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The Double Taxation Relief (Taxes on Income) (Australia) Order 2003

Draft. This instrument was laid in draft and may differ from the one made. Look for the made version under its title.

Draft 2003, ISBN 0110474864

Original text. legislation.gov.uk does not revise statutory instruments, so later amendments are not shown here. Changes made to it are listed under each provision when known.

Draft Order in Council laid before the House of Commons under the Income and Corporation Taxes Act 1988, s 788(10), for an Address to Her Majesty from that House praying that the Order be made.

INCOME TAX

Made 2003

At the Court at Buckingham Palace, the day of 2003

Present,

The Queen’s Most Excellent Majesty in Council

Whereas a draft of this Order was laid before the House of Commons in accordance with the provisions of section 788(10) of the Income and Corporation Taxes Act 1988f1, and an Address has been presented to Her Majesty by that House praying that an Order may be made in the terms of that draft:

Now, therefore, Her Majesty, in exercise of the powers conferred upon Her by section 788 of the said Act, and of all other powers enabling Her in that behalf, is pleased, by and with the advice of Her Privy Council, to order, and it is hereby ordered, as follows:—

Annotations to the whole text

Footnotes

f1

1988 c. 1; section 788 is extended by section 277 of the Taxation of Chargeable Gains Act 1992 (c. 12).

Contents

  1. 1Article 1
  2. 2Article 2
  3. Signature
  4. Schedule
  5. ICONVENTION BETWEEN THE GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND AND THE GOVERNMENT OF AUSTRALIA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL GAINS
  6. ARTICLE 1Persons covered
  7. Taxes covered
  8. 1Paragraph 1
  9. 2Paragraph 2
  10. General definitions
  11. 3Paragraph 3
  12. Residence
  13. 4Paragraph 4
  14. 5Paragraph 5
  15. 6Paragraph 6
  16. Permanent establishment
  17. 7Paragraph 7
  18. 8Paragraph 8
  19. Income from real property
  20. Business profits
  21. Shipping and air transport
  22. Associated enterprises
  23. Dividends
  24. Interest
  25. 9Paragraph 9
  26. Royalties
  27. Alienation of property
  28. Income from employment
  29. Fringe benefits
  30. Entertainers and sportspersons
  31. Pensions and annuities
  32. Government service
  33. ARTICLE 19Students
  34. Other income
  35. ARTICLE 21Source of income
  36. Elimination of double taxation
  37. Limitation of relief
  38. ARTICLE 24Partnerships
  39. Non-discrimination
  40. Mutual agreement procedure
  41. Exchange of information
  42. ARTICLE 28Members of diplomatic missions or permanent missions and consular posts
  43. Entry into force
  44. ARTICLE 30Termination
  45. Schedule
  46. IIEXCHANGE OF NOTES
  47. 1With reference generally to the application of the Convention (including these Notes),
  48. 2With reference to Article 5 (Permanent establishment),
  49. 3With reference to Article 7 (Business profits),
  50. 4With reference to Article 9 (Associated enterprises),
  51. 5With reference to Article 10 (Dividends),
  52. 6With reference to Article 11 (Interest),
  53. 7With reference to Article 12 (Royalties),
  54. 8With reference to Article 14 (Income from employment),
  55. 9With reference to Article 25 (Non-discrimination),
  56. 10With reference to Article 26 (Mutual agreement procedure) and Article 27 (Exchange of information),
  57. 11With reference to Article 26 (Mutual agreement procedure),
  58. 12Miscellaneous
  59. Explanatory note

1

This Order may be cited as the Double Taxation Relief (Taxes on Income) (Australia) Order 2003.

2

It is hereby declared—

(a)

that the arrangements specified in the Convention set out in Part I of the Schedule to this Order and in the Exchange of Notes constituting an Agreement set out in Part II of that Schedule have been made with the Government of Australia with a view to affording relief from double taxation in relation to income tax, corporation tax or capital gains tax and taxes of a similar character imposed by the laws of Australia;

(b)

that those arrangements include provisions with respect to the exchange of information forseeably relevant to the administration or enforcement of the domestic laws of the United Kingdom and the laws of Australia concerning taxes covered by the arrangements including, in particular, provisions about the prevention of fiscal evasion with respect to those taxes; and

(c)

that it is expedient that those arrangements should have effect.

Signature

Clerk of the Privy Council

ICONVENTION BETWEEN THE GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND AND THE GOVERNMENT OF AUSTRALIA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL GAINS

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

Desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital gains,

Have agreed as follows:

ARTICLE 1Persons covered

This Convention shall apply to persons who are residents of one or both of the Contracting States.

1

The existing taxes to which this Convention shall apply are:

(a)

in the case of the United Kingdom:

(i)

the income tax;

(ii)

the corporation tax; and

(iii)

the capital gains tax;

(b)

in the case of Australia:

the income tax, the resource rent tax in respect of offshore projects relating to exploration for or exploitation of petroleum resources, and the fringe benefits tax, imposed under the federal law of Australia.

2

This Convention shall also apply to any identical or substantially similar taxes which are imposed under the federal law of Australia or the law of the United Kingdom after the date of signature of this Convention in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify each other of any substantial changes that have been made in the law of their respective States relating to the taxes to which this Convention applies within a reasonable period of time after those changes.

3

As regards the application of this Convention at any time by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning that it has at that time under the laws of that State for the purposes of the taxes to which this Convention applies, any meaning under the applicable tax laws of that State prevailing over a meaning given to the term under other laws of that State.

4

Where by reason of the preceding provisions of this Article a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident only of the State in which its place of effective management is situated.

5

Notwithstanding paragraph 4 of this Article, where by reason of paragraph 1 of this Article a company, which is a participant in a dual listed company arrangement, is a resident of both Contracting States then it shall be deemed to be a resident only of the Contracting State in which it is incorporated, provided it has its primary stock exchange listing in that State.

6

The term “dual listed company arrangement” as used in this Article means an arrangement pursuant to which two publicly listed companies, while maintaining their separate legal entity status, shareholdings and listings, align their strategic directions and the economic interests of their respective shareholders through:

(a)

the appointment of common (or almost identical) boards of directors;

(b)

management of the operations of the two companies on a unified basis;

(c)

equalised distributions to shareholders in accordance with an equalisation ratio applying between the two companies, including in the event of a winding up of one or both of the companies;

(d)

the shareholders of both companies voting in effect as a single decision-making body on substantial issues affecting their combined interests; and

(e)

cross-guarantees as to, or similar financial support for, each other’s material obligations or operations, except where the effect of the relevant regulatory requirements prevents such guarantees or financial support.

7

An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that State through a broker, general commission agent or any other agent of an independent status, provided that such brokers or agents are acting in the ordinary course of their business as such.

8

The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself make either company a permanent establishment of the other.

9

No relief shall be available under this Article if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the debt-claim in respect of which the interest is paid to take advantage of this Article by means of that creation or assignment.

ARTICLE 19Students

Where a student, who is a resident of a Contracting State or who was a resident of that State immediately before visiting the other Contracting State and who is temporarily present in that other State solely for the purpose of the student’s education, receives payments from sources outside that other State for the purpose of the student’s maintenance or education, those payments shall be exempt from tax in that other State.

ARTICLE 21Source of income

Income or gains derived by a resident of the United Kingdom which, under any one or more of Articles 6 to 8 and 10 to 16 and 18, may be taxed in Australia shall for the purposes of the laws of Australia relating to its tax be deemed to arise from sources in Australia.

ARTICLE 24Partnerships

Where a partnership is treated as a taxable unit under the law of a Contracting State and under any provision of this Convention is entitled, as a resident of that State, to relief from tax in the other Contracting State on any income or gains, that provision shall not be construed as restricting the right of that other State to tax any member of the partnership who is a resident of that other State on that member’s share of such income or gains; but any such income or gains shall be treated for the purposes of Article 22 of this Convention as income or gains from sources in the first-mentioned State.

ARTICLE 28Members of diplomatic missions or permanent missions and consular posts

Nothing in this Convention shall affect the fiscal privileges of members of diplomatic missions or permanent missions or consular posts under the general rules of international law or under the provisions of special international agreements.

ARTICLE 30Termination

This Convention shall remain in force until terminated by one of the Contracting States. Either Contracting State may, on or before 30th June in any calendar year beginning after the expiration of 5 years from the date of its entry into force, give written notice of termination through the diplomatic channel and, in that event, the Convention shall cease to have effect:

(a)

in the case of Australia:

(i)

in respect of withholding tax on income that is derived by a non-resident, in relation to income derived on or after 1st January in the calendar year next following that in which the notice of termination is given;

(ii)

in respect of fringe benefits tax, in relation to fringe benefits provided on or after 1st April in the calendar year next following that in which the notice of termination is given;

(iii)

in respect of other Australian tax, in relation to income or gains of any year of income beginning on or after 1st July in the calendar year next following that in which the notice of termination is given;

(b)

in the case of the United Kingdom:

(i)

in respect of taxes withheld at source, for amounts paid or credited on or after 1st January in the calendar year next following that in which the notice of termination is given;

(ii)

in respect of income tax not described in clause (i) of this subparagraph and capital gains tax, for any year of assessment beginning on or after 6th April in the calendar year next following that in which the notice of termination is given;

(iii)

in respect of corporation tax, for any financial year beginning on or after 1st April in the calendar year next following that in which the notice of termination is given.

IIEXCHANGE OF NOTES

No LGB 03/170

The Department of Foreign Affairs and Trade presents its compliments to the British High Commission to Australia and has the honour to refer to the Convention between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of Australia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital Gains which has been signed today (the “Convention”).

The Department has the honour to make the following proposals on behalf of the Government of Australia:

1With reference generally to the application of the Convention (including these Notes),

the Contracting States agree that:

(a)

the term “income or gains” includes “profits”;

(b)

the term “laws” includes the full body of law, and is not limited to statutory law;

(c)

the terms “paid or credited” and “payments or credits” shall not include the recording of internal transactions between a permanent establishment and another part of the same enterprise;

(d)

the expression “any provision of the laws of a Contracting State which is designed to prevent the avoidance or evasion of taxes” includes:

(i)

measures designed to address thin capitalisation, dividend stripping and transfer pricing;

(ii)

controlled foreign company, transferor trust and foreign investment fund rules;

(iii)

measures designed to ensure that taxes can be effectively recovered (conservancy measures); and

(e)

nothing in the Convention shall be construed as restricting, in any manner, the application of any provision of the laws of a Contracting State which is designed to prevent the avoidance or evasion of taxes.

2With reference to Article 5 (Permanent establishment),

the Contracting States agree that the term “permanent establishment” fully encompasses the concept of a “fixed base” used in other double tax treaties in the context of independent personal services.

3With reference to Article 7 (Business profits),

the Contracting States agree that:

(a)

nothing in paragraph 3 of the Article shall permit the deduction of an expense which would not be deductible if the permanent establishment were an independent enterprise which incurred the expense; and

(b)

where:

(i)

a resident of a Contracting State is beneficially entitled, whether directly or through one or more interposed trust estates, to a share of the business profits of an enterprise carried on in the other Contracting State by the trustee of a trust estate other than a trust estate which is treated as a company for tax purposes; and

(ii)

in relation to that enterprise, that trustee would, in accordance with the principles of Article 5, have a permanent establishment in that other State,

the enterprise carried on by the trustee shall be deemed to be a business carried on in the other State by that resident through a permanent establishment situated in that other State and that share of business profits shall be attributed to that permanent establishment.

4With reference to Article 9 (Associated enterprises),

the Contracting States note that the expression “dealing wholly independently with one another” is included in paragraph 1 of the Article to conform to Australia’s consistent treaty practice and to address Australia’s concerns that the appropriate benchmark for determining the conditions operating between the associated enterprises should have regard to whether those dealings between the enterprises occurred on a truly independent basis.

5With reference to Article 10 (Dividends),

the Contracting States agree that if the relevant law in either Contracting State at the date of signature of the Convention is varied otherwise than in minor respects so as not to affect its general character, the Contracting States shall consult each other with a view to agreeing to any amendment of paragraph 2 and 3 of the Article as may be appropriate.

6With reference to Article 11 (Interest),

the Contracting States agree that:

(a)

the term “financial institution” shall not include a corporate treasury or a member of a corporate group performing financing services for the group; and

(b)

nothing in the Convention shall have the effect of subjecting to tax in a Contracting State any interest paid by a resident of that State to a resident of the other State where the payer has outside both Contracting States a permanent establishment in connection with which the indebtedness on which the interest is paid was incurred, and that interest is borne by that permanent establishment.

7With reference to Article 12 (Royalties),

the Contracting States agree that:

(a)

the term “royalties” shall not include payments for the use of spectrum licences. The provisions of Article 7 of the Convention shall apply to such payments; and

(b)

nothing in the Convention shall have the effect of subjecting to tax in a Contracting State any royalties paid by a resident of that State to a resident of the other State where the payer has outside both Contracting States a permanent establishment in connection with which the liability to pay the royalties was incurred, and the royalties are borne by the permanent establishment.

8With reference to Article 14 (Income from employment),

the Contracting States agree that:

(a)

income or gains derived by employees in relation to share option schemes shall be treated as “other similar remuneration” for the purposes of Article 14;

(b)

unless the facts otherwise indicate, the period of employment to which the option relates shall be taken to be the period between the grant of the option and the date on which all the conditions for its exercise have been satisfied (the vesting of the option); and

(c)

where a resident of a Contracting State derives such income or gains, and

(i)

the period of employment to which the share option relates is the period between grant and vesting of the option;

(ii)

the employee remains in that employment at the date of alienation or exercise of the option; and

(iii)

that employment has been exercised by the employee in the other Contracting State during all or part of the period between grant and vesting of the option;

the proportion of the income or gain which shall be attributable to employment exercised in the other Contracting State shall be determined in accordance with the ratio of the number of days of employment exercised in that State between grant and vesting of the option to the total number of days of employment exercised between grant and vesting of the option.

9With reference to Article 25 (Non-discrimination),

the Contracting States agree that:

(a)

in relation to paragraph 4 and subparagraph 6(c) of the Article, the reference to capital being owned or controlled “directly or indirectly” includes cases where the capital is held through a chain of companies or other entities; and

(b)

nothing in the Article shall be construed as obliging a Contracting State to allow tax rebates and credits in relation to dividends received by a person who is a resident of the other Contracting State.

10With reference to Article 26 (Mutual agreement procedure) and Article 27 (Exchange of information),

the Contracting States agree that the provisions of the Articles shall have effect from the date of entry into force of the Convention, without regard to the date of the relevant transactions or the taxable or chargeable period to which the matter relates.

11With reference to Article 26 (Mutual agreement procedure),

the Contracting States agree that in relation to paragraph 1 of the Article, the applicable time limits in the domestic laws bearing on the time available for presenting a case to the relevant competent authority shall apply, whether or not those applicable time limits specifically refer to the competent authority process.

12Miscellaneous

the Contracting States agree that the two Governments shall consult each other at intervals of not more than five years regarding the terms, operation and application of the Convention with a view to ensuring that it continues to serve the purposes of avoiding double taxation and preventing fiscal evasion. The first such consultation shall take place no later than the end of the fifth year after the entry into force of the Convention.

If the foregoing proposals are acceptable to the Government of the United Kingdom of Great Britain and Northern Ireland, the Department has the honour to propose that the present Note and the High Commission’s confirmatory Note in reply shall constitute an Agreement on certain matters between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of Australia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital Gains, which shall enter into force at the same time as the entry into force of the Convention.

The Department of Foreign Affairs and Trade avails itself of this opportunity to renew to the British High Commission to Australia the assurances of its highest consideration.

CANBERRA

21st August 2003

No 41/03

The British High Commission to Australia presents its compliments to the Department of Foreign Affairs and Trade and has the honour to refer to the Department’s Note No LGB 03/170 of 21st August 2003 which reads as follows:

“The Department of Foreign Affairs and Trade presents its compliments to the British High Commission to Australia and has the honour to refer to the Convention between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of Australia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital Gains which has been signed today (the “Convention”).

The Department has the honour to make the following proposals on behalf of the Government of Australia:

With reference generally to the application of the Convention (including these Notes),

1

the Contracting States agree that:

(a)

the term “income or gains” includes “profits”;

(b)

the term “laws” includes the full body of law, and is not limited to statutory law;

(c)

the terms “paid or credited” and “payments or credits” shall not include the recording of internal transactions between a permanent establishment and another part of the same enterprise;

(d)

the expression “any provision of the laws of a Contracting State which is designed to prevent the avoidance or evasion of taxes” includes:

(i)

measures designed to address thin capitalisation, dividend stripping and transfer pricing;

(ii)

controlled foreign company, transferor trust and foreign investment fund rules;

(iii)

measures designed to ensure that taxes can be effectively recovered (conservancy measures); and

(e)

nothing in the Convention shall be construed as restricting, in any manner, the application of any provision of the laws of a Contracting State which is designed to prevent the avoidance or evasion of taxes.

With reference to Article 5 (Permanent establishment),

2

the Contracting States agree that the term “permanent establishment” fully encompasses the concept of a “fixed base” used in other double tax treaties in the context of independent personal services.

With reference to Article 7 (Business profits),

3

the Contracting States agree that:

(a)

nothing in paragraph 3 of the Article shall permit the deduction of an expense which would not be deductible if the permanent establishment were an independent enterprise which incurred the expense; and

(b)

where:

(i)

a resident of a Contracting State is beneficially entitled, whether directly or through one or more interposed trust estates, to a share of the business profits of an enterprise carried on in the other Contracting State by the trustee of a trust estate other than a trust estate which is treated as a company for tax purposes; and

(ii)

in relation to that enterprise, that trustee would, in accordance with the principles of Article 5, have a permanent establishment in that other State,

the enterprise carried on by the trustee shall be deemed to be a business carried on in the other State by that resident through a permanent establishment situated in that other State and that share of business profits shall be attributed to that permanent establishment.

With reference to Article 9 (Associated enterprises),

4

the Contracting States note that the expression “dealing wholly independently with one another” is included in paragraph 1 of the Article to conform to Australia’s consistent treaty practice and to address Australia’s concerns that the appropriate benchmark for determining the conditions operating between the associated enterprises should have regard to whether those dealings between the enterprises occurred on a truly independent basis.

With reference to Article 10 (Dividends),

5

the Contracting States agree that if the relevant law in either Contracting State at the date of signature of the Convention is varied otherwise than in minor respects so as not to affect its general character, the Contracting States shall consult each other with a view to agreeing to any amendment of paragraph 2 and 3 of the Article as may be appropriate.

With reference to Article 11 (Interest),

6

the Contracting States agree that:

(a)

the term “financial institution” shall not include a corporate treasury or a member of a corporate group performing financing services for the group; and

(b)

nothing in the Convention shall have the effect of subjecting to tax in a Contracting State any interest paid by a resident of that State to a resident of the other State where the payer has outside both Contracting States a permanent establishment in connection with which the indebtedness on which the interest is paid was incurred, and that interest is borne by that permanent establishment.

With reference to Article 12 (Royalties),

7

the Contracting States agree that:

(a)

the term “royalties” shall not include payments for the use of spectrum licences. The provisions of Article 7 of the Convention shall apply to such payments; and

(b)

nothing in the Convention shall have the effect of subjecting to tax in a Contracting State any royalties paid by a resident of that State to a resident of the other State where the payer has outside both Contracting States a permanent establishment in connection with which the liability to pay the royalties was incurred, and the royalties are borne by the permanent establishment.

With reference to Article 14 (Income from employment),

8

the Contracting States agree that:

(a)

income or gains derived by employees in relation to share option schemes shall be treated as “other similar remuneration” for the purposes of Article 14;

(b)

unless the facts otherwise indicate, the period of employment to which the option relates shall be taken to be the period between the grant of the option and the date on which all the conditions for its exercise have been satisfied (the vesting of the option); and

(c)

where a resident of a Contracting State derives such income or gains, and

(i)

the period of employment to which the share option relates is the period between grant and vesting of the option;

(ii)

the employee remains in that employment at the date of alienation or exercise of the option; and

(iii)

that employment has been exercised by the employee in the other Contracting State during all or part of the period between grant and vesting of the option;

the proportion of the income or gain which shall be attributable to employment exercised in the other Contracting State shall be determined in accordance with the ratio of the number of days of employment exercised in that State between grant and vesting of the option to the total number of days of employment exercised between grant and vesting of the option.

With reference to Article 25 (Non-discrimination),

9

the Contracting States agree that:

(a)

in relation to paragraph 4 and subparagraph 6(c) of the Article, the reference to capital being owned or controlled “directly or indirectly” includes cases where the capital is held through a chain of companies or other entities; and

(b)

nothing in the Article shall be construed as obliging a Contracting State to allow tax rebates and credits in relation to dividends received by a person who is a resident of the other Contracting State.

With reference to Article 26 (Mutual agreement procedure) and Article 27 (Exchange of information),

10

the Contracting States agree that the provisions of the Articles shall have effect from the date of entry into force of the Convention, without regard to the date of the relevant transactions or the taxable or chargeable period to which the matter relates.

With reference to Article 26 (Mutual agreement procedure),

11

the Contracting States agree that in relation to paragraph 1 of the Article, the applicable time limits in the domestic laws bearing on the time available for presenting a case to the relevant competent authority shall apply, whether or not those applicable time limits specifically refer to the competent authority process.

Miscellaneous

12

The Contracting States agree that the two Governments shall consult each other at intervals of not more than five years regarding the terms, operation and application of the Convention with a view to ensuring that it continues to serve the purposes of avoiding double taxation and preventing fiscal evasion. The first such consultation shall take place no later than the end of the fifth year after the entry into force of the Convention.

If the foregoing proposals are acceptable to the Government of the United Kingdom of Great Britain and Northern Ireland, the Department has the honour to propose that the present Note and the High Commission’s confirmatory Note in reply shall constitute an Agreement on certain matters between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of Australia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital Gains, which shall enter into force at the same time as the entry into force of the Convention.

The Department of Foreign Affairs and Trade avails itself of this opportunity to renew to the British High Commission to Australia the assurances of its highest consideration.”

The High Commission has the honour to advise that the Department’s proposals are acceptable to the Government of the United Kingdom of Great Britain and Northern Ireland and that the Department’s Note and this confirmatory Note in reply shall constitute an Agreement on certain matters between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of Australia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital Gains, which shall enter into force at the same time as the entry into force of the Convention.

The British High Commission to Australia avails itself of this opportunity to renew to the Department of Foreign Affairs and Trade the assurances of its highest consideration.

CANBERRA

21st August 2003

Explanatory note

(This note is not part of the Order)

A Convention dealing with the avoidance of double taxation and fiscal evasion between the United Kingdom and Australia (“the Convention”) is set out in Part I of the Schedule to this Order.

Article 1 of the Order provides for its citation.

Article 2 makes a declaration as to the effect and content of the arrangements set out in the Convention contained in Part I of the Schedule to the Order and in the Exchange of Notes constituting an Agreement set out in Part II of that Schedule, and that it is expedient that those arrangements should have effect.

The Convention provides for business profits not arising through a permanent establishment to be taxed only in the country of the taxpayer’s residence. Profits attributable to a permanent establishment may be taxed in the country in which the permanent establishment is situated (Articles 5 and 7).

Income from real property and income or gains from the alienation of real property may be taxed in the country in which the property is situated (Articles 6 and 13).

Profits from international shipping and air transport and income or gains from the alienation of ships or aircraft operated internationally are generally to be taxed only in the residence state of the enterprise (Articles 8 and 13).

The Convention includes rules for determining taxable profits when a company in one country is associated with a company in the other (Article 9).

Subject to certain conditions, dividends are exempted from tax in the country of source if they are beneficially owned by a company resident in the other country that has owned shares representing 80 per cent. or more of the voting power of the company paying the dividends for a 12-month period ending on the date the dividend is declared. Otherwise, the rate of tax imposed in the country of source on dividends beneficially owned by a resident of the other country is not to exceed 5 per cent. of the gross amount of the dividends if the beneficial owner is a company which holds directly at least 10 per cent. of the voting power in the company paying the dividends, and 15 per cent. of the gross amount of the dividends in all other cases (Article 10).

Subject to certain conditions, interest is exempted from tax in the country of source if it is beneficially owned by the government or central bank of the other country, or by a financial institution of the other country which is unrelated to, and dealing wholly independently with, the payer of the interest. In all other cases, the rate of tax imposed in the country of source on interest beneficially owned by a resident of the other country is not to exceed 10 per cent. of the gross amount (Article 11).

The rate of tax imposed in the country of source on royalties beneficially owned by a resident of the other country is not to exceed 5 per cent. of the gross amount (Article 12).

Subject to certain specified exceptions, each country may tax capital gains in accordance with its domestic law (Article 13).

The earnings of individuals resident in one country but working temporarily in the other country are, subject to certain conditions, to be taxed only in the country of the taxpayer’s residence (Article 14). Fringe benefits are to be taxed only in the country which would have the primary taxing right under the Convention if the value of the benefit was paid as ordinary employment income (Article 15). Income derived from the activities of entertainers and sportspersons may be taxed in the country in which those activities are performed (Article 16).

Pensions (including government pensions) and annuities are to be taxed only in the country of residence of the recipient (Article 17).

Government service remuneration is normally to be taxed only by the paying Government (Article 18). There are separate provisions for diplomatic or consular officials (Article 28). Certain payments made to visiting students are generally exempt from tax in the country visited (Article 19).

Other income not specified in the Convention will generally be taxed only by the country of which the beneficial owner is a resident. However, if such income arises in the other country, it may also be taxed in that country (Article 20).

Income or gains derived by a resident of the United Kingdom and taxable in Australia under one or more of Articles 6 to 8 and 10 to 16 and 18 of the Convention, are deemed for the purposes of Australian tax law to arise from sources in Australia (Article 21).

In general, where income continues to be taxable in both countries, credit is to be given by the country of the taxpayer’s residence for tax imposed by the other country (Article 22).

Provision is made to limit the relief to be allowed under the Convention in circumstances where this might otherwise interact with certain provisions of the domestic law in either country to produce an unintended measure of relief (Article 23).

Members of a partnership may be taxed in their country of residence on their individual shares of the income or gains of the partnership, even if the partnership is treated as a taxable unit under the law of the other country (Article 24).

Provision is made to safeguard nationals and enterprises of one country against discriminatory taxation in the other country (Article 25).

Provisions are also made for consultation to resolve difficulties in the application or interpretation of the Convention (Article 26) and for exchanges of information between the taxation authorities of the two countries (Article 27).

The Exchange of Notes comprising Part II of the Schedule clarifies the intended interpretation of certain parts of the Convention.

The Convention will enter into force on the date of the later of the notifications by each country of the completion of its legislative procedures. It will take effect in the United Kingdom in respect of tax withheld at source on 1st July next following the date of entry into force, in respect of corporation tax on 1st April next following that date, and in respect of capital gains tax and income tax generally from 6th April next following that date. It will take effect in Australia in respect of tax withheld at source on 1st July next following the date of entry into force, in respect of fringe benefits tax on 1st April next following that date and in respect of other Australian tax on 1st July next following that date (Article 29). The date of entry into force will, in due course, be published in the London, Edinburgh and Belfast Gazettes.