DT2704 - DT: Australia: old agreement, Article 5: Industrial or commercial profits

This Agreement applied up to 31st March 2004 for UK Corporation Tax, 5th April 2004 for UK income tax and 30th June 2004 for Australian tax. For later periods the new Agreement applies. This can be accessed via the page Tax Treaties – in force http://www.hmrc.gov.uk/international/in_force.htm.

(5)(1) Industrial or commercial profits of a United Kingdom enterprise shall be exempt from Australian tax unless the enterprise carries on trade or business in Australia through a permanent establishment situated therein. If the enterprise carries on trade or business as aforesaid, Australian tax may be imposed on the industrial or commercial profits of the enterprise but only on so much of them as is attributable to that permanent establishment.

(2) Industrial or commercial profits of an Australian enterprise shall be exempt from United Kingdom tax unless the enterprise carries on trade or business in the United Kingdom through a permanent establishment situated therein. If the enterprise carries on trade or business as aforesaid, United Kingdom tax may be imposed on the industrial or commercial profits of the enterprise but only on so much of them as is attributable to that permanent establishment.

(3) Where an enterprise of one of the territories carries on trade or business in the other territory through a permanent establishment situated therein, there shall be attributed to that permanent establishment the industrial or commercial profits which it might be expected to derive in that other territory if it were an independent enterprise engaged in the same or similar activities and its dealings with the enterprise of which it is a permanent establishment were dealings at arm's length with that enterprise or an independent enterprise; and the profits so attributed shall be deemed to be income derived from sources in that other territory.

(4) In determining the industrial or commercial profits of an enterprise of one of the territories which are taxable in the other territory in accordance with the previous paragraphs of this Article, there shall be allowed as deductions all expenses of the enterprise (including executive and general administrative expenses) which would be deductible if the permanent establishment were an independent enterprise and which are reasonably connected with the profits so taxable, whether incurred in the territory in which the permanent establishment is situated or elsewhere, but where goods manufactured out of the other territory by the enterprise are imported into that territory, and the goods are, either before or after importation, sold in that territory by the enterprise, the profits of the enterprise taxable in that territory may be determined by deducting from the sale price of the goods the amount for which, at the date the goods were shipped to that territory, goods of the same nature and quality could be purchased by a wholesale buyer in the country of manufacture, and the expenses incurred in transporting them to and selling them in that territory.

(5) If the information available to the taxation authority concerned is inadequate to determine the profits to be attributed to the permanent establishment, nothing in this Article shall affect the application of the law of either territory in relation to the liability of the permanent establishment to pay tax on an amount determined by the exercise of a discretion or the making of an estimate by the taxation authority of that territory. Provided that such discretion shall be exercised or such estimate shall be made, so far as the information available to the taxation authority permits, in accordance with the principle stated in this Article.

(6) 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.

(7) The term 'industrial or commercial profits' means income derived by an enterprise from the conduct of a trade or business, including income derived by an enterprise from the furnishing of services of employees or other personnel, but it does not include -

(a) dividends, interest, royalties (as defined in Articles 8, 9 and 10) or rents other than dividends, interest, royalties or rents effectively connected with a trade or business carried on through a permanent establishment which an enterprise of one of the territories has in the other territory; or

(b) remuneration for personal (including professional) services; or

(c) income arising from, or in relation to, contracts or obligations to provide the services of public entertainers or athletes referred to in Article 13.

(8) Nothing in this Article shall apply to either territory to prevent the operation in the territory of any provisions of its law relating specifically to the taxation of any person who carries on a business of any form of insurance or to the taxation of a non-resident who derives income under any contract or agreement with any person in relation to the carrying on in the territory by that person of any form of film business controlled abroad. Provided that if the law in force in either territory at the date of signature of this Agreement relating to the taxation of such persons is varied (otherwise than in minor respects so as not to affect its general character, or by this Agreement), the Contracting Governments shall consult with each other with a view to agreeing to such amendment of this paragraph as may be necessary.

(9) This Article shall not apply to profits derived by a resident of one of the territories from the operation of ships or aircraft which are exempt from tax in the other territory under paragraph (1) of Article 6, nor shall it apply to profits to which paragraph (2) of Article 6 applies.