In the case of Jersey, the competent authority is the Treasury and Resources Minister or an authorised representative of the Minister. Explanatory memoranda Index Parliament of Australia In the existing New Zealand treaty, the withholding tax rates for interest, royalty payments, and dividends are limited to 10, 10 and 15 per cent of the gross payments, respectively. Accordingly, the rate limitation of 10 per cent and the exemption for financial institutions (subparagraphb) of paragraph 3 of this Article) do not apply to such interest in the country in which the interest is sourced. If New Zealand also treats the third State legal entity as a company for its tax purposes, paragraph 2 of Article 1 (Persons Covered) would not apply but the outcome would still be the same; that is, no benefits under the Convention. an agricultural, pastoral or forestry property. This means that the Australian Government, the state governments and local councils of Australia will be residents for the purpose of the Convention. Similarly, dividends paid by a NewZealand company to an Australian company that is itself owned by one or more companies entitled to equivalent benefits under another tax treaty between the country of which that company (or those companies) were a resident and NewZealand, would also be exempt. The competent authority of the source country is required to consult with the other countrys competent authority if it intends to deny the benefits of this Article under paragraph 7. Tax treaties provide increased certainty and reduce complexity and compliance costs for business. no source country tax is payable on intercorporate dividends where the beneficial owner of those dividends is a company that holds, directly or indirectly, at least 80per cent of the voting power, subject to certain conditions [Article10, paragraph 3]; no source country tax is payable on dividends where the beneficial owner of those dividends holds directly no more than 10percent of the voting power of the company paying the dividend, and the beneficial owner is a Contracting State, a political subdivision or a local authority thereof [Article10, paragraph 4]; a 5percent limitation applies to intercorporate dividends where the beneficial owner of those dividends is a company that holds directly at least 10 per cent of the voting power of the company paying the dividends [Article10, subparagraph 2a)]; and. [Article II], 3.23 New Article 26 will apply to taxes imposed at source on income derived on or after 1 January 2010, and to income tax imposed in respect of taxable periods beginning on or after that date. For withholding taxes, on income, profits or gains derived: for any income year beginning on or after 1April next following the date on which the Convention enters into force. The impact of the Jersey Agreement on the forward estimates is estimated to be negligible. The zero rate will also apply to interest derived by governments, their political subdivisions and local authorities (including government investment funds). 2.388 It is intended that the Article extend to any identical or substantially similar taxes which are subsequently imposed by either country in addition to, or in place of, these taxes. The texts of most US income tax treaties in force are available here. 2.275 There may be circumstances in both countries where a resident of one country working in the other country would be liable to tax in both countries on the fringe benefit. 5.101 The negotiation of the Jersey Agreement was not conducted in the public domain and, consequently, no public consultation was undertaken. 3.7 Article 26 authorises and limits the exchange of information by the two competent authorities to information foreseeably relevant to the administration or enforcement of the relevant taxes. substantial equipment is being used by, for or under contract with the enterprise. 2.336 Non-resident individuals do not have to be granted the personal allowances, reliefs or reductions available to residents of the tax treaty countries. 2.72 This Article sets out the basis upon which the residential status of a person is to be determined for the purposes of the Convention. New Zealand may also tax but, under Article 23 (Elimination of Double Taxation), would be obliged to give credit for the Australian tax paid on the fringe benefit if it was ordinary employment income. Osaka Co is listed on a stock exchange that is a recognised stock exchange within the meaning of Article 23 of the 2008 AustraliaJapan Convention. The text of the current US Model Income Tax Convention and accompanying preamble are available here. Paragraph 4 complements paragraph 1 of this Article and is designed to cover arrangements involving the effective alienation of incorporated real property, or like arrangements. 2.376 As discussed in the OECD Model Commentary, it is not intended that the arbitration mechanism be an alternative to the mutual agreement procedure. Ships, boats and aircraft are excluded from the definition of real property, therefore this Article does not cover income from their use. Persons who are residents of Australia and/or NewZealand and who derive income, profits, gains or fringe benefits from Australia or NewZealand will be affected by this Bill. [Article 15, subparagraph 2a)]. 5.3 Double taxation can therefore arise when the country of residence and the country where the income is sourced both seek to tax the same income. [Article 10, paragraph 5]. As well as revising the allocation of taxing rights between the two countries and the withholding tax rate limits prescribed in the treaty, Australia is able to achieve improved certainty for taxpayers by restricting the time in which transfer pricing adjustments may be made and allowing taxpayers to have issues of fact resolved by arbitration in cases where they cannot be resolved by the Australian and New Zealand tax authorities within two years. 5.10 The detriment to business from not modernising the existing New Zealand tax treaty and Protocol is difficult to assess and quantify. This means, for example, that information concerning Australian indirect taxes (for example, the GST) may be requested and obtained from New Zealand. FBTAA 1986 (other than section 67 which is an antiavoidance rule). [Article 11, paragraph 1], 4.45 In the event of either country terminating the Jersey Agreement, it would cease to be effective in Australia in the year of income beginning on or after 1 July in the calendar year next following that in which the notice of termination is given. 2.415 However, this does not prevent Australia from applying administrative measures to collect a New Zealand revenue claim, even though invoked solely to provide assistance in the collection of NewZealand taxes. Entities falling under this description in Australia and NewZealand include certain partnerships and trusts. Accordingly, that person remains liable to tax in Australia as a resident, insofar as the Convention allows. 5.95 The Jersey Agreement is likely to have an impact on: recipients of Australian source pensions or retirement annuities who reside in Jersey; Australian individuals providing services to an Australian government (or political subdivision or local authority) in Jersey; Australian students and business apprentices temporarily residing in Jersey for education or training purposes; 5.96 The impact of the Jersey Agreement on the forward estimates is estimated to be negligible. Similarly, paragraph 1 of Article 26 (Exchange of Information) and paragraph 2 of Article 27 (Assistance in the Collection of Taxes) provide that all taxes imposed under NewZealands tax laws are covered by those Articles. Staff from the ATO, clients and tax professionals will need to be made aware of the entry into force and changes from the previous treaty. [Article 12, paragraphs 1 and 2]. As discussed in relation to dividends in paragraph 2.184, this ensures that interest derived by Australias Future Fund (and other Funds) from sources in NewZealand is exempt from NewZealand tax. 2.380 Paragraph 6 provides that unless a person directly affected by the case rejects the arbitration decision on the issues, the decision is binding on both Australia and New Zealand. Where the short-term visit exemption doesnt apply, Xavier, a New Zealand resident employee of a New Zealand company is sent to work in Australia. [Article 4, paragraph 4]. Accordingly, that income will be treated for the purposes of the Convention as income derived by a resident of that country, even if the source country would treat the trust as fiscally transparent. In the course of negotiations, the two delegations noted that: The term pensions and other similar periodic remuneration is understood to include superannuation annuities, life annuities, periodic workers compensation and periodic accident compensation but would not include financial products in the form of annuities as these are more appropriately covered under the Interest Article., 2.284 The application of this Article extends to pensions and annuity payments made to dependants, for example, a widow, widower or children of the person in respect of whom the pension or annuity entitlement accrued where, upon that persons death, such entitlement has passed to that persons dependants. Business profits from agriculture, forestry and fishing are dealt with in Article 7 (Business Profits). 5.59 While the existing New Zealand treaty already has a services provision in that it permits a country to tax professional services in the country where they are performed where the individual is present for a period of 183 days in any twelve months (in the Independent Personal Services Article), it does not provide an exemption for short-term stays of five days or less. As Jasons salary is borne by Tasman Banks permanent establishment in Wellington, and the other conditions of paragraph 2 are met, the income will be taxed only in New Zealand. Australia is required to provide double tax relief for New Zealand tax imposed on the part of the interest income allocated to the Australian resident unitholders. However, this Article does not allocate sole taxing rights to New Zealand in that situation. assessable income but in respect of which there is a tax offset that results in the rate of income tax applying to that amount equal to 0percent. 2.359 This Article provides for consultation between the competent authorities of the two countries with a view to reaching a solution in cases where a person is able to demonstrate actual or potential imposition of taxation contrary to the provisions of the Convention. [Article 10, subparagraph (b)], 4.44 The Jersey Agreement is to continue in effect indefinitely. 2.260 In the event that the operation of this Article should result in an item of income or gain being subjected to tax in both States, the country of which the person deriving the income or gain is a resident (as determined in accordance with Article 4 (Resident)) would be obliged by Article 23 (Elimination of Double Taxation) to provide double tax relief for the tax imposed by the other country. relief will be restricted to the gross amount of royalties which would be expected to be paid on an arms length dealing between independent parties. Dividends paid to non-residents are subject to withholding tax and are not assessable income. 2.77 Notwithstanding that the Convention deems certain dual residents to be a resident only of one country for treaty purposes, a dual resident remains a resident for the purposes of Australian domestic tax law. 2.236 The royalties definition includes payments made for the use of, or the right to use, motion picture films. In determining whether the six-month time threshold has been met, the time spent undertaking those activities by each of the enterprises would be aggregated. In the course of negotiations, the two delegations noted: The delegations agreed that a permanent establishment will exist where building sites or projects last for more than six months regardless of whether or not the paragraph 1 test has been satisfied. Accordingly, acompany that is incorporated in Australia would be a national of Australia while a company that is incorporated under a law of NewZealand would be a national of New Zealand for the purposes ofthis paragraph. 5.13 New Zealand has been a major trading partner for many years. [Article 24, paragraph 7]. Where this election is made the relevant assets of the individual are deemed to be taxable Australian property and accordingly are subject to tax in Australia when the individual disposes of the asset or again becomes an Australian resident. Given the extent of Australia and New Zealands trade and investment relationship it is important that these rate limits remain as up-to-date as possible with current treaty practice. In such cases, the 10percent rate limit will apply. 2.16 In the first situation above, treaty residents who participate in the entity will be eligible for treaty benefits in respect of items of income (including profits or gains) derived from the source country through that entity, to the extent that the other country treats the income as flowedthrough to those participants. The existing treaty maintains the domestic tax law treatment where the taxation treatment of the income, profit or gain from the disposal of property is not subject to specific rules in the treaty. The evidence from international consideration (for example, by 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. It will modernise the tax relationship between the two countries and will serve to facilitate trade and investment between Australia and NewZealand. The modifications made by the MLI are effective in [Article11, paragraphs 1 and 2]. Updates all Articles, having regard to Australian, NewZealand and the Organisation for Economic Cooperation and Development (OECD) tax treaty developments since the existing New Zealand Agreement was entered into. New Zealand is the third largest market for Australian investment abroad, with Australia the largest investor in New Zealand. The Commentary cites the following criteria as relevant for the purpose of making the distinction: Contracts for the supply of know-how concern information of the kind described in paragraph 11 of the Commentary that already exists, or concern the supply of that type of information after its development or creation and include specific provisions concerning the confidentiality of that information. Pensions (including government pensions) may be taxed only in the country of residence of the recipient. 2.110 Where an enterprise performs services through an individual who is present in a country for a period exceeding 183 days in any 12month period, and more than 50percent of the gross revenues attributable to active business activities of the enterprise during this period are derived from those services, it will be deemed to have in that country a permanent establishment through which those activities are performed (unless the activities are of a type described in paragraph 7 of this Article and are of a preparatory or auxiliary nature). Rules in the Convention will protect nationals and businesses from tax discrimination in the other country and gives them private rights of appeal. Given the bilateral flows between Australia and NewZealand, the current features of the Australian and New Zealand tax systems, and the impact of the changes in the arrangements under the Convention, the revenue costs are expected to be broadly offset by revenue gains. Provides for access to arbitration if mutual agreement on issues of fact is not reached within two years. In the case of Australia, effect will be given to the double tax relief obligations arising under the Convention by application of the general foreign income tax offset provisions of Australias domestic law, or the relevant exemption provisions of that law where applicable. Treaty benefits in respect of such items of income (including profits or gains) will be granted where: the beneficiaries, members or participants are residents of the other country; and.

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