Australia

Details

  • Service: Tax, Corporate Tax
  • Industry: Asia Business
  • Type: Regulatory update
  • Date: 23/07/2014

Rod Henderson

Rod Henderson
Partner, Tax

+61 2 9335 8787

rbhenderson@kpmg.com.au

Jenny Wong

Jenny Wong
Director, Tax

+61 2 9335 8661

jywong@kpmg.com.au

Time to refresh Australia’s tax treaties with Asia 

by Rod Henderson, Partner, China Practice Tax Lead and Jenny Wong, Director, Australian Tax Centre

It is worth asking the question whether Australia’s tax treaties with our Asian trading partners are up to date and fit for purpose? Treasury has requested input into Australia’s Tax Treaty Program, with submissions due by 8 August 2014.

The Australia / China Double Tax Agreement (DTA) was executed in 1988 and should be compared with some of Australia’s newer more investor friendly treaties. For example, China inbound investor are currently subject to 15 percent dividend withholding tax (DWHT) on unfranked dividends whereas under the recent Australia/Japan DTA, Japanese companies can achieve a 0 percent DWHT on unfranked dividends paid from Australian subsidiaries with an 80 percent or more shareholding. There are also opportunities to revisit clauses that are current barriers to Australian outbound investment flows into China eg the article relating to capital gains tax.

 

The DTA with Japan reflects the modern style of Australian tax treaty agreed with the US, the UK and New Zealand (eg 0 percent withholding tax on interest derived by financial institutions).  Listed below are the dates on which the last Australian tax treaties were agreed with key Asian trading partners. The core provisions of most of these treaties are quite old.

 

Australian tax treaty with: 

Year of last treaty or protocol

China 

1988 

India 

1991 (amended in 2011)

Indonesia

1992 

Japan 

2008 

Korea 

1982 

Malaysia 

2002 / 2010 protocol 

Singapore 

1989 

Thailand 

1989 


 

Consideration should also be given to whether Australia should seek to negotiate tax treaties with jurisdictions such as Hong Kong and Myanmar.

 

Treaty negotiations are quite drawn out processes and ultimately depend on the ability to accommodate both country’s objectives.

 

KPMG would be to be happy to discuss the tax treaty renegotiation process with companies and organisations and to assist in making submissions.

 

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