International Tax Agreements Amendment Act (No. 1) 2007 (Cth)

International Tax Agreements Amendment Act (No. 1) 2007 No. 136, 2007 An Act to amend the International Tax Agreements Act 1953, and for related purposes Contents 1 Short title 2 Commencement 3 Schedule(s) Schedule 1—The 2006 French convention International Tax Agreements Act 1953 Schedule 2—The 2006 Norwegian convention International Tax Agreements Act 1953 International Tax Agreements Amendment Act (No. 1) 2007 No. 136, 2007 An Act to amend the International Tax Agreements Act 1953, and for related purposes [Assented to 3 September 2007] The Parliament of Australia enacts: 1 Short title This Act may be cited as the International Tax Agreements Amendment Act (No. 1) 2007. 2 Commencement This Act commences on the day on which it receives the Royal Assent. 3 Schedule(s) Each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms. Schedule 1—The 2006 French convention International Tax Agreements Act 1953 1 Subsection 3(1) (after paragraph (bb) of the definition of agreement) Insert: (bc) the 1969 French airline profits agreement; (bd) the 1976 French agreement; (be) the 1976 French agreement as amended by the 1989 French protocol; 2 Subsection 3(1) Insert: the 1969 French airline profits agreement means the Agreement between the Government of Australia and the Government of the French Republic for the avoidance of double taxation of income derived from international air transport that was signed at Canberra on 27 March 1969. 3 Subsection 3(1) Insert: the 1976 French agreement means the Agreement between the Government of Australia and the Government of the French Republic for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income that was signed at Canberra on 13 April 1976. 4 Subsection 3(1) Insert: the 1989 French protocol means the Protocol, signed at Paris on 19 June 1989, between the Government of Australia and the Government of the French Republic amending the 1976 French agreement. 5 Subsection 3(1) Insert: the 2006 French convention means the Convention between the Government of Australia and the Government of the French Republic for the avoidance of double taxation with respect to taxes on income and the prevention of fiscal evasion 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 11. 6 Subsection 3(1) (definition of the French agreement) Repeal the definition. 7 Subsection 3(1) (definition of the French airline profits agreement) Repeal the definition. 8 Subsection 3(1) (definition of the French protocol) Repeal the definition. 9 Subsection 3(7) Omit "French agreement", substitute "1976 French agreement, the 2006 French convention". 10 Sections 9, 9A and 9B Repeal the sections, substitute: 9 The 2006 French convention Subject to this Act, on and after the date of entry into force of a provision of the 2006 French convention, the provision has the force of law according to its tenor. 9A Previous French agreements etc. The provisions of: (a) the 1969 French airline profits agreement; and (b) the 1976 French agreement; and (c) the 1976 French agreement as amended by the 1989 French protocol; so far as those provisions affect Australian tax, continue to have the force of law for tax in respect of income in relation to which the agreements remain effective. Note 1: Paragraph 3 of Article 30 of the 2006 French convention preserves the operation of Article 19 of the 1976 French agreement (which provides that the income received in respect of teaching or conducting research by visiting professors and teachers is taxed only in their home country). This applies to individuals who are entitled to the benefit at the time when the 2006 French convention enters into force. The benefit is preserved until the individual concerned would have ceased to be entitled to it under the 1976 French agreement. Note 2: Article 19 of the 1976 French agreement is affected by Article 8 of the 1989 French protocol. 11 Schedule 7 Repeal the Schedule. 12 Schedules 11 and 11A Repeal the Schedules, substitute: Schedule 11—2006 French convention Note: See section 3. CONVENTION BETWEEN THE GOVERNMENT OF AUSTRALIA AND THE GOVERNMENT OF THE FRENCH REPUBLIC FOR THE AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME AND THE PREVENTION OF FISCAL EVASION The Government of Australia and the Government of the French Republic, Desiring to conclude a Convention for the avoidance of double taxation with respect to taxes on income and the prevention of fiscal evasion, Have agreed as follows: Article 1 PERSONS COVERED This Convention shall apply to persons who are residents of one or both of the Contracting States. Article 2 TAXES COVERED 1. The existing taxes to which this Convention shall apply are : a) in the case of Australia: the income tax, and the resource rent tax in respect of offshore projects relating to exploration for or exploitation of petroleum resources, imposed under the federal law of Australia; b) in the case of France: (i) the income tax ("l'impôt sur le revenu"); (ii) the corporation tax ("l'impôt sur les sociétés"); (iii) the additional taxes on corporations ("les contributions sur l'impôt sur les sociétés"); and (iv) widespread social security contributions ("contributions sociales généralisées") and contributions for the reimbursment of the social debt ("contributions pour le remboursement de la dette sociale"), including any withholding tax with respect to the aforesaid taxes. 2. This Convention shall also apply to any identical or substantially similar taxes which are subsequently imposed by a Contracting State in addition to, or in place of the existing taxes to which this Convention applies. The competent authorities of the Contracting States shall notify each other of significant changes which have been made in their law relating to taxes to which this Convention applies. 3. Notwithstanding paragraphs 1 and 2, the taxes to which Articles 25 and 26 shall apply are: a) in the case of Australia, taxes of every kind and description imposed under the federal taxes laws administered by the Commissioner of Taxation ; and b) in the case of France, taxes of every kind and description imposed on behalf of France or its political subdivisions or local authorities Article 3 DEFINITIONS 1. For the purposes of this Convention, unless the context otherwise requires: a) the term "Australia", when used in a geographical sense, excludes all external territories other than: (i) the Territory of Norfolk Island; (ii) the Territory of Christmas Island; (iii) the Territory of Cocos (Keeling) Islands; (iv) the Territory of Ashmore and Cartier Islands; (v) the Territory of Heard Island and McDonald Islands; and (vi) the Coral Sea Islands Territory, and includes any area adjacent to the territorial limits of Australia (including the Territories specified in this subparagraph) in respect of which there is for the time being in force, consistently with international law, a law of Australia dealing with the exploration for or exploitation of any of the natural resources of the seabed and subsoil of the continental shelf; b) the term "France" means the European and Overseas Departments of the French Republic including the territorial sea, and any area outside the territorial sea within which, in accordance with international law, the French Republic has sovereign rights for the purpose of exploring and exploiting the natural resources of the seabed and its subsoil and the superjacent waters; c) the terms "Contracting State", "a Contracting State" and "the other Contracting State" mean Australia or France, as the context requires; d) the term "person" includes an individual, a company and any other body of persons; e) the term "company" means any body corporate or any entity which is treated as a company or body corporate for tax purposes; f) the term "enterprise" applies to the carrying on of any business; g) the terms "enterprise of a Contracting State" and "enterprise of the other Contracting State" mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State; h) the term "Australian tax" means tax imposed by Australia, being tax to which this Convention applies by virtue of paragraphs 1 and 2 of Article 2; i) the term "French tax" means tax imposed by France, being tax to which this Convention applies by virtue of paragraphs 1 and 2 of Article 2; j) the term "competent authority" means in the case of Australia, the Commissioner of Taxation or an authorised representative of the Commissioner and in the case of France, the minister in charge of the budget or an authorised representative of the minister; k) the term "business" includes the performance of professional services and of other activities of an independent character; l) the term "international traffic" means any transport by a ship or aircraft operated by an enterprise of a Contracting State, except when the ship or aircraft is operated solely from a place or between places in the other Contracting State. 2. In this Convention, the terms "Australian tax" and "French tax" do not include any penalty or interest imposed under the law of either Contracting State relating to the taxes referred to in Article 2. 3. As regards the application of the 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 law of that State concerning the taxes to which the Convention applies, any meaning under the applicable tax law of that State prevailing over a meaning given to the term under other law of that State. Article 4 RESIDENCE 1. For the purposes of this Convention, the term "resident of a Contracting State" means: a) in the case of Australia, a person who is a resident of Australia for the purposes of Australian tax; and b) in the case of France, a person who is domiciled in France for the purposes of French tax. A Contracting State or a political subdivision or statutory body or a local authority thereof is also a resident of that State for the purposes of this Convention. 2. A person is not a resident of a Contracting State for the purposes of this Convention if the person is liable to tax in that State in respect only of income from sources in that State. 3. Where by reason of the preceding provisions of this Article a person, being an individual, is a resident of both Contracting States, the person's status shall be determined as follows: a) the individual shall be deemed to be a resident only of the State in which a permanent home is available to that individual; but if a permanent home is available in both States, or in neither of them, that individual shall be deemed to be a resident only of the State with which the individual's personal and economic relations are closer (centre of vital interests); b) if the State in which the centre of vital interests is situated cannot be determined, the individual shall be deemed to be a resident only of the State of which that individual is a national or citizen. 4. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, it shall be deemed to be a resident solely of the Contracting State in which its place of effective management is situated. 5. The term "resident of a Contracting State" shall include, where that State is France, any partnership or group of persons which has its place of effective management in France and all partners, shareholders or other members of which are personally liable to tax therein in respect of their part of the profits of those partnerships or groups of persons pursuant to French domestic laws. Article 5 PERMANENT ESTABLISHMENT 1. For the purposes of this Convention, the term "permanent establishment" means a fixed place of business through which the business of the enterprise is wholly or partly carried on. 2. The term "permanent establishment" shall include especially: a) a place of management; b) a branch; c) an office; d) a factory; e) a workshop; f) a mine, quarry or other place of extraction of natural resources; and g) an agricultural, pastoral or forestry property. 3. An enterprise shall not be deemed to have a permanent establishment merely by reason of: a) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise; b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery; c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise; d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or for collecting information, for the enterprise; e) the maintenance of a fixed place of business solely for the purpose of activities which have a preparatory or auxiliary character for the enterprise, such as advertising or scientific research. 4. An enterprise shall be deemed to have a permanent establishment in a Contracting State and to carry on business through that permanent establishment if: a) it has a building site or construction, installation or assembly project in that State which exists for more than twelve months; or b) it carries on supervisory activities in that State for more than six months in connection with a building site, or a construction, installation or assembly project which is being undertaken in that State; or c) it maintains substantial equipment for rental or other purposes within that State (excluding equipment let under a hire‑purchase agreement) for more than six months. 5. a) The duration of activities under subparagraphs a) and b) of paragraph 4 will be determined by aggregating the periods during which activities are carried on in a Contracting State by associated enterprises provided that the activities of the enterprise in that State are connected with the activities carried on in that State by its associate. b) The period during which two or more associated enterprises are carrying on concurrent activities will be counted only once for the purpose of determining the duration of activities. c) For the purposes of this Article, an enterprise shall be deemed to be associated with another enterprise if: (i) one is controlled directly or indirectly by the other ; or (ii) both are controlled directly or indirectly by the same person or persons. 6. A person acting in a Contracting State on behalf of an enterprise of the other Contracting State ‑ other than an agent of an independent status to whom paragraph 7 applies ‑ shall be deemed to be a permanent establishment of that enterprise in the first‑mentioned State if: a) the person has, and habitually exercises in that State, an authority to conclude contracts on behalf of the enterprise, unless the person's activities are limited to the purchase of goods or merchandise for the enterprise; or b) in so acting the person manufactures or processes in that State for the enterprise goods or merchandise belonging to the enterprise. 7. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status, where that person is acting in the ordinary course of the person's business as such a broker or agent. 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. The principles set forth in the preceding paragraphs of this Article shall be applied in determining for the purposes of paragraph 7 of Article 11 and paragraph 5 of Article 12 whether there is a permanent establishment outside both Contracting States, and whether an enterprise, not being an enterprise of a Contracting State, has a permanent establishment in a Contracting State. Article 6 INCOME FROM REAL PROPERTY 1. Income from real property, including income from an agricultural, pastoral or forestry property, may be taxed in the Contracting State in which that property is situated. 2. For the purposes of this Article, the term "real property": a) in the case of Australia, has the meaning which it has under the law of Australia, and shall also include: (i) a lease of land and any other interest in or over land, whether improved or not including a right to explore for mineral, oil or gas deposits or other natural resources, and a right to mine those deposits or resources; and (ii) a right to receive variable or fixed payments either as consideration for or in respect of the exploitation of, or the right to explore for or exploit, mineral, oil or gas deposits, quarries or other places of extraction or exploitation of natural resources; and b) in the case of France, means such property which, according to the law of France, is immovable property and shall in any case include: (i) property accessory to immovable property; (ii) livestock and equipment used in agriculture and forestry; (iii) rights to which the provisions of the general law respecting landed property apply; and (iv) usufruct of immovable property and rights to variable or fixed payments as consideration for the working of or the right to work mineral deposits, mineral sources and other natural resources. Ships and aircraft shall not be regarded as real property. 3. The provisions of paragraph 1 shall apply to income derived from the direct use, letting or use in any other form of real property. 4. Notwithstanding the provisions of Article 7, where shares or other rights in a company, trust or comparable institution entitle a person to the enjoyment of real property of that company, trust or comparable institution, income derived from the direct use, letting or use in any other form of that right of enjoyment may be taxed in the Contracting State in which the real property is situated. 5. The provisions of paragraphs 1, 3 and 7 shall also apply to income from real property of an enterprise. 6. The provisions of paragraph 4 shall also apply to income of an enterprise derived from the direct use, letting or use in any other form of a right of enjoyment referred to in that paragraph. 7. Any interest or right referred to in paragraph 2 or 4 shall be regarded as situated where the buildings, land, mineral, oil or gas deposits, quarries, mineral sources or natural resources, as the case may be, are situated or where the exploration may take place. Article 7 BUSINESS PROFITS 1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment. 2. Where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment. 3. In the determination of the profits of a permanent establishment there shall be allowed as deductions expenses of the enterprise, including executive and general administrative expenses, which are deductible according to the law of the State in which the permanent establishment is situated whether incurred in that State or elsewhere. 4. If the information available to the competent authority of a Contracting State is inadequate to determine the profits to be attributed to the permanent establishment of an enterprise, the competent authority may apply to that enterprise for that purpose the provisions of the taxation law of that State, provided that that law shall be applied, so far as the information available to the competent authority permits, in accordance with the principles of this Article. 5. 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. 6. Where profits include items of income which are dealt with separately in other Articles of this Convention, then the provisions of those Articles shall not be affected by the provisions of this Article. 7. Notwithstanding the preceding provisions of this Article, profits of an enterprise of a Contracting State from carrying on a business of any form of insurance other than life insurance may be taxed in the other Contracting State in accordance with the law of that other State relating specifically to the taxation of any person who carries on such a business, provided that if the law in force in either Contracting State at the date of signature of this Convention relating to the taxation of such a person is varied (otherwise than in minor respects so as not to affect its general character), the Contracting States shall consult with each other with a view to agreeing to such amendment of this paragraph as may be necessary. 8. Where: a) 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 b) 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. Article 8 SHIPs and aircraft 1. Profits of an enterprise of a Contracting State derived from the operation of ships or aircraft in international traffic shall be taxable only in that State. 2. Notwithstanding the provisions of paragraph 1, profits of an enterprise of a Contracting State derived from the operation of ships or aircraft may be taxed in the other Contracting State to the extent that they are profits derived directly or indirectly from ship or aircraft operations confined solely to places in that other State. 3. The amount which shall be charged to tax in a Contracting State under paragraph 2 in respect of transport operations of ships shall not exceed 5 per cent of the amount paid or payable (net of rebates) in respect of carriage. 4. The provisions of paragraph 3 shall not apply to profits from the operation of ships, where the profits are attributable to a permanent establishment of the enterprise situated in the other Contracting State. 5. The profits to which the provisions of paragraphs 1 and 2 apply include profits from the operation of ships or aircraft derived through participation in a pool service or other profit sharing arrangement. 6. For the purposes of this Article, profits derived from the carriage by ships or aircraft of passengers, livestock, mail, goods or merchandise which are shipped in a Contracting State and are discharged at a place in that State (without having been discharged outside that State) shall be treated as profits from ship or aircraft operations confined solely to places in that State. Article 9 ASSOCIATED ENTERPRISES 1. Where: a) an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State; or b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State, and in either case conditions exist between the two enterprises in their commercial or financial relations which differ from those which may be expected between independent enterprises dealing wholly independently with one another, then any profits which might, but for those conditions, be expected to accrue to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly. 2. If the information available to the competent authority of a Contracting State is inadequate to determine the profits to be attributed to an enterprise, the competent authority may apply to that enterprise for that purpose the provisions of the taxation law of that State, provided that that law shall be applied, so far as the information available to the competent authority permits, in accordance with the principles of this Article. 3. Where, according to the provisions of paragraphs 1 and 2, profits are included by a Contracting State in the profits of an enterprise, the other Contracting State shall, on a claim being made by the other enterprise concerned, consistently with its law consider the inclusion so made and the provision of relief to that other enterprise in relation to the taxation of profits which the other State determines to be profits which, but for the particular conditions referred to in paragraphs 1 and 2, might have been expected to accrue to the first‑mentioned enterprise. Article 10 DIVIDENDS 1. Dividends paid by a company which is a resident of a Contracting State for the purposes of its tax, being dividends beneficially owned by a resident of the other Contracting State may be taxed in that other State. 2. However, those dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident for the purposes of its tax, and according to the law of that State, but the tax so charged shall not exceed: a) 0 per cent where those dividends are paid out of profits that have borne the normal rate of company tax and those dividends are paid to a company which, in the case of Australia, holds directly at least 10 per cent of the voting power of the company paying the dividends, or in the case of France, holds directly at least 10 per cent of the capital of the company paying the dividends; and b) 5 per cent of the gross amount of other dividends, if the beneficial owner of those dividends is a company which, in the case of Australia, holds directly at least 10 per cent of the voting power of the company paying the dividends, or in the case of France, holds directly at least 10 per cent of the capital of the company paying the dividends; and c) 15 per cent of the gross amount of the dividends in all other cases, provided that if the relevant law in either Contracting State at the date of signature of this 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 this paragraph that may be appropriate. 3. The term "dividends" as used in this Article means income from shares or other rights, not being debt‑claims, participating in profits, as well as other amounts which are subjected to the same taxation treatment as a distribution or dividend by the law of the State of which the company making the distribution is a resident for the purposes of its tax. 4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated in that other State, and the holding in respect of which the dividends are paid is effectively connected with that permanent establishment. In such case, the provisions of Article 7 shall apply. 5. Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company—being dividends beneficially owned by a person who is not a resident of the other Contracting State—except insofar as the holding in respect of which such dividends are paid is effectively connected with a permanent establishment situated in that other State, even if the dividends paid consist wholly or partly of profits or income arising in such other State. This paragraph shall not apply in relation to dividends paid by any company which is a resident of Australia for the purposes of Australian tax and which is also a resident of France for the purposes of French tax. Article 11 INTEREST 1. Interest arising in a Contracting State and beneficially owned by a resident of the other Contracting State may be taxed in that other State. 2. However, that interest may also be taxed in the Contracting State in which it arises, and according to the law of that State, but the tax so charged shall not exceed 10 per cent of the gross amount of the interest. 3. Notwithstanding paragraph 2, interest arising in a Contracting State and beneficially owned by a resident of the other Contracting State may not be taxed in the first‑mentioned State if: a) the interest is derived from the investment of official reserve assets by the government of a Contracting State or a political subdivision or local authority thereof, its monetary institutions or a bank performing central banking functions in that State; or b) the interest is derived by a financial institution which is unrelated to and dealing wholly independently with the payer. For the purposes of this Article, the term "financial institution" means a bank or other enterprise substantially deriving its profits by raising debt finance in the financial markets or by taking deposits at interest and using those funds in carrying on a business of providing finance. 4. Notwithstanding paragraph 3, interest referred to in subparagraph b) of that paragraph may be taxed in the State in which it arises at a rate not exceeding 10 per cent of the gross amount of the interest if the interest is paid as part of an arrangement involving back‑to‑back loans or other arrangement that is economically equivalent and intended to have a similar effect to back‑to‑back loans. 5. The term "interest" in this Article includes interest from government securities or from bonds or debentures, whether or not secured by mortgage and whether or not carrying a right to participate in profits, interest from any other form of indebtedness, as well as income which is subjected to the same taxation treatment as income from money lent by the law of the Contracting State in which the income arises. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article. 6. The provisions of paragraphs 1 and 2, subparagraph b) of paragraph 3 and paragraph 4 of this Article shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated in that other State, and the indebtedness in respect of which the interest is paid is effectively connected with that permanent establishment. In such case the provisions of Article 7 shall apply. 7. Interest shall be deemed to arise in a Contracting State when the payer is a resident of that State for the purposes of its tax. Where, however,