DT2718 - DT: Australia: old agreement, Article 19: Elimination of double taxation

This Agreement applies up to 5th April 2004 for UK income and capital gains tax, up to 31st March 2004 for UK Corporation tax and up to 30th June 2004 for Australian taxes and UK withholding taxes. 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.

(19)(1) Subject to the provisions of the law of the United Kingdom regarding the allowance as a credit against United Kingdom tax of tax payable in a territory outside the United Kingdom (which shall not affect the general principle hereof)-

(a) Australian tax payable under the laws of Australia and in accordance with this Agreement, whether directly or by deduction, on profits, income or chargeable gains from sources within Australia (excluding in the case of a dividend, tax payable in respect of the profits out of which the dividend is paid), shall be allowed as a credit against any United Kingdom tax computed by reference to the same profits, income or chargeable gains by reference to which the Australian tax is computed; and

(b) in the case of a dividend paid by a company which is a resident of Australia and is not resident in the United Kingdom to a company which is resident in the United Kingdom and which controls directly or indirectly at least 10 per cent of the voting power in the first-mentioned company, the credit shall take into account (in addition to any Australian tax creditable under (a)) the Australian tax payable by the company in respect of the profits out of which such dividend is paid.

(2)-

(a) Subject to the provisions of the law of Australia from time to time in force and which relate to the allowance of a credit against Australian tax of tax payable in a country outside Australia (which shall not affect the general principle hereof), United Kingdom tax payable under the laws of the United Kingdom and in accordance with this Agreement (reduced by the amount of any relief or repayment attributable to that income which is allowable under the law of the United Kingdom), whether directly or by deduction, on income derived by a resident of Australia from sources in the United Kingdom (excluding in the case of a dividend, tax payable in respect of the profits out of which the dividend is paid) shall be allowed as a credit against the Australian tax assessed by reference to the same income by reference to which the United Kingdom tax is payable;

(b) in the event that Australia should cease to allow a company which is a resident of Australia a rebate in its assessment at the average rate of tax payable by the company in respect of dividends derived from sources in the United Kingdom and included in the taxable income of the company, the Contracting Governments will enter into negotiations in order to establish new provisions concerning the credit to be allowed by Australia against its tax on the dividends.

(3)

(a) For the purposes of this Article -
(i) Australian tax borne by a United Kingdom resident in respect of dividends (as defined in Article 8) paid by a company which is a resident of Australia shall be treated as tax on income from sources in Australia;
(ii) United Kingdom tax borne by an Australian resident in respect of dividends (as defined in Article 8) paid by a company which is resident in the United Kingdom shall be treated as tax on income from sources in the United Kingdom;

(b) interest and royalties (as defined in Articles 9 and 10), which under the law of one of the territories -
(i) are derived from sources within that territory; or
(ii) being derived by a non-resident are subject to withholding tax,
shall be treated in the other territory as having a source in the first mentioned territory;

(c) remuneration in respect of an employment exercised aboard a ship or aircraft in international traffic shall be treated as having a source in the territory in which the place of effective management of the enterprise is situated;

(d) any amount which is included, for the purposes of tax in one of the territories, in the chargeable profits or taxable income of a person who is a resident of the other territory, and which is so included under any provision of the law of the first- mentioned territory for the time being in force regarding taxation of income of a business of any form of insurance or of income derived under a contract or agreement with a person who carries on in the first-mentioned territory any form of film business controlled abroad shall be treated as having a source in that first- mentioned territory;

(e) profits to which paragraph (2) of Article 6 applies derived by a resident of one of the territories from the operation of ships, being profits that are charged to tax in the other territory, shall be treated as having a source in that other territory.

(4) Where profits on which an enterprise of one of the territories has been charged to tax in that territory are also included in the profits of an enterprise of the other territory and the profits so included are profits which might have been expected to accrue to that enterprise of the other territory if conditions operative between each of the enterprises had been those which might be expected to operate between independent enterprises dealing at arm's length, the amount of such profits included in the profits of both enterprises shall be treated for the purposes of this Article as income from a source in the other territory of the enterprise of the first-mentioned territory and relief shall be given in accordance with this Article in respect of the extra tax chargeable in the other territory as a result of the inclusion of the said amount.