March 1969 existing Schedule 6 to the
Agreements Act 1953
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the 2008
Japanese convention
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the
Convention between Australia and Japan for the avoidance of double
taxation and the prevention of fiscal evasion with respect to taxes
on income and its associated Protocol and Exchange of Notes, which
were signed in Tokyo on 31 January 2008 proposed Schedule 6 to be
inserted into the Agreements Act 1953 in place of existing Schedule
6 by this Bill
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Passage history
Date introduced:
27 August 2008
House: House of Representatives
Portfolio: Treasury
Commencement:
The Act commences on Royal
Assent. (The application of the 2008 Japanese convention is dealt
with in the Main provisions section of the Bills
Digest.)
Links: The
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
To amend the
International Tax Agreements Act 1953 (Cth) (the
Agreements Act 1953) to incorporate into Australian law the 2008
Japanese convention between Australia and Japan for the avoidance
of double taxation and prevention of fiscal evasion with respect to
taxes on income.
The Australia-Japan relationship is based upon
solid foundations that are the result of shared interests and
long-term complementarity. This includes:
- economic complementarity: Japan
is Australia s largest export market and has played a central role
in Australia s post-war economic development.[1] While China could soon overtake Japan s
position as the primary export market, the complementary nature of
the Australia-Japan relationship will remain vital to both
economies long into the future.
- shared regional aims: Australia
and Japan as odd men out in the region share similar views on
emerging East Asian regionalism. For socio-historical reasons,
Japan finds regional integration difficult. Similarly, as a
predominantly European society in the extreme southern periphery of
East Asia, Australia finds regional integration difficult. Both
states share a common view on the importance of a US presence in
the region. Accordingly, they share similar views on the direction
that East Asian regionalism should take as it becomes a more viable
option in the long term.
- shared strategic outlook: Japan
and Australia share a similar strategic outlook based upon their
status as market-based liberal democracies. The two countries share
strategic interest in the maintenance of a rules-based
international order, freedom of navigation, the continued
involvement of the US in the region and the maintenance of
a strong alliance relationship, and an interest in accommodating
China into the existing regional strategic architecture.
Importantly, the two states also share similar levels of military
technology and hardware as a result of long-established
inter-operability with the US under respective alliance
relationships.
Despite these shared interests and long-term
complementarity, media reports in both Australia and Japan
highlighted a relative decline in the relationship in early 2008.
These reports were based upon a series of unrelated incidents,
including:
- Australian diplomatic efforts to end Japanese whaling in the
Southern Ocean
- the fact that Prime Minister Kevin Rudd undertook a state visit
to China prior to visiting Japan, and
- shelving of the quadrilateral security dialogue between the
United States, Japan, India and Australia.
Underlying these concerns in Japan was the
misperception that Australia may tilt towards China under its new
Mandarin-speaking Prime Minister.[2] While similar concerns were raised in the United
States, they were dismissed at an early stage. Prime Minister Rudd
made several statements highlighting the importance of continuity
in the Australia-United States relationship and several statements
regarding the centrality of the alliance to Australia s national
security.[3] Prime
Minister Rudd also indicated that the withdrawal of Australian
forces from Iraq would not be undertaken in a manner that
undermines coalition efforts.
However, in Japan, concerns regarding the
potential tendency for Canberra to tilt towards China never
subsided. In part, this reflects the Japanese sense of
vulnerability that has grown commensurate with the economic growth
of China. Japan is aware that the potential tendency of Australia
to incline towards China is more likely to be seen in the context
of second-tier diplomatic relations, such as between Australia and
Japan, than in the context of first-tier diplomatic relations, such
as between Australia and the United States.[4]
The Australian Government failed to address
these concerns with Japan at an early stage.[5] This was compounded by misperceptions
regarding diplomatic signalling. On 5 February 2008, during a visit
by Chinese Foreign Minister Yang Jiechi, Foreign Minister Stephen
Smith announced the decision to place on hold quadrilateral
strategic dialogue between the United States, Japan, India and
Australia. In Japan, the decision to publicly announce an end to
the quadrilaterals during the visit of Yang was perceived as
indicative of an Australian tilt towards China.[6]
In 2007, Japan was the world s second-largest
economy measured in US dollars and the third largest economy
measured in purchasing power parity (PPP) terms.[7] Economic growth is expected to
continue at a rate of 1.5 to 2.0 per cent over the next two
years.[8] The economy
is driven by strong business investment and export growth, with
strong regional demand providing a considerable input. Challenges
faced by the economy over the medium-term include controlling
deflation and the growing public debt, as well as strengthening the
lagging services sector. Underpinning these challenges is the
problem of an ageing population, which requires both a political
and an economic solution.
Japan became Australia s primary export market
in 1969 and continues in the number one position to this day. In
2007, total two-way trade between Australia and Japan was valued at
$54.5 billion, accounting for a 0.9 per cent decrease on
2006.[9] Trade
between the two countries is largely stable, as a result of
domination by multinationals in the resources sector using
long-term supply contracts. Japan is Australia s third largest
source of investment, which in 2006 was valued at $51
billion.[10]
Japanese investment has played a central role in Australia s
post-war economic development, particularly in the resources,
manufacturing (auto) and tourism sectors.
The Australia-Japan economic relationship is
significant due to its historical and contemporary importance. The
two economies have enjoyed a highly complementary trade
relationship and relative geographic proximity, which has provided
a solid foundation for both countries growth and as an impetus to
the wider relationship.
However, the economic downturn in Japan during
the 1990s and the contemporaneous economic growth in neighbouring
China reduced the importance of Japan to the Australian economy, in
relative terms. Reflecting this, the Australian and Japanese
governments have worked to broaden and strengthen the economic
relationship. This includes negotiations towards a bilateral Free
Trade Agreement (FTA), which commenced in April 2007. The key aims
of the Australia-Japan FTA include:
- addressing tariff and non-tariff barriers facing Australian
companies
- expansion of export opportunities in Japan s agricultural
market
- promotion of two-way investment, and
- reducing discrimination resulting from Japan s FTAs with other
countries.[11]
Japan has indicated that it would like a FTA
with Australia to address Japan s situation of food security and
high primary resource dependency. Resource diplomacy has recently
become a more important issue across Asia as energy and non-energy
resource demand increases. An FTA could potentially increase levels
of bilateral investment and access to government procurement, which
could have a significant strategic impact. Naturally, a FTA would
also result in closer and more regular government-to-government
consultation and benefit the wider relationship.
A joint study of the benefits from an
Australia-Japan FTA conducted in 2006 estimated a net gain in
present value terms over 20 years of $39 billion for Australia, and
$27 billion for Japan.[12] The fifth round of negotiations towards an
Australia-Japan FTA was held in Canberra from 28 April to 1 May
2008. It is estimated that a deal could be concluded by the end of
2009, largely dependent upon the political situation in Japan.
The current Bill, which gives force to a new
tax treaty with Japan could be viewed in the context of efforts to
develop and strengthen the economic relationship. The facilitation
of trade and investment between the two countries will allow the
maintenance of a strong foundation upon which the wider
relationship can continue to grow.
Tax treaties generally serve three main
functions:
- They reduce or eliminate double taxation which arises by two
tax jurisdictions exercising the right to tax based on source of
income and residence of the recipient of income when that income
flows across borders.
- They set out the means of resolving transfer pricing issues by
setting out an agreed basis for allocating profits within a
multinational company operating in both jurisdictions.
- They provide provisions for the exchange of information between
the revenue authorities of two jurisdictions and in consequence
would assist in preventing fiscal evasion.
Australia generally follows the Organisation
for Economic Co-operation and Development (OECD) Model Tax
Convention on Income and on Capital (OECD Model) in
negotiating bilateral tax treaties. The OECD Model generally
favours the residence approach to the allocation of taxing rights,
although there are instances where Australia has adopted the source
country taxing rights approach.
The current tax treaty with Japan was signed
on 20 March 1969 and has been effective from the income year
commencing from 1 July 1970.
The Convention between Australia and Japan
for the Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with Respect to Taxes on Income and its associated
Protocol and Exchange of Notes (together referred to as the 2008
Japanese convention ) were signed in Tokyo on 31 January 2008.
The Joint Standing Committee on Treaties
(JSCOT) in Report 91 tabled on 12 March 2008, summarised the key
differences between the 1969 Japanese Tax Treaty and the 2008
Japanese convention in paragraphs 4.4 to 4.7 of Chapter 4 titled
Double Tax Convention with Japan. The contents of
these paragraphs are set out below:
4.4 The Committee was advised that the proposed
treaty is generally consistent with recent tax treaties concluded
by Australia and includes a number of changes from the existing
treaty. The key differences are reduced rates of withholding taxes
(WHT) on dividends, interest and royalties, and improved integrity
measures, particularly relating to rules for the exchange of
information on tax matters. The treaty also introduces rules for
real property which align the Capital Gains Tax treatment closely
with that of the Organisation for Economic Cooperation and
Development (OECD).
4.5 Treasury advised that it sought greater
clarity in the revised agreement. The organisations that would be
subject to exemptions for interests to withholding taxes have been
expanded to include the Australian Export Finance and Insurance
Corporation, the public authority that manages the investments of
Australia s Future Fund, the Japan Bank for International
Cooperation, and Nippon Export and Investment Insurance.
4.6 Treasury summarised the other key changes
to the agreement as:
- The inclusion of anti-treaty shopping provisions in relation to
withholding tax rates on dividends, interest and royalties;
- The inclusion of a comprehensive limitation on the benefits
clause to ensure treaty benefits pass only to qualified
persons;
- Rules to prevent tax discrimination;
- Updated provisions for the taxation of business profits from
natural resource activities, building sites and the operation of
substantial equipment;
- New rules to deal with the taxation of income derived through
business trusts; and
- Provisions preventing double exemption of income derived by
temporary residence.
4.7 The treaty will also reduce tax impediments
to the cross-border movement of people, capital and technology
between Australia and Japan and facilitate cooperation between the
taxation authorities to reduce fiscal evasion.
(Note: the footnote references have been
omitted)
As mentioned above, the 2008 Japanese was
considered by JSCOT in its Report 91, tabled on 26 June 2008. JSCOT
recommended that binding treaty action be taken.
The Explanatory Memorandum to the Bill on page
5 sets out the financial impact of the new convention as
follows.
Treasury has estimated the
impact of the first round effects on forward estimates as $345
million. The estimated distribution of the first round costs is
shown in the table below:
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2008-09
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2009-10
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2010-11
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2011-12
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$40m
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$100m
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$100m
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$105m
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Indirect revenue benefits
may arise from increased trade and investment between Australia and
Japan and reduced tax credit obligations to Japan.
The Agreements Act 1953 gives the force of law
to all the tax treaties entered into between Australia and other
countries and which are listed in various Schedules to that Act.
Schedule 6 sets out the terms of the 1969 Japanese agreement.
Section 4 of the Agreements Act 1953
incorporates the Income Tax Assessment Act 1936 (ITAA
1936) and the Income Tax Assessment Act 1997 (the ITAA
1997). Section 4AA of the Agreements Act 1953 incorporates the
Fringe Benefits Tax Assessment Act 1986 (the FBTAA 1986).
Sections 4 and 4AA both provide that these Acts are to be read as
one with the Agreements Act 1953, and that the Agreements Act 1953
takes precedence over these other Acts except for the
anti-avoidance provisions in Part IVA of the ITAA 1936 and in
section 67 of the FBTAA 1986.
Item 9 of Schedule
1 to the Bill repeals existing Schedule 6 and substitutes
a new Schedule 6 to the Agreements Act 1953,
setting out the terms of the 2008 Japanese convention.
Item 3 of Schedule
1 amends subsection 3(1) of the Agreements Act 1953 to
insert the definition of the 1969 Japanese agreement:
the 1969
Japanese agreement means the Agreement between the
Government of the Commonwealth of Australia and the Government of
Japan for the avoidance of double taxation and the prevention of
fiscal evasion with respect to taxes on income and the protocol to
that agreement, being the agreement and protocol that was signed at
Canberra on 20 March 1969.
Item 4 of Schedule
1 amends subsection 3(1) to insert the definition of the
2008 Japanese convention:
the 2008 Japanese
convention means the Convention between Australia and
Japan for the avoidance of double taxation and the prevention of
fiscal evasion with respect to taxes on income and the protocol to
that convention, being the convention and protocol a copy of each
of which in the English language is set out in Schedule
6.
It is not within the scope of this Bills
Digest to cover all the Articles of the 2008 Japanese convention.
However, brief comments will be made on certain key Articles of the
2008 Japanese convention for which there is no equivalent in the
1969 Japanese agreement or where there has been a substantial
modification of the provisions in the 1969 Japanese agreement.
The Explanatory Memorandum to the Bill (pages
12 to 16) sets out in a table a summary of key features of the new
law and the current law citing various Articles of the 2008
Japanese convention. For ease of reference this table is included
in Attachment A to this Bills Digest.
Paragraph 1 of
Article 6 provides that the income of a resident
of one country, from real property situated in the other country,
may be taxed by the country where that property is situated. Thus
the source country is allowed to tax income from real property
.
Paragraph 2 of
Article 6 defines the term real property and
allows the taxation of income from amongst other things, the right
to explore for, and exploit natural resources. This definition
excludes ships and aircraft. The taxation of income from shipping
and air transport is dealt with by Article 8.
There is no equivalent to Article
6 in the 1969 Japanese agreement.
Article 13 deals with the
taxation of income, profits and gains from the alienation of real
property referred to in Article 6. It provides
that such income, profits and gains derived by a resident in one
Contracting State from the alienation of real property situated in
the other Contracting State may be taxed in the other Contracting
State.
The dividend withholding tax on dividends paid
by a company in one contracting state to a resident in another
contracting state who has directly owned more than 80 per cent of
the voting power of the company, is zero subject to certain
conditions under paragraph 3 of Article
10.
Where paragraph 3 of
Article 10 does not apply, and the beneficial
owner of dividends is a company which owns directly shares
representing at least 10 per cent of the voting power of the
company paying the dividends, the rate of withholding tax is a
maximum of 5 per cent under paragraph 2(a) of
Article 10.
In other cases, the rate of withholding tax is
10 per cent under paragraph 2(b) of
Article 10.
Under the 1969 Japanese agreement the rate of
dividend withholding tax is limited to 15 per cent.
Paragraph 7 of
Article 10 limits withholding tax from Australian
Real Estate Investment Trusts (REITs) to 15 per cent of the gross
amount of the distribution if the beneficial owner of the
distributions is a resident of Japan subject to certain
conditions.
Paragraph 2 of
Article 11 reduces the rate of interest
withholding tax to a maximum of 10 per cent of the gross amount of
the interest.
However, paragraph 3 of
Article 11 provides that the rate of interest
withholding tax shall be zero where interest is paid to:
- government bodies or the Bank of Japan or the Reserve Bank of
Australia,
- financial institutions, or
- the Japan Bank for International Cooperation, Nippon Export and
Investment Insurance, Australia s Export Finance and Insurance
Corporation or any public authority that manages the investments of
the Future Fund.
There is no equivalent to Article
11 in the 1969 Japanese agreement.
Paragraph 2 of
Article 12 reduces the rate of royalty withholding
tax to a maximum of 5 per cent of the gross amount of
royalties.
Under the 1969 Japanese agreement, the rate of
royalty withholding tax is limited to 10 per cent of the gross
amount of royalties.
Clause 2 of the Bill provides
that the proposed Act commences on the day on which it receives
Royal Assent.
Paragraph (1) of item
8 of Schedule 1 provides that on or after
the date of entry into force of the 2008 Japanese convention, the
provisions of the convention have the force of law.
Paragraph 1 of
Article 31 of the 2008 Japanese convention
provides that the convention shall be approved in accordance with
the legal procedures of each of the Contracting States and shall
enter into force on the thirtieth day after the date of exchange of
diplomatic notes indicating such approval. The convention was
tabled in both Houses of Parliament on 12 March 2008.[13]
In the case of Australia, the enactment of
this Bill will be a prerequisite to such notification.
Paragraph 2(b) of
Article 31 provides that the convention will apply
as follows:
- with respect to withholding taxes on income that is derived by
a resident of Japan, in relation to income derived on or after 1
January in the calendar year next following that in which the
Convention enters into force; and
- with respect to other taxes, as regards any taxable year
beginning on or after 1 July in the calendar year next following
that in which the Convention enters into force.
Paragraph 2(a) of
Article 31 provides that the convention will apply
as follows:
- with respect to taxes withheld at source, for amounts taxable
on or after 1 January in the calendar year next following that in
which the Convention enters into force;
- with respect to taxes on income which are not withheld at
source, as regards income for any taxable year beginning on or
after 1 January in the calendar year next following that inn which
the Convention enters into force; and
- with respect to other taxes, as regards taxes for any taxable
year beginning on or after 1 January in the calendar year next
following that in which the Convention enters into force
Concluding comments
It was noted in the section on Financial
implications in this Bills Digest that Treasury has estimated the
impact of the first round effects on forward estimates as a cost to
revenue of $345 million. Treasury has also added a qualification
that indirect revenue benefits may arise from increased trade and
investment between Australia and Japan and reduced tax credit
obligations to Japan .
The Regulation Impact Statement (RIS) in
paragraph 2.19 and 2.20 on page 101 of the Explanatory Memorandum
succinctly highlights the difficulties of estimating which includes
the estimation of cross-border behavioural responses to concessions
in a tax treaty:
2.19 Only a partial analysis of costs and
benefits can be provided because all the impacts of tax treaties
cannot be quantified. While the direct cost to Australian revenue
of withholding tax changes can be quantified relatively easily,
other cost impacts such as compliance costs are inherently
difficult to quantify. There are also efficiency and growth gains
and losses to Australia that provide estimation problems. Analysis
has been conducted to establish plausible impacts on Australian
economic activity and consequent tax revenue flowing from
implementation of the tax treaty. The tax revenue estimates are
subject to more uncertainty than the estimates of costs but are
best estimates given the technology of estimation, the availability
of estimates of behavioural responses, and data.
2.20 Benefits that flow to business are
generally equally difficult to quantify. The evidence from
international consideration (eg, the OECD) and from consultation
with business strongly indicates, however, that while the quantum
of benefits is very difficult to assess, a modern tax treaty
provides a clear positive benefit to trade and investment
relationships. Tax treaties provide increased certainty and reduce
complexity and compliance costs for business.
On the impact of the cost to revenue, the RIS
also notes there may be some additional flow on effects
that are not included in the $345 million figure:
2.48 Treasury has estimated the impact of the
first round effects on forward estimates as $345 million, with the
identifiable costs to revenue associated with the reductions in
dividend, interest and royalty withholding tax rates. As Australia
has a number of most favoured nation clauses regarding dividend
withholding tax rates in its existing treaties, Australia would be
obliged to enter into negotiations with a view to offering similar
withholding tax reductions to those countries (including the
proposed 10 per cent rate limit for other dividends), which
may create an additional pressure on revenue cost.
Countries that offer bilateral treaty withholding tax reductions
for distributions from real estate investment trusts would also be
expected to seek the 15 per cent withholding tax rate limit for
such payments proposed for Japan, which may also create a
pressure on revenue cost. [emphasis added].
(Extract from the Explanatory Memorandum,
pages 12 to 16.)
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New law
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Current law
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Updates all Articles, having regard to
Australian, Japanese and the Organisation for Economic Co-operation
and Development (OECD) tax treaty developments since the existing
Agreement was entered into.
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Not applicable.
|
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Updates the definition of Australia to cover
Australia s Exclusive Economic Zone , the seabed and subsoil of the
continental shelf.
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Only territories specifically included.
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Extends the coverage of this Convention to
Australian tax on capital gains and updates the list of taxes to
which the new treaty arrangements apply. In the case of Australia,
these taxes are:
- the income tax;
- the petroleum resource rent tax; and
- any identical or substantially similar taxes imposed under the
federal law of Australia.
However, a broader range of taxes apply to
certain Articles. In the case of Australia, the taxes are:
- taxes of every kind and description for Article 26
(Non-Discrimination); and
- all taxes imposed under the federal tax laws administered by
the Commissioner for Article 28 (Exchange of
Information)
|
In the case of Australia, the taxes to which all
Articles of the existing treaty apply are:
- the Commonwealth income tax (including the former additional
tax upon the undistributed amount of the distributable income of a
private company); and
- any identical or substantially similar taxes imposed under the
law of Australia.
|
|
Includes an Article setting out the basis on
which the residential status of a person is to be determined for
the purposes of this Convention. This Article includes tiebreaker
rules for both individuals and corporations Article 4
(Resident).
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No equivalent tie-breaker rules.
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Updates the meaning of permanent establishment
in Article 5. In particular, under this Convention a building site
or construction or installation project constitutes a permanent
establishment only where it lasts for more than 12 months. An
enterprise is deemed to have a permanent establishment if:
- it carries on supervisory or consultancy activities connected
with a building site or construction or installation project for a
period exceeding 12 months;
- it carries on activities (including the operation of
substantial equipment) in the exploration for, or exploitation of,
natural resources for a period or periods exceeding in the
aggregate 90 days in any 12-month period; or
- it operates substantial equipment (other than in natural
resource activities) for a period or periods exceeding in the
aggregate 183 days in any 12-month period.
Integrity provisions are included to prevent
related parties from circumventing the permanent establishment time
thresholds by splitting contracts.
|
A building site or construction, installation or
assembly project which exists for more than six months is included
in the list of examples of a permanent establishment. In addition,
an enterprise is deemed to have a permanent establishment if:
- it carries on supervisory activities for more than six months
in connection with a building site, or construction, installation
or assembly project.
No equivalent for activities in the exploration
for, or exploitation of, natural resources.
No equivalent for substantial equipment.
|
|
Includes an Article dealing with the taxation of
real property. This Article allows source country taxation of
income from real property, including from the exploration for, and
exploitation of, natural resources; permanent establishment assets
and interests in land rich entities. This is broadly consistent
with the scope of Australia s domestic law treatment of capital
gains.
|
No equivalent.
|
|
Aligns the treatment of income from independent
personal services to that of business profits under Article 7. It
also clarifies the application of the Business Profits
Article to business trusts.
|
Income from independent personal services is
treated under the previous international standard in Article 10 of
the existing Agreement.
|
|
Limits the time for the tax authorities to
initiate transfer-pricing adjustments to seven years, except in the
case of fraud or wilful default where there remains no time
limit.
|
No limit specified in the treaty. No limit in
domestic law.
|
|
Dividend withholding tax is limited to:
- zero for intercorporate dividends on non-portfolio holdings of
more than 80 per cent, subject to certain conditions;
- five per cent for intercorporate dividends on other
non-portfolio holdings; and
- ten per cent in all other cases.
|
The rate of dividend withholding tax is limited
to 15 per cent.
|
|
Limits withholding tax on distributions from
Australian real estate investment trusts and dividends which are
paid by a Japanese company which is entitled to a deduction for
dividends paid to its beneficiaries in computing its taxable income
in Japan to 15 per cent where the distribution is made up of
predominantly rental income.
|
No equivalent.
|
|
Reduces the rate of interest withholding tax
from a maximum of 10 per cent to zero where interest is paid
to:
- government bodies and the Bank of Japan or the Reserve Bank of
Australia;
- financial institutions; or
- the Japan Bank for International Cooperation, Nippon Export and
Investment Insurance, Australia s Export Finance and Insurance
Corporation and any public authority that manages the investments
of the Future Fund.
|
No equivalent.
|
|
Reduces the rate of royalty withholding tax to 5
per cent of the gross royalty payment and extends the meaning of
royalty to include forbearance. Leasing of industrial, commercial
or scientific equipment will no longer constitute a royalty.
|
The rate of royalty withholding tax is limited
to 10 per cent of the gross payment.
Definition of royalties includes payments for
use of industrial, commercial and scientific equipment.
|
|
Includes a comprehensive Alienation of
Property Article which allocates taxing rights over capital
gains and prevents double non-taxation of certain capital
gains.
|
No equivalent.
|
|
Includes a Directors Fees Article.
|
No equivalent.
|
|
Includes a new Article dealing specifically with
a Japanese sleeping partnership-Tokumei Kumiai .
|
No equivalent.
|
|
Includes a comprehensive Limitation on
Benefits Article, which is broadly consistent with that agreed
in the Australia-United States treaty.
|
No equivalent.
|
|
Includes a new Limitation of Relief
Article that:
- limits the treaty benefits that a country is obliged to provide
where income, profits or gains of temporary resident individuals
are exempted from tax; and
- limits the relief a Contracting State must provide where an
individual is taxed in the other Contracting State only on income,
profits or gains that are remitted or received in that other
state.
|
No equivalent.
|
|
Includes a comprehensive Article preventing
discrimination in relation to tax laws (Article 26
(Non-Discrimination)).
|
No equivalent.
|
|
Closely aligns Article 28 (Exchange of
Information) to the 2005 OECD standard. The effect of the
changes is to expand the range of taxes to which the Article
applies and to clarify that bank secrecy laws do not limit the
exchange of information.
|
The existing rules apply to a narrower range of
taxes.
|
[13]. For details about the
status of the 2008 Japanese convention, see:
http://www.info.dfat.gov.au/Info/Treaties/treaties.nsf/AllDocIDs/6717496B22961197CA2573E500826977
(accessed on 1 September 2008).
Bernard Pulle, Jeffrey Robertson and Paige Darby
2 September 2008
Bills Digest Service
Parliamentary Library
© Commonwealth of Australia
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