Double taxation relief for income which, under the Convention, may be taxed by both countries, is required to be provided by the country of which the taxpayer is a resident under the terms of the Convention as follows: in Australia, by allowing a credit for the New Zealand tax against Australian tax payable on income derived by a resident of Australia from sources in New Zealand [Article23, paragraph 1]; in New Zealand, by allowing a credit for the Australian tax against New Zealand tax payable on income derived by a resident of New Zealand from sources in Australia [Article23, paragraph 2]; and. 2.100 The application of various provisions of the Convention (principally Article 7 (Business Profits)) is dependent upon whether a person who is a resident of one country carries on business through a permanent establishment in the other country, and if so, whether income derived by that person is attributable to, or assets of that person are effectively connected with, that permanent establishment. This chapter explains the rules that apply in the 2009 Convention between Australia and NewZealand for the Avoidance of Double Taxation with Respect to Taxes on Income and Fringe Benefits and the Prevention of Fiscal Evasion (the Convention). In the Convention, the definition adopts the OECD Model approach in referring to information concerning technical, industrial, commercial or scientific experience, rather than the more usual reference in Australian treaties to knowledge or experience. 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. [Article 3, paragraph 3]. 5.40 The zero Australian interest withholding tax rate on interest arising in Australia and paid to unrelated New Zealand financial institutions is consistent with Australias current treaty practice, recognising that a 10percent interest withholding tax rate on gross interest derived by financial institutions may be excessive given their cost of funds. a 15percent limitation applies to all other dividends [Article10, subparagraph 2b)]; Source country taxation on interest is limited to 10percent [Article11, paragraph 2]. 2.164 Under the existing New Zealand Agreement, profits of an enterprise of one country from the operation of ships and aircraft could, to the extent that they related to operations that were confined solely to places in the other country, be taxed in the other country. As double taxation does not arise in these cases, the credit form of relief will not be relevant. As such, in this example, the dividend income paid to the partnership will be considered, for purposes of the treaty, to be derived by the Australian resident partners as they are assessable under Australian income tax law. [Article 30, sub-subparagraph 1b)(i)], 2.431 The Convention will first apply to New Zealand taxes as regards any year of income beginning on or after 1 April next following the date on which the Convention enters into force. During negotiations, the delegations noted that: It is understood that the term naturally-occurring in (paragraph 2) refers to both forests and fish.. 5.34 The Convention will address businesses desire to improve the competitiveness of Australias tax treaty network, particularly through the reductions of withholding tax rates.
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