International Tax Agreements Act 1953 Act No. 82 of 1953 as amended This compilation was prepared on 16 October 2009 taking into account amendments up to Act No. 105 of 2009 Volume 2 includes: Schedules 25-49 Note 1 Table of Acts Act Notes Table of Amendments Table A The text of any of those amendments not in force on that date is appended in the Notes section The operation of amendments that have been incorporated may be affected by application provisions that are set out in the Notes section Contents Schedule 25-2006 Finnish agreement 1 Schedule 26-Agreement between the Government of Australia and the Government of the People's Republic of China for the Avoidance of Double Taxation of Income and Revenues derived by Air Transport Enterprises from International Air Transport 38 Schedule 27-Agreement between Australia and the Republic of Austria for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income 41 Schedule 28-Agreement between the Government of Australia and the Government of the People's Republic of China for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income 63 Schedule 29-Agreement between Australia and the Independent State of Papua New Guinea for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income 87 Schedule 30-Agreement between Australia and the Kingdom of Thailand for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income 111 Schedule 31-Agreement between Australia and the Democratic Socialist Republic of Sri Lanka for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income 136 Schedule 32-Agreement between Australia and Fiji for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income 160 Schedule 33-Agreement between Australia and the Republic of Hungary for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income 184 Schedule 34-Agreement between Australia and the Republic of Kiribati for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income 206 Schedule 35-Agreement between the Government of Australia and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income 229 Schedule 36-Agreement between Australia and the Republic of Poland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income 255 Schedule 37-Agreement between the Government of Australia and the Government of the Republic of Indonesia for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income 276 Schedule 38-Agreement between the Government of Australia and the Government of the Socialist Republic of Vietnam for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income 300 Schedule 38A-Exchange of Notes between the Government of Australia and the Government of the Socialist Republic of Vietnam amending the Agreement between the Government of Australia and the Government of the Socialist Republic of Vietnam for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income 322 Schedule 39-Agreement between Australia and the Kingdom of Spain for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income 328 Schedule 40-Agreement between Australia and the Czech Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income 351 Schedule 41-Taipei agreement 372 Schedule 42-South African agreement 395 Schedule 42A-South African protocol 423 Schedule 43-Slovak agreement 444 Schedule 44-Argentine agreement 468 Schedule 45-Romanian agreement 499 Schedule 46-Russian agreement 525 Schedule 47-Mexican agreement and protocol 553 Schedule 48-The British Virgin Islands agreement 586 Schedule 49-The Isle of Man agreement 597 Notes 611 Schedule 25-2006 Finnish agreement Note: See section 3. AGREEMENT BETWEEN THE GOVERNMENT OF AUSTRALIA AND THE GOVERNMENT OF FINLAND 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 Finland, Desiring to conclude an Agreement for the avoidance of double taxation with respect to taxes on income and the prevention of fiscal evasion, Have agreed as follows: CHAPTER I SCOPE OF THE AGREEMENT ARTICLE 1 Persons Covered This Agreement 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 Agreement shall apply are: a) in the case of Australia: the income tax, including 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 Finland: (i) the state income taxes; (ii) the corporate income tax; (iii) the communal tax; (iv) the church tax; (v) the tax withheld at source from interest; and (vi) the tax withheld at source from non-residents' income. 2. The Agreement shall apply also to any identical or substantially similar taxes that are imposed under the federal law of Australia or the law of Finland after the date of signature of the Agreement in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify each other of any significant changes that have been made in the law of their respective States relating to the taxes to which the Agreement applies within a reasonable period of time after those changes. 3. For the purposes of Article 23, the taxes to which this Agreement shall apply are taxes of every kind and description imposed on behalf of the Contracting States, or their political subdivisions or local authorities. 4. For the purposes of Articles 25 and 26, the taxes to which this Agreement shall apply are: a) in the case of Australia, taxes of every kind and description imposed under the federal tax laws administered by the Commissioner of Taxation; and b) in the case of Finland, taxes of every kind and description. CHAPTER II DEFINITIONS ARTICLE 3 General Definitions 1. For the purposes of this Agreement, 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 "Finland" means the Republic of Finland and, when used in a geographical sense, means the territory of the Republic of Finland, and any area adjacent to the territorial waters of the Republic of Finland within which, under the laws of Finland and in accordance with international law, the rights of Finland with respect to the exploration for and exploitation of the natural resources of the sea bed and its subsoil and of the superjacent waters may be exercised; c) the term "person" includes an individual, a company and any other body of persons; d) the term "company" means any body corporate or any entity which is treated as a company or body corporate for tax purposes; e) 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; f) the term "tax" means Australian tax or Finnish tax as the context requires, but does not include any penalty or interest imposed under the law of either Contracting State relating to its tax; g) the term "Australian tax" means tax imposed by Australia, being tax to which this Agreement applies by virtue of Article 2; h) the term "Finnish tax" means tax imposed by Finland or its local authorities, being tax to which this Agreement applies by virtue of Article 2; i) 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 Finland, the Ministry of Finance or a representative authorised by the Ministry of Finance; j) the term "business" includes the performance of professional services and of other activities of an independent character; k) the term "enterprise" applies to the carrying on of any business; 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 between places in the other Contracting State; m) the term "national", in relation to a Contracting State, means: (i) any individual possessing the nationality or citizenship of that Contracting State; and (ii) any company deriving its status as such from the laws in force in that Contracting State; n) the term "recognised stock exchange" means: (i) the Australian Stock Exchange and any other Australian stock exchange recognised as such under Australian law; (ii) the Helsinki Stock Exchange and any other Finnish stock exchange recognised as such under Finnish law; and (iii) any other stock exchange agreed upon by the competent authorities. 2. As regards the application of the Agreement 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 Agreement 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 Agreement, 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 Finland, a person who is liable under the laws of Finland to tax therein by reason of the person's domicile, residence, place of management, place of incorporation (registration) or any other criterion of a similar nature. The Government of a Contracting State or a political subdivision, local authority or statutory authority of that State is also a resident of that State for the purposes of the Agreement. 2. A person is not a resident of a Contracting State for the purposes of this Agreement 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, then 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; c) if the individual is a national of both States, or of neither of them, the competent authorities of the Contracting States shall endeavour to resolve the question by mutual agreement. 4. Where an item of income, profits or gains derived by an individual is exempt from tax in a Contracting State by reason only of the status of that individual as a temporary resident under the applicable tax laws of that State, no relief shall be available under this Agreement in the other Contracting State in respect of that item of income, profits or gains. 5. Where by reason of the provisions of paragraph 1 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 it is incorporated (registered). ARTICLE 5 Permanent Establishment 1. For the purposes of this Agreement, 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" includes especially: a) a place of management; b) a branch; c) an office; d) a factory; e) a workshop; f) a mine, an oil or gas well, a quarry or any other place relating to the exploration for or exploitation of natural resources; and g) an agricultural, pastoral or forestry property situated in Australia. 3. A building site or construction or installation project constitutes a permanent establishment only if it lasts more than 6 months. 4. Notwithstanding the provisions of paragraphs 1, 2 and 3, where an enterprise of a Contracting State: a) carries on supervisory or consultancy activities in the other State for a period or periods exceeding in the aggregate 183 days in any 12 month period in connection with a building site or construction or installation project which is being undertaken in that other State; b) carries on activities (including the operation of substantial equipment) in the other State in the exploration for or exploitation of natural resources situated in that other State for a period or periods exceeding in the aggregate 90 days in any 12 month period; or c) operates substantial equipment in the other State (other than as provided in subparagraph b)) for a period or periods exceeding in the aggregate 183 days in any 12 month period, such activities shall be deemed to be performed through a permanent establishment that the enterprise has in that other State, unless the activities are limited to those mentioned in paragraph 6 and are, in relation to the enterprise, of a preparatory or auxiliary character. 5. a) The duration of activities under paragraphs 3 and 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) Under 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. Notwithstanding the preceding provisions of this Article, the term "permanent establishment" shall be deemed not to include: 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 of collecting information, for the enterprise; e) the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character; f) the maintenance of a fixed place of business solely for any combination of activities mentioned in sub-paragraphs a) to e) of this paragraph, provided that such activities are, in relation to the enterprise, of a preparatory or auxiliary character. 7. Notwithstanding the provisions of paragraphs 1 and 2, where a person - other than an agent of an independent status to whom paragraph 8 applies - is acting on behalf of an enterprise and: a) has, and habitually exercises, in a Contracting State an authority to substantially negotiate or conclude contracts on behalf of the enterprise; or b) manufactures or processes in a Contracting State for the enterprise goods or merchandise belonging to the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for that enterprise, unless the activities of such person are limited to those mentioned in paragraph 6 and are, in relation to the enterprise, of a preparatory or auxiliary character. 8. 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 person who is a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of the person's business as such a broker or agent. 9. 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. 10. 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. CHAPTER III TAXATION OF INCOME ARTICLE 6 Income from Real Property 1. Income derived by a resident of a Contracting State from real property, including income from an agricultural, pastoral or forestry property situated in Finland, may be taxed in the Contracting State in which the real 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 includes: (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 Finland, means such property which, according to the laws of Finland, is immovable property and shall in any case include buildings, property accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of general law respecting landed property apply, usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources and other natural resources. Ships and aircraft shall not be regarded as real property. 3. Any interest or right referred to in paragraph 2 shall be regarded as situated where the land, mineral, oil or gas deposits, quarries or natural resources, as the case may be, are situated or where the exploration may take place. 4. The provisions of paragraph 1 shall apply to income derived from the direct use, letting or use in any other form of real property. 5. Where the ownership of shares or other rights in a company, trust or comparable institution entitle a person to the enjoyment of real property held by or on behalf of that company, trust or comparable institution, income derived from the direct use, letting or use in any other form of such right to enjoyment may be taxed in the Contracting State in which the real property is situated. 6. The provisions of paragraphs 1, 3 and 4 shall also apply to income from real property of an enterprise. 7. The provisions of paragraph 5 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. 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. Subject to the provisions of paragraph 3, 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 or with other enterprises with which it deals. 3. In determining the profits of a permanent establishment, there shall be allowed as deductions expenses of the enterprise, being expenses which are incurred for the purposes of the permanent establishment (including executive and general administrative expenses so incurred) and which would be deductible if the permanent establishment were an independent entity which paid those expenses, whether incurred in the Contracting State in which the permanent establishment is situated or elsewhere. 4. 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. 5. Nothing in this Article shall affect the application of any law of a Contracting State relating to the determination of the tax liability of a person, including determinations in cases where the information available to the competent authority of that State is inadequate to determine the profits to be attributed to a permanent establishment, provided that that law shall be applied, so far as it is practicable to do so, consistently with the principles of this Article. 6. Where profits include items of income or gains which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article. 7. Nothing in this Article shall affect the application of any law of a Contracting State relating to tax imposed on profits from insurance with non-residents provided that if the relevant law in force in either Contracting State at the date of signature of this Agreement 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 any amendment of this paragraph that may be appropriate. 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 therein 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 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. 4. 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 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 operate between the two enterprises in their commercial or financial relations which differ from those which might be expected to operate between independent enterprises dealing wholly independently with one another, then any profits which, but for those conditions, might have been 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. Nothing in this Article shall affect the application of any law of a Contracting State relating to the determination of the tax liability of a person, including determinations in cases where the information available to the competent authority of that State is inadequate to determine the profits accruing to an enterprise, provided that that law shall be applied, so far as it is practicable to do so, consistently with the principles of this Article. 3. Where profits on which an enterprise of a Contracting State has been charged to tax in that State are also included, by virtue of the provisions of paragraph 1 or 2, in the profits of an enterprise of the other Contracting State and charged to tax in that other State, and the profits so included are profits which might have been expected to have accrued to that enterprise of the other State if the conditions operative between the enterprises had been those which might have been expected to have operated between independent enterprises dealing wholly independently with one another, then the first-mentioned State shall make an appropriate adjustment to the amount of tax charged therein on those profits, where that first-mentioned State considers the adjustment justified. In determining such an adjustment, due regard shall be had to the other provisions of this Agreement and the competent authorities of the Contracting States shall if necessary consult each other. 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) 5 per cent of the gross amount of the dividends if the beneficial owner of those dividends is a company which holds directly at least 10 per cent of the voting power in the company paying the dividends; b) 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 Agreement 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. Notwithstanding the provisions of paragraph 2 of this Article, dividends shall not be taxed in the Contracting State of which the company paying the dividends is a resident for the purposes of its tax if the beneficial owner of the dividends is a company that is a resident of the other Contracting State 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 and the company that is the beneficial owner of the dividends: a) has its principal class of shares listed on a recognised stock exchange specified in subparagraph (i) or (ii) of subparagraph n) of paragraph 1 of Article 3 and is regularly traded on one or more recognised stock exchanges; b) is owned directly or indirectly by one or more companies whose principal class of shares is listed on a recognised stock exchange specified in subparagraph (i) or (ii) of subparagraph n) of paragraph 1 of Article 3 and is regularly traded on one or more recognised stock exchanges; c) does not meet the requirements of subparagraphs a) or b) of this paragraph but the competent authority of the first-mentioned Contracting State determines, in accordance with the law of that State, that the establishment, acquisition or maintenance of the company that is the beneficial owner of the dividends and the conduct of its operations did not have as one of its principal purposes the obtaining of benefits under the Agreement. The competent authority of the first-mentioned Contracting State shall consult the competent authority of the other Contracting State before refusing to grant benefits of the Agreement under this subparagraph. 4. 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 income from shares by the law of the State of which the company making the distribution is a resident for the purposes of its tax. 5. The provisions of paragraphs 1, 2 and 3 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 therein and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment. In such case the provisions of Article 7 shall apply. 6. 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, nor subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits 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 Finland for the purposes of Finnish tax. 7. 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 shares or other rights in respect of which the dividend is paid to take advantage of this Article by means of that creation or assignment. 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, such 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 shall be taxable only in that other Contracting State if: a) the interest is derived by a Contracting State or by a political or administrative sub-division or a local authority thereof, or by any other body exercising governmental functions in a Contracting State, or by a bank performing central banking functions in a Contracting 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. 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 therein and the indebtedness in respect of which the interest is paid is effectively connected with such 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, the person paying the interest, whether the person is a resident of a Contracting State or not, has in a Contracting State or outside both Contracting States a permanent establishment in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment, then such interest shall be deemed to arise in the State in which the permanent establishment is situated. 8. Where, by reason of a special relationship between the payer and the beneficial owner of the interest, or between both of them and some other person, the amount of the interest paid, having regard to the indebtedness for which it is paid, exceeds the amount which might have been expected to have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Agreement. 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 indebtedness in respect of which the interest is paid to take advantage of this Article by means of that creation or assignment. ARTICLE 12 Royalties 1. Royalties 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, those royalties may also be taxed in the Contracting State in which they arise, and according to the law of that State, but the tax so charged shall not exceed 5 per cent of the gross amount of the royalties. 3. The term "royalties" in this Article means payments or credits, whether periodical or not, and however described or computed, to the extent to which they are made as consideration for: a) the use of, or the right to use, any copyright, patent, design or model, plan, secret formula or process, trademark or other like property or right; b) the supply of scientific, technical, industrial or commercial knowledge or information; c) the supply of any assistance that is ancillary and subsidiary to, and is furnished as a means of enabling the application or enjoyment of, any such property or right as is mentioned in subparagraph a) or any such knowledge or information as is mentioned in subparagraph b); d) the use of, or the right to use: (i) motion picture films; (ii) films or audio or video tapes or disks, or any other means of image or sound reproduction or transmission for use in connection with television, radio or other broadcasting; e) the use of, or the right to use, some or all of the part of the radiofrequency spectrum specified in a spectrum licence, being spectrum of a Contracting State where the payment or credit arises; or f) total or partial forbearance in respect of the use or supply of any property or right referred to in this paragraph. 4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise through a permanent establishment situated therein and the right or property in respect of which the royalties are paid or credited is effectively connected with such permanent establishment. In such case the provisions of Article 7 shall apply. 5. Royalties 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, the person paying the royalties, whether the person is a resident of a Contracting State or not, has in a Contracting State or 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, then such royalties shall be deemed to arise in the State in which the permanent establishment is situated. 6. Where, by reason of a special relationship between the payer and the beneficial owner of the royalties, or between both of them and some other person, the amount of the royalties paid or credited, having regard to what they are paid or credited for, exceeds the amount which might have been expected to have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the amount of the payments or credits shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Agreement. 7. 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 rights in respect of which the royalties are paid or credited to take advantage of this Article by means of that creation or assignment. ARTICLE 13 Alienation of Property 1. Income, profits or gains derived by a resident of a Contracting State from the alienation of real property referred to in paragraph 2 of Article 6 and situated in the other Contracting State may be taxed in that other State. 2. Income, profits or gains from the alienation of property, other than real property, that forms part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State, including income, profits or gains from the alienation of that permanent establishment (alone or with the whole enterprise), may be taxed in that other State. 3. Income, profits or gains of an enterprise of a Contracting State from the alienation of ships or aircraft operated by that enterprise in international traffic, or of property (other than real property) pertaining to the operation of such ships or aircraft, shall be taxable only in that State. 4. Income, profits or gains derived by a resident of a Contracting State from the alienation of any shares or comparable interests in an entity, where more than half of the value of the assets of that entity, whether they are held directly or indirectly, is attributable to real property situated in the other State, may be taxed in that other State. 5. Gains of a capital nature from the alienation of any property, other than that referred to in the preceding paragraphs, shall be taxable only in the Contracting State of which the alienator is a resident. ARTICLE 14 Income from Employment 1. Subject to the provisions of Articles 15, 17 and 18, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State. 2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if: a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any 12 month period commencing or ending in the year of income of that other State, and b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and c) the remuneration is not borne by a permanent establishment which the employer has in the other State. 3. Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic may be taxed in the Contracting State of which the enterprise operating the ship or aircraft is a resident. ARTICLE 15 Directors' Fees Directors' fees and other similar payments derived by a resident of a Contracting State in that person's capacity as a member of the board of directors or any other similar body of a company which is a resident of the other Contracting State may be taxed in that other State. ARTICLE 16 Entertainers and Sportspersons 1. Notwithstanding the provisions of Articles 7 and 14, income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as a sportsperson, from that person's personal activities as such exercised in the other Contracting State, may be taxed in that other State. 2. Where income in respect of personal activities exercised by an entertainer or a sportsperson in that person's capacity as such accrues not to that person but to another person, that income may, notwithstanding the provisions of Articles 7 and 14, be taxed in the Contracting State in which the activities of the entertainer or sportsperson are exercised. ARTICLE 17 Pensions and Annuities 1. Subject to the provisions of paragraph 3, any pension or annuity paid to a resident of a Contracting State shall be taxable only in that State. 2. The term "annuity" means a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time under an obligation to make the payments in return for adequate and full consideration in money or money's worth. 3. Pensions paid by a Contracting State or a political subdivision, local authority or statutory authority thereof to any individual in respect of services rendered to that State or subdivision or authority and pensions paid and other payments made under the social security legislation of a Contracting State may be taxed in that State. The provisions of this paragraph shall apply only to individuals who are citizens or nationals of the Contracting State from which the payments are made. 4. Any alimony or other maintenance payment arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in the first-mentioned State. ARTICLE 18 Government Service 1. a) Salaries, wages and other similar remuneration, other than a pension or annuity, paid by a Contracting State or a political subdivision, local authority or statutory authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State. b) However, such salaries, wages and other similar remuneration shall be taxable only in the other Contracting State if the services are rendered in that State and the individual is a resident of that State who: (i) is a national of that State; or (ii) did not become a resident of that State solely for the purpose of rendering the services. 2. The provisions of Articles 14, 15 and 16 shall apply to salaries, wages and other similar remuneration in respect of services rendered in connection with a business carried on by a Contracting State or a political subdivision, local authority or statutory authority thereof. ARTICLE 19 Students Payments which a student or business apprentice who is or was immediately before visiting a Contracting State a resident of the other Contracting State and who is temporarily present in the first-mentioned State solely for the purpose of their education or training receives for the purpose of their maintenance, education or training shall not be taxed in that State, provided that such payments arise from sources outside that State. ARTICLE 20 Other Income 1. Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Agreement shall be taxable only in that State. 2. The provisions of paragraph 1 shall not apply to income, other than income from real property as defined in paragraph 2 of Article 6, derived by a resident of a Contracting State who carries on business in the other Contracting State through a permanent establishment situated therein and the right or property in respect of which the income is paid is effectively connected with such permanent establishment. In such case the provisions of Article 7 shall apply. 3. Notwithstanding the provisions of paragraphs 1 and 2, items of income of a resident of a Contracting State not dealt with in the foregoing Articles of the Agreement from sources in the other Contracting State may also be taxed in the other Contracting State. ARTICLE 21 Source of Income 1. Income, profits or gains derived by a resident of a Contracting State which, under any one or more of Articles 6 to 8 or 10 to 18, may be taxed in the other Contracting State shall for the purposes of the law of that other Contracting State relating to its tax be deemed to arise from sources in that other Contracting State. 2. Income, profits or gains derived by a resident of a Contracting State which, under any one or more of Articles 6 to 8 or 10 to 18, may be taxed in the other Contracting State shall for the purposes of Article 22 and of the law of the first-mentioned Contracting State relating to its tax be deemed to arise from sources in the other Contracting State. CHAPTER IV RELIEF FROM DOUBLE TAXATION ARTICLE 22 Relief from Double Taxation 1. Subject to the provisions of the law of Australia from time to time in force which relate to the allowance of a credit against Australian tax of tax paid in a country outside Australia (which shall not affect the general principle of this Article), Finnish tax paid under the law of Finland and in accordance with this Agreement, whether directly or by deduction, in respect of income derived by a person who is a resident of Australia from sources in Finland shall be allowed as a credit against Australian tax payable in respect of that income. 2. Subject to the provisions of Finnish law regarding the elimination of international double taxation (which shall not affect the general principle hereof), double taxation shall be eliminated in Finland as follows: a) where a resident of Finland derives income which, in accordance with the provisions of this Agreement, may be taxed in Australia, Finland shall, subject to the provisions of subparagraph b), allow as a deduction from the Finnish tax of that person, an amount equal to the Australian tax paid under Australian law and in accordance with the Agreement, as computed by reference to the same income by reference to which the Finnish tax is computed; b) dividends paid by a company being a resident of Australia to a company which is a resident of Finland and which controls directly at least 10 per cent of the voting power in the company paying the dividends shall be exempt from Finnish tax; c) where in accordance with any provision of this Agreement any income derived by a resident of Finland is exempt from tax in Finland, Finland may nevertheless, in calculating the amount of tax on any other income of such resident, take into account the exempted income. CHAPTER V SPECIAL PROVISIONS Article 23 Non-Discrimination 1. Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances, in particular with respect to residence, are or may be subjected. This provision shall, notwithstanding the provisions of Article 1, also apply to persons who are not residents of one or both of the Contracting States. 2. The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favourably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities in similar circumstances. This provision shall not be construed as obliging a Contracting State to grant to individuals who are residents of the other Contracting State any of the personal allowances, reliefs and reductions for tax purposes which are granted to its own residents. 3. Except where the provisions of paragraph 1 of Article 9, paragraph 8 of Article 11, or paragraph 6 of Article 12, apply, interest, royalties and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first- mentioned State. 4. Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of the first-mentioned State in similar circumstances are or may be subjected. 5. This Article shall not apply to any provision of the laws of a Contracting State which: a) is designed to prevent the avoidance or evasion of taxes; b) does not permit the deferral of tax arising on the transfer of an asset where the subsequent transfer of the asset by the transferee would be beyond the taxing jurisdiction of the Contracting State under its laws; c) provides for consolidation of group entities for treatment as a single entity for tax purposes provided that a company, being a resident of that State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, may access such consolidation treatment on the same terms and conditions as other companies that are residents of the first-mentioned State; d) does not allow tax rebates or credits in relation to dividends paid by a company that is a resident of that State for purposes of its tax; e) provides deductions to eligible taxpayers for expenditure on research and development; or f) is otherwise agreed to be unaffected by this Article in an Exchange of Notes between the Contracting States. 6. In this Article, provisions of the laws of a Contracting State which are designed to prevent avoidance or evasion of taxes include: a) measures designed to address thin capitalisation, dividend stripping and transfer pricing; b) controlled foreign company, transferor trusts and foreign investment fund rules; and c) measures designed to ensure that taxes can be effectively collected and recovered, including conservancy measures. 7. The provisions of this Article shall apply to the taxes which are referred to in paragraph 3 of Article 2 of this Agreement. ARTICLE 24 Mutual Agreement Procedure 1. Where a person considers that the actions of one or both of the Contracting States result or will result for the person in taxation not in accordance with this Agreement, the person may, irrespective of the remedies provided by the domestic law of those States concerning taxes to which the Agreement applies, present a case to the competent authority of the Contracting State of which the person is a resident or, if the case comes under paragraph 1 of Article 23, to that of the Contracting State of which the person is a national. The case must be presented within 3 years from the first notification of the action resulting in taxation not in accordance with the Agreement. 2. The competent authority shall endeavour, if the claim appears to it to be justified and if it is not itself able to arrive at a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation which is not in accordance with the Agreement. Any agreement reached shall be implemented notwithstanding any time limits in the domestic law of the Contracting States. 3. The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Agreement. They may also consult together for the elimination of double taxation in cases not provided for in the Agreement. 4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs. 5. For the purposes of paragraph 3 of Article XXII (Consultation) of the General Agreement on Trade in Services, the Contracting States agree that, notwithstanding that paragraph, any dispute between them as to whether a measure falls within the scope of this Agreement may be brought before the Council for Trade in Services, as provided by that paragraph, only with the consent of both Contracting States. Any doubt as to the interpretation of this paragraph shall be resolved under paragraph 3 of this Article or, failing agreement under that procedure, pursuant to any other procedure agreed to by both Contracting States. ARTICLE 25 Exchange of Information 1. The competent authorities of the Contracting States shall exchange such information as is foreseeably relevant for carrying out the provisions of this Agreement or to the administration or enforcement of the domestic law concerning taxes referred to in paragraph 4 of Article 2, insofar as the taxation thereunder is not contrary to the Agreement. The exchange of information is not restricted by Article 1. 2. Any information received under paragraph 1 by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic law of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, the determination of appeals in relation to, the taxes referred to in paragraph 1, or the oversight of the above. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions. 3. In no case shall the provisions of paragraphs 1 and 2 be construed so as to impose on a Contracting State the obligation: a) to carry out administrative measures at variance with the law and administrative practice of that or of the other Contracting State; b) to supply information which is not obtainable by the competent authority under the law or in the normal course of the administration of that or of the other Contracting State; c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy (ordre public). 4. If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall use its information gathering measures to obtain the requested information, even though that other State may not need such information for its own tax purposes. The obligation contained in the preceding sentence is subject to the limitations of paragraph 3 but in no case shall such limitations be construed to permit a Contracting State to decline to supply information solely because it has no domestic interest in such information. 5. In no case shall the provisions of paragraph 3 be construed to permit a Contracting State to decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person. ARTICLE 26 Assistance in the Collection of Taxes 1. The Contracting States shall lend assistance to each other in the collection of revenue claims. This assistance is not restricted by Article 1. The competent authorities of the Contracting States may by mutual agreement settle the mode of application of this Article. 2. The term "revenue claim" as used in this Article means an amount owed in respect of taxes referred to in paragraph 4 of Article 2, insofar as the taxation thereunder is not contrary to this Agreement or any other instrument to which the Contracting States are parties, as well as interest, administrative penalties and costs of collection or conservancy related to such amount. 3. When a revenue claim of a Contracting State is enforceable under the laws of that State and is owed by a person who, at that time, cannot, under the laws of that State, prevent its collection, that revenue claim shall, at the request of the competent authority of that State, be accepted for purposes of collection by the competent authority of the other Contracting State. That revenue claim shall be collected by that other State in accordance with the provisions of its laws applicable to the enforcement and collection of its own taxes as if the revenue claim were a revenue claim of that other State. 4. When a revenue claim of a Contracting State is a claim in respect of which that State may, under its law, take measures of conservancy with a view to ensure its collection, that revenue claim shall, at the request of the competent authority of that State, be accepted for purposes of taking measures of conservancy by the competent authority of the other Contracting State. That other State shall take measures of conservancy in respect of that revenue claim in accordance with the provisions of its laws as if the revenue claim were a revenue claim of that other State even if, at the time when such measures are applied, the revenue claim is not enforceable in the first-mentioned State or is owed by a person who has a right to prevent its collection. 5. Notwithstanding the provisions of paragraphs 3 and 4, a revenue claim accepted by a Contracting State for purposes of paragraph 3 or 4 shall not, in that State, be subject to the time limits or accorded any priority applicable to a revenue claim under the laws of that State by reason of its nature as such. In addition, a revenue claim accepted by a Contracting State for the purposes of paragraph 3 or 4 shall not, in that State, have any priority applicable to that revenue claim under the laws of the other Contracting State. 6. Proceedings with respect to the existence, validity or the amount of a revenue claim of a Contracting State shall not be brought before the courts or administrative bodies of the other Contracting State. 7. Where, at any time after a request has been made by a Contracting State under paragraph 3 or 4 and before the other Contracting State has collected and remitted the relevant revenue claim to the first-mentioned State, the relevant revenue claim ceases to be a) in the case of a request under paragraph 3, a revenue claim of the first-mentioned State that is enforceable under the laws of that State and is owed by a person who, at that time, cannot, under the laws of that State, prevent its collection, or b) in the case of a request under paragraph 4, a revenue claim of the first-mentioned State in respect of which that State may, under its laws, take measures of conservancy with a view to ensure its collection the competent authority of the first-mentioned State shall promptly notify the competent authority of the other State of that fact and, at the option of the other State, the first-mentioned State shall either suspend or withdraw its request. 8. In no case shall the provisions of this Article be construed so as to impose on a Contracting State the obligation: a) to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State; b) to carry out measures which would be contrary to public policy (ordre public); c) to provide assistance if the other Contracting State has not pursued all reasonable measures of collection or conservancy, as the case may be, available under its laws or administrative practice; d) to provide assistance in those cases where the administrative burden for that State is clearly disproportionate to the benefit to be derived by the other Contracting State; e) to provide assistance if that State considers that the taxes with respect to which assistance is requested are imposed contrary to generally accepted taxation principles. ARTICLE 27 Members of Diplomatic Missions and Consular Posts Nothing in this Agreement shall affect the fiscal privileges of members of diplomatic missions or consular posts under the general rules of international law or under the provisions of special international agreements. CHAPTER VI FINAL PROVISIONS ARTICLE 28 Entry into Force 1. The Contracting States shall notify each other in writing through the diplomatic channel of the completion of their domestic requirements for the entry into force of this Agreement. The Agreement shall enter into force 30 days after the date of the later of the notifications and its provisions shall have effect: a) in Australia: (i) in respect of withholding tax on income that is derived by a non-resident, in relation to income derived on or after 1 January in the calendar year next following the date on which the Agreement enters into force; (ii) in respect of other Australian tax, in relation to income, profits or gains of any year of income beginning on or after 1 July in the calendar year next following the date on which the Agreement enters into force; b) in Finland: (i) in respect of taxes withheld at source, on income derived on or after 1 January in the calendar year next following the year in which the Agreement enters into force; (ii) in respect of other taxes on income for taxes chargeable for any tax year beginning on or after 1 January in the calendar year next following the year in which the Agreement enters into force; c) for purposes of Article 25, from the date of entry into force of this Agreement. Notwithstanding the provisions of subparagraphs a) and b), Article 26 shall have effect from the date agreed in an exchange of notes through the diplomatic channel. 2. The Agreement between Finland and Australia for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, signed at Canberra on 12th September 1984, as modified by the Protocol signed at Canberra on 5th November 1997 (hereinafter referred to as "the 1984 Agreement"), shall cease to have effect with respect to taxes to which this Agreement applies in accordance with the provisions of paragraph 1. The 1984 Agreement shall terminate on the last date on which it has effect in accordance with the foregoing provision of this paragraph. ARTICLE 29 Termination This Agreement shall continue in effect indefinitely, but either Contracting State may terminate the Agreement by giving written notice of termination, through the diplomatic channel, to the other State at least 6 months before the end of any calendar year beginning after the expiration of 5 years from the date of its entry into force and, in that event, the Agreement shall cease to be effective: a) in Australia: (i) in respect of withholding tax on income that is derived by a non-resident, in relation to income derived on or after 1 January in the calendar year next following that in which the notice of termination is given; (ii) in respect of other Australian tax, in relation to income, profits or gains of any year of income beginning on or after 1 July in the calendar year next following that in which the notice of termination is given; b) in Finland: (i) in respect of taxes withheld at source, on income derived on or after 1 January in the calendar year next following that in which the notice of termination is given; (ii) in respect of other taxes on income for taxes chargeable for any tax year beginning on or after 1 January in the calendar year next following that in which the notice of termination is given. IN WITNESS WHEREOF the undersigned, being duly authorised, have signed this Agreement. DONE in duplicate at Melbourne this twentieth day of November 2006, in the English and Finnish languages, both texts being equally authentic. |FOR THE GOVERNMENT OF |FOR THE GOVERNMENT OF | |AUSTRALIA: |FINLAND: | | | | | | | |Hon. Peter Costello |Eero Heinäluoma | |Treasurer |Minister for Finance | [signatures omitted] PROTOCOL At the signing today of the Agreement between the Government of Australia and the Government of Finland for the avoidance of double taxation with respect to taxes on income and the prevention of fiscal evasion (hereinafter referred to as "the Agreement"), the undersigned have agreed upon the following provisions which shall form an integral part of the Agreement: 1. With reference generally to the application of the Agreement a) Nothing in the Agreement 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. b) It is understood that nothing in the Agreement prevents the application of the provisions of Article 26 to the exchange of information that existed prior to the entry into force of the Agreement. 2. With reference to Articles 4, 17 and 18 The term "statutory authority" means any legal entity of a public character created by the laws of a Contracting State in which no person other than the State itself, a political subdivision or a local authority thereof, has an interest, and, in the case of Finland, includes the Bank of Finland, the Helsinki University and the Social Insurance Institution of Finland. 3. With reference to paragraph 7 of Article 5 The Contracting States note that the term "substantially negotiate" is included at Australia's request to remove any doubt as to the existence of a permanent establishment where contracts that have been negotiated by an agent in one State are formally concluded in the other State by signature in that other State. IN WITNESS WHEREOF the undersigned, being duly authorised, have signed this Protocol. DONE in duplicate at Melbourne this twentieth day of November 2006, in the English and Finnish languages, both texts being equally authentic. |FOR THE GOVERNMENT OF |FOR THE GOVERNMENT OF | |AUSTRALIA: |FINLAND: | | | | | | | |Hon. Peter Costello |Eero Heinäluoma | |Treasurer |Minister for Finance | [signatures omitted] Schedule 26-Agreement between the Government of Australia and the Government of the People's Republic of China for the Avoidance of Double Taxation of Income and Revenues derived by Air Transport Enterprises from International Air Transport Section 3 The Government of Australia and the Government of the People's Republic of China, Desiring to conclude an Agreement for the avoidance of double taxation of income and revenues derived by air transport enterprises from international air transport, Have agreed as follows: ARTICLE 1 Taxes Covered The taxes to which this Agreement shall apply are: (a) in the case of Australia: the income tax imposed under the federal law of the Commonwealth of Australia, including the additional tax upon the undistributed amount of the distributable income of a private company; (b) in the case of the People's Republic of China: (i) the income tax concerning foreign enterprises; and (ii) the consolidated industrial and commercial tax including any additional tax on that tax, and any identical or substantially similar taxes which are imposed after the date of signature of this Agreement in addition to, or in place of, the taxes referred to in sub-paragraph (a) or (b). ARTICLE 2 General Definitions (1) In this Agreement: (a) the terms Contracting State, one of the Contracting States and other Contracting State mean Australia or the People's Republic of China, the Governments of which have concluded this Agreement; (b) the term enterprise of one of the Contracting States means an enterprise that is designated, under an Agreement made between the Governments of the Contracting States, to operate authorised scheduled air services between those States and that has its place of effective management in Australia or in the People's Republic of China; and (c) the term tax means the taxes to which this Agreement applies by virtue of Article 1 and which are imposed by Australia or by the People's Republic of China, as the context requires. (2) In the application of this Agreement by a Contracting State, any term not defined in this Agreement shall, unless the context otherwise requires, have the meaning which it has under the laws of that State relating to the taxes to which this Agreement applies. ARTICLE 3 Air Transport Profits and Revenues (1) Profits and revenues from the operation of aircraft, including sales of tickets and documents relating to such operations, derived by an enterprise of one of the Contracting States shall be exempt from tax in the other Contracting State. (2) Notwithstanding the provisions of paragraph (1), such profits and revenues may be taxed in the other Contracting State where they are profits and revenues derived from the carriage by aircraft of passengers, livestock, mail, goods or merchandise solely from one place in that other Contracting State to another place in that State. (3) The provisions of paragraphs (1) and (2) shall apply in relation to the share of the profits and revenues from the operation of aircraft derived by an enterprise of one of the Contracting States through participation in a pool service, in a joint transport operating organisation or in an international operating agency. ARTICLE 4 Entry Into Force The Government of each of the Contracting States shall give to the Government of the other Contracting State through the diplomatic channel written notice of the completion of the procedures required by its law to give this Agreement the force of law in Australia or in the People's Republic of China as the case may be. This Agreement shall enter into force on the date of the later of those notifications and thereupon shall have effect in respect of profits and revenues derived on or after 1 July 1984. ARTICLE 5 Termination This Agreement shall continue in effect indefinitely but the Government of either of the Contracting States may give to the Government of the other Contracting State through the diplomatic channel six months prior written notice of termination and, in that event, this Agreement shall cease to be effective in relation to profits and revenues derived on or after 1 January in the calendar year next following that in which that period of six months expires. IN WITNESS WHEREOF the undersigned, duly authorised thereto by their respective Governments, have signed this Agreement. DONE in duplicate at Beijing this twenty-second day of November one thousand nine hundred and eighty-five in the English and Chinese lanuages, both texts being equally authentic. |FOR THE GOVERNMENT OF |FOR THE GOVERNMENT OF | |AUSTRALIA |THE PEOPLE'S REPUBLIC OF | | |CHINA | |D. T. IRVINE |LIN RONGSHENG | Schedule 27-Agreement between Australia and the Republic of Austria for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income Section 3 Australia and the Republic of Austria, Desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, Have agreed as follows: CHAPTER I SCOPE OF THE AGREEMENT ARTICLE 1 Personal Scope This Agreement 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 Agreement shall apply are: (a) in the case of Australia: the income tax imposed under the federal law of the Commonwealth of Australia, including the additional tax upon the undistributed amount of the distributable income of a private company and the tax known as the resource rent tax; (b) in the case of Austria: (i) the income tax (die Einkommensteuer); (ii) the corporation tax (die Körperschaftsteuer); (iii) the tax on interest yields (die Zinsertragsteuer); (iv) the directors tax (die Aufsichtsratsabgabe); and (v) the tax on commercial and industrial enterprises, including the tax levied on the sum of wages (die Gewerbesteuer einschliesslich der Lohnsummensteuer). (2) This Agreement shall also apply to any identical or substantially similar taxes which are imposed under the federal law of the Commonwealth of Australia or the law of the Republic of Austria after the date of signature of this Agreement in addition to, or in place of, the existing taxes. As soon as possible after the end of each calendar year, the competent authority of each Contracting State shall notify the competent authority of the other Contracting State of any substantial changes which have been made in the laws of his State relating to the taxes to which this Agreement applies. CHAPTER II DEFINITIONS ARTICLE 3 General Definitions (1) In this Agreement, 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 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 subparagraphs (paragraphs (i) to (vi) inclusive) in respect of which there is for the time being in force, consistently with international law, a law of Australia dealing with the exploitation of any of the natural resources of the sea-bed and subsoil of the continental shelf; (b) the term 'Austria' means the Republic of Austria; (c) the terms 'Contracting State', 'one of the Contracting States' and 'other Contracting State' mean Australia or Austria, 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 terms 'enterprise of one of the Contracting States' and 'enterprise of the other Contracting State' mean an enterprise carried on by a resident of Australia or an enterprise carried on by a resident of Austria, as the context requires; (g) the term 'tax' means Australian tax or Austrian tax, as the context requires; (h) the term 'Australian tax' means tax imposed by Australia, being tax to which this Agreement applies by virtue of Article 2; (i) the term 'Austrian tax' means tax imposed by Austria, being tax to which this Agreement applies by virtue of Article 2; (j) the term 'competent authority' means, in the case of Australia, the Commissioner of Taxation or his authorized representative and, in the case of Austria, the Federal Minister of Finance. (2) In this Agreement, the terms 'Australian tax' and 'Austrian tax' do not include any penalty or interest imposed under the law of either Contracting State relating to the taxes to which this Agreement applies by virtue of Article 2. (3) In the application of this Agreement by a Contracting State, any term not defined in this Agreement shall, unless the context otherwise requires, have the meaning which it has under the laws of that State from time to time in force relating to the taxes to which this Agreement applies. ARTICLE 4 Residence (1) For the purposes of this Agreement, a person is a resident of one of the Contracting States: (a) in the case of Australia, if the person is a resident of Australia for the purposes of Australian tax; and (b) in the case of Austria, if the person is subject to unlimited tax liability under Austrian law. (2) A person is not a resident of a Contracting State for the purposes of this Agreement if he 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 an individual is a resident of both Contracting States, then his status shall be determined in accordance with the following rules: (a) he shall be deemed to be a resident solely of the Contracting State in which he has a permanent home available to him; (b) if he has a permanent home available to him in both Contracting States, or if he does not have a permanent home available to him in either of them, he shall be deemed to be a resident solely of the Contracting State with which his personal and economic relations are the closer. (4) Where by reason of the provisions of paragraph (1), a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident solely of the Contracting State in which its place of effective management is situated. ARTICLE 5 Permanent Establishment (1) For the purposes of this Agreement, the term 'permanent establishment', in relation to an enterprise, 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, an oil or gas well, a quarry or any other place of extraction of natural resources; (g) an agricultural, pastoral or forestry property; (h) a building site or construction, installation or assembly project, or supervisory activities in connection with such a site or project, where that site or project exists, or those activities are carried on, for more than twelve months. (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) A person acting in one of the Contracting States on behalf of an enterprise of the other Contracting State-other than an agent of an independent status to whom paragraph (5) applies-shall be deemed to be a permanent establishment of that enterprise in the first-mentioned State if: (a) he has, and habitually exercises in that State, an authority to conclude contracts on behalf of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise; or (b) in so acting, he manufactures or substantially processes in that State for the enterprise goods or merchandise belonging to the enterprise, provided that the provisions of this sub-paragraph shall apply only in relation to the goods or merchandise so manufactured or processed. (5) An enterprise of one of the Contracting States 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 his business as such a broker or agent. (6) The fact that a company which is a resident of one of the Contracting States 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. (7) The principles set forth in the preceding paragraphs of this Article shall be applied in determining for the purposes of this Agreement whether there is a permanent establishment outside both Contracting States, and whether an enterprise, not being an enterprise of one of the Contracting States, has a permanent establishment in one of the Contracting States. CHAPTER III TAXATION OF INCOME ARTICLE 6 Income from Real Property (1) Income from real property, including royalties and other payments in respect of the operation of mines or quarries or of the exploitation of any natural resource, may be taxed in the Contracting State in which the real property, mines, quarries or natural resources are situated. (2) Income from a lease of land and income from any other direct interest in or over land, whether or not improved, shall be regarded as income from real property situated where the land to which the lease or other direct interest relates is situated. (3) The provisions of paragraphs (1) and (2) shall also apply to the income from real property of an enterprise and to income from real property used for the performance of professional services. ARTICLE 7 Business Profits (1) The profits of an enterprise of one of the Contracting States 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) Subject to the provisions of paragraph (3), where an enterprise of one of the Contracting States 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 or with other enterprises with which it deals. (3) In the determination of the profits of a permanent establishment, there shall be allowed as deductions expenses of the enterprise, being expenses which are incurred for the purposes of the permanent establishment (including executive and general administrative expenses so incurred) and which would be deductible if the permanent establishment were an independent entity which paid those expenses, whether incurred in the Contracting State in which the permanent establishment is situated or elsewhere. (4) 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. (5) Nothing in this Article shall affect the application of any law of a Contracting State relating to the determination of the tax liability of a person in cases where the information available to the competent authority of that State is inadequate to determine the profits to be attributed to a permanent establishment, provided that that law shall be applied, so far as the information available to the competent authority permits, consistently with the principles of this Article. (6) Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article. (7) Nothing in this Article shall affect the operation of any law of a Contracting State relating to tax imposed on profits from insurance with non-residents provided that if the relevant law in force in either Contracting State at the date of signature of this Agreement 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 any amendment of this paragraph that may be appropriate. (8) The provisions of this Article shall also apply to income derived by a sleeping partner from participation in a sleeping partnership (stille Gesellschaft) created under Austrian law. (9) Where: (a) a resident of Austria 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 Australia by the trustee of a trust estate other than a corporate unit trust; and (b) in relation to that enterprise, that trustee would, in accordance with the principles of Article 5, have a permanent establishment in Australia, the enterprise carried on by the trustee shall be deemed to be a business carried on in Australia by that resident through a permanent establishment situated therein and that share of business profits shall be attributed to that permanent establishment. ARTICLE 8 Ships and Aircraft (1) Profits from the operation of ships or aircraft derived by a resident of one of the Contracting States shall be taxable only in that State. (2) Notwithstanding the provisions of paragraph (1), such profits may be taxed in the other Contracting State where they are profits from operations of ships or aircraft confined solely to places in that other State. (3) The provisions of paragraphs (1) and (2) shall apply in relation to the share of the profits from the operation of ships or aircraft derived by a resident of one of the Contracting States through participation in a pool service, in a joint transport operating organization or in an international operating agency. (4) For the purposes of this Article, profits derived from the carriage by ships or aircraft of passengers, livestock, mail, goods or merchandise shipped in one of the Contracting States for discharge at another place in that State shall be treated as profits from operations of ships or aircraft confined solely to places in that State. (5) Income derived by an enterprise of one of the Contracting States from the alienation of ships or aircraft operated in international traffic while owned by that enterprise or of personal property pertaining to the operation of those ships or aircraft shall be taxable only in that State. ARTICLE 9 Associated Enterprises (1) Where: (a) an enterprise of one of the Contracting States 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 one of the Contracting States and an enterprise of the other Contracting State, and in either case conditions operate between the two enterprises in their commercial or financial relations which differ from those which might be expected to operate between independent enterprises dealing wholly independently with one another, then any profits which, but for those conditions, might have been 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) Nothing in this Article shall affect the application of any law of a Contracting State relating to the determination of the tax liability of a person, including determinations in cases where the information available to the competent authority of that State is inadequate to determine the income to be attributed to an enterprise, provided that that law shall be applied, so far as it is practicable to do so, consistently with the principles of this Article. (3) Where profits on which an enterprise of one of the Contracting States has been charged to tax in that State are also included, by virtue of paragraph (1) or (2), in the profits of an enterprise of the other Contracting State and charged to tax in that other State, and the profits so included are profits which might have been expected to have accrued to that enterprise of the other State if the conditions operative between the enterprises had been those which might have been expected to have operated between independent enterprises dealing wholly independently with one another, then the first-mentioned State shall make an appropriate adjustment to the amount of tax charged on those profits in the first- mentioned State. In determining such an adjustment, due regard shall be had to the other provisions of this Agreement and for this purpose the competent authorities of the Contracting States shall if necessary consult each other. ARTICLE 10 Dividends (1) Dividends paid by a company which is a resident of one of the Contracting States for the purposes of its tax, being dividends to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State. (2) Such dividends may 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 15 per cent of the gross amount of the dividends. (3) The term dividends in this Article means income from shares and other income assimilated to income from shares by the law, relating to tax, of the Contracting State of which the company making the distribution is a resident for the purposes of its tax. (4) The provisions of paragraph (2) shall not apply if the person beneficially entitled to the dividends, being a resident of one of the Contracting States, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In any such case the provisions of Article 7 or Article 14, as the case may be, shall apply. (5) Dividends paid by a company which is a resident of one of the Contracting States, being dividends to which a person who is not a resident of the other Contracting State is beneficially entitled, shall be exempt from tax in that other State except insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or fixed base situated in that other State. Provided that 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 resident of Austria for the purposes of Austrian tax. (6) Nothing in this Agreement shall be construed as preventing Australia from imposing, under a federal law, tax on the income of a company that is a resident of Austria in addition to the taxes referred to in Article 2 in relation to Australia which are payable by a company which is a resident of Australia, provided that any such additional tax shall not exceed 15 per cent of the amount by which the taxable income of the first- mentioned company of a year of income exceeds the tax payable on that taxable income to Australia. Any tax payable to Australia on the undistributed profits of a company which is a resident of Austria shall be calculated as if that company were not liable to the additional tax referred to in this paragraph and had paid dividends of such amount that tax equal to the amount of that additional tax would have been payable on the dividends in accordance with paragraph (2) of this Article. ARTICLE 11 Interest (1) Interest arising in one of the Contracting States, being interest to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State. (2) Such interest may 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) 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, and interest from any other form of indebtedness as well as all other income assimilated to income from money lent by the law, relating to tax, of the Contracting State in which the income arises. (4) The provisions of paragraph (2) shall not apply if the person beneficially entitled to the interest, being a resident of one of the Contracting States, carries on business in the other Contracting State, in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the indebtedness in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply. (5) Interest shall be deemed to arise in a Contracting State when the payer is that State itself or a political subdivision or local authority of that State or a person who is a resident of that State for the purposes of its tax. Where, however, the person paying the interest, whether he is a resident of one of the Contracting States or not, has in one of the Contracting States or outside both Contracting States a permanent establishment or fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated. (6) Where, owing to a special relationship between the payer and the person beneficially entitled to the interest, or between both of them and some other person, the amount of the interest paid, having regard to the indebtedness for which it is paid, exceeds the amount which might have been expected to have been agreed upon by the payer and the person so entitled in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In that case, the excess part of the amount of the interest paid shall remain taxable according to the law, relating to tax, of each Contracting State, but subject to the other provisions of this Agreement. ARTICLE 12 Royalties (1) Royalties arising in one of the Contracting States, being royalties to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State. (2) Such royalties may be taxed in the Contracting State in which they arise, 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 royalties. (3) The term 'royalties' in this Article means payments or credits, whether periodical or not, and however described or computed, to the extent to which they are made as consideration for: (a) the use of, or the right to use, any copyright, patent, design or model, plan, secret formula or process, trademark, or other like property or right; (b) the use of, or the right to use, any industrial, commercial or scientific equipment; (c) the supply of scientific, technical, industrial or commercial knowledge or information; (d) the supply of any assistance that is ancillary and subsidiary to, and is furnished as a means of enabling the application or enjoyment of, any such property or right as is mentioned in sub- paragraph (a), any such equipment as is mentioned in sub-paragraph (b) or any such knowledge or information as is mentioned in sub- paragraph (c); (e) the use of, or the right to use: (i) motion picture films; (ii) films or video tapes for use in connection with television; or (iii) tapes for use in connection with radio broadcasting; or (f) total or partial forbearance in respect of the use or supply of any property or right referred to in this paragraph. (4) The provisions of paragraph (2) shall not apply if the person beneficially entitled to the royalties, being a resident of one of the Contracting States, carries on business in the other Contracting State, in which the royalties arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the property or right in respect of which the royalties are paid or credited is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply. (5) Royalties shall be deemed to arise in a Contracting State when the payer is that State itself or a political subdivision or local authority of that State or a person who is a resident of that State for the purposes of its tax. Where, however, the person paying the royalties, whether he is a resident of one of the Contracting States or not, has in one of the Contracting States or outside both Contracting States a permanent establishment or fixed base in connection with which the liability to pay the royalties was incurred, and the royalties are borne by the permanent establishment or fixed base, then the royalties shall be deemed to arise in the State in which the permanent establishment or fixed base is situated. (6) Where, owing to a special relationship between the payer and the person beneficially entitled to the royalties, or between both of them and some other person, the amount of the royalties paid or credited, having regard to what they are paid or credited for, exceeds the amount which might have been expected to have been agreed upon by the payer and the person so entitled in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In that case, the excess part of the amount of the royalties paid or credited shall remain taxable according to the law, relating to tax, of each Contracting State, but subject to the other provisions of this Agreement. ARTICLE 13 Alienation of Property (1) Income from the alienation of real property may be taxed in the Contracting State in which that property is situated. (2) For the purposes of this Article: (a) the term 'real property' shall include: (i) a lease of land or any other direct interest in or over land; (ii) rights to exploit, or to explore for, natural resources; and (iii) shares or comparable interests in a company, the assets of which consists wholly or principally of direct interests in or over land in one of the Contracting States or of rights to exploit, or to explore for, natural resources in one of the Contracting States; (b) real property shall be deemed to be situated: (i) where it consists of direct interests in or over land-in the Contracting State in which the land is situated; (ii) where it consists of rights to exploit, or to explore for, natural resources-in the Contracting State in which the natural resources are situated or the exploration may take place; and (iii) where it consists of shares or comparable interests in a company, the assets of which consist wholly or principally of direct interests in or over land in one the Contracting States or of rights to exploit, or to explore for, natural resources in one of the Contracting States-in the Contracting State in which the assets or the principal assets of the company are situated. ARTICLE 14 Independent Personal Services (1) Income derived by an individual who is a resident of one of the Contracting States in respect of professional services or other independent activities of a similar character shall be taxable only in that State unless he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities. If he has such a fixed base, the income may be taxed in the other State but only so much of it as is attributable to activities exercised from that fixed base. (2) The term 'professional services' includes services performed in the exercise of independent scientific, literary, artistic, educational or teaching activities as well as in the exercise of the independent activities of physicians, lawyers, engineers, architects, dentists and accountants. ARTICLE 15 Dependent Personal Services (1) Subject to the provisions of Articles 16, 18, and 19, salaries, wages and other similar remuneration derived by an individual who is a resident of one of the Contracting States in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived from that exercise may be taxed in that other State. (2) Notwithstanding the provisions of paragraph (1), remuneration derived by an individual who is a resident of one of the Contracting States in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if: (a) the recipient is present in that other State for a period or periods not exceeding in the aggregate 183 days in the year of income or the taxable year, as the case may be, of that other State; (b) the remuneration is paid by, or on behalf of, an employer who is not a resident of that other State; (c) the remuneration is not deductible in determining taxable profits of a permanent establishment or a fixed base which the employer has in that other State; and (d) the remuneration is, or upon the application of this Article will be, subject to tax in the first-mentioned State. (3) Notwithstanding the preceding provisions of this Article, remuneration in respect of an employment exercised aboard a ship or aircraft operated in international traffic by a resident of one of the Contracting States may be taxed in that State. ARTICLE 16 Directors' Fees Directors' fees and similar payments derived by a resident of one of the Contracting States in his capacity as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other State. ARTICLE 17 Entertainers (1) Notwithstanding the provisions of Articles 14 and 15, income derived by entertainers (such as theatrical, motion picture, radio or television artistes and musicians and athletes) from their personal activities as such may be taxed in the Contracting State in which these activities are exercised. (2) Where income in respect of the personal activities of an entertainer as such accrues not to that entertainer but to another person that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer are exercised. ARTICLE 18 Pensions and Annuities (1) Subject to the provisions of paragraph (2) of Article 19, pensions and annuities paid to a resident of one of the Contracting States shall be taxable only in that State. (2) The term 'annuity' means a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time under an obligation to make the payments in return for adequate and full consideration in money or money's worth. (3) Any alimony or other maintenance payment arising in one of the Contracting States and paid to a resident of the other Contracting State shall be taxable only in the first-mentioned State. ARTICLE 19 Government Service (1) Remuneration, other than a pension or annuity, paid by one of the Contracting States or a political subdivision or local authority of that State to any individual in respect of services rendered in the discharge of governmental functions shall be taxable only in that State. However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that other State and the recipient is a resident of that other State who: (a) is a citizen or national of that State; or (b) did not become a resident of that State solely for the purpose of performing the services. (2) (a) Subject to the provisions of subparagraph (paragraph (b), a pension paid by, or out of funds created by, one of the Contracting States or a political subdivision or a local authority of that State to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State. (b) A pension referred to in sub-paragraph (a) shall be taxable only in the other Contracting State if the individual is a resident of, and a citizen or national of, that State. (3) The provisions of paragraph (1) shall also apply to remuneration paid out of public funds provided by Austria to any individual in respect of services rendered as a member of the Austrian permanent delegation of foreign commerce in Australia. (4) The provisions of paragraph (1) shall not apply to remuneration in respect of services rendered in connection with any trade or business carried on by one of the Contracting States or a political subdivision or local authority of that State. In such a case, the provisions of Article 15 or Article 16, as the case may be, shall apply. ARTICLE 20 Students Where a student, who is a resident of one of the Contracting States 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 his education, receives payments from sources outside that other State for the purpose of his maintenance or education, those payments shall be exempt from tax in that other State. ARTICLE 21 Income Not Expressly Mentioned (1) Items of income of a resident of one of the Contracting States which are not expressly mentioned in the foregoing Articles of this Agreement shall be taxable only in that State. (2) However, any such income derived by a resident of one of the Contracting States from sources in the other Contracting State may also be taxed in that other State. (3) The provisions of paragraph (1) shall not apply to income derived by a resident of one of the Contracting States where that income is effectively connected with a permanent establishment or fixed base situated in the other Contracting State. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply. ARTICLE 22 Source of Income (1) Income derived by a resident of Austria which, under any one or more of Articles 6 to 8, Articles 10 to 19 and Article 21, may be taxed in Australia shall for the purposes of the law of Australia relating to Australian tax be deemed to be income from sources in Australia. (2) Income derived by a resident of Australia which, under any one or more of Articles 6 to 8, Articles 10 to 19 and Article 21, may be taxed in Austria shall for the purposes of paragraph (1) of Article 23 and of the law of Australia relating to Australian tax be deemed to be income from sources in Austria. CHAPTER IV METHODS OF ELIMINATION OF DOUBLE TAXATION ARTICLE 23 (1) Subject to the provisions of the law of Australia from time to time in force which relate to the allowance of a credit against Australian tax of tax paid in a country outside Australia (which shall not affect the general principle hereof), Austrian tax paid under the law of Austria and in accordance with this Agreement, whether directly or by deduction, in respect of income derived by a person who is a resident of Australia from sources in Austria (not including, in the case of a dividend, tax paid in respect of the profits out of which the dividend is paid) shall be allowed as a credit against Australian tax payable in respect of that income. (2) For the purposes of paragraph (1), the term 'Austrian tax' shall include the tax on commercial and industrial enterprises, referred to in sub-paragraph (b) (v) of paragraph (1) of Article 2, only where it is levied on a basis other than capital or the sum of wages. (3) In the case of a resident of Austria double taxation shall be avoided as follows: (a) where a resident of Austria derives income which in accordance with the provisions of this Agreement may be taxed in Australia, Austria shall, subject to the provisions of sub-paragraphs (b) and (c), exempt such income from tax; (b) where a resident of Austria derives items of income which, in accordance with the provisions of paragraph (2) of Article 10, 11 or 12, paragraph (1) of Article 13 (in regard only to income from the alienation of real property as defined in sub-paragraph (2) (a) (iii) of that Article) or paragraph (2) of Article 21, may be taxed in Australia, Austria shall allow as a deduction from the tax on the income of that resident an amount equal to the tax paid in Australia. Such deduction shall not, however, exceed that part of the tax as computed before the deduction is given, which is attributable to such items of income derived in Australia; and (c) where in accordance with any provision of this Agreement income derived by a resident of Austria, is exempt from tax in Austria, may nevertheless, in calculating the amount of tax on the remaining income of that resident, take into account the exempted income. (4) If, in an agreement for the avoidance of double taxation that is made, after the date of signature of this Agreement, between Australia and a third State, being a State that is a member of the Organization for Economic Co-operation and Development, Australia agrees to limit the rate of tax: (a) on dividends paid by a company which is a resident of Australia for the purposes of Australian tax to which a company that is a resident of the third State is entitled, to a rate less than that provided in paragraph (2) of Article 10; (b) on interest arising in Australia to which a resident of the third State is entitled, to a rate less that that provided in paragraph (2) of Article 11; or (c) on royalties arising in Australia to which a resident of the third State is entitled, to a rate less that that provided in paragraph (2) of Article 12, the Government of Australia shall immediately inform the Government of Austria in writing through the diplomatic channel and shall enter into negotiations with the Government of Austria to review the relevant provision or provisions in order to provide the same treatment for Austria as that provided for the third State. CHAPTER V SPECIAL PROVISIONS ARTICLE 24 Mutual Agreement Procedure (1) Where a resident of one of the Contracting States considers that the actions of the competent authority of one or both of the Contracting States result or will result for him in taxation not in accordance with this Agreement he may, notwithstanding the remedies provided by the national laws of those States, present his case to the competent authority of the Contracting State of which he is a resident. The case must be presented within three years from the first notification of the action giving rise to taxation not in accordance with this Agreement. (2) The competent authority shall endeavour, if the claim appears to it to be justified and if it is not itself able to arrive at an appropriate solution, to resolve the case with the competent authority of the other Contracting State, with a view to the avoidance of taxation not in accordance with this Agreement. The solution so reached shall be implemented notwithstanding any time limits in the national laws of the Contracting States. (3) The competent authorities of the Contracting States shall jointly endeavour to resolve any difficulties or doubts arising as to the application of this Agreement. (4) The competent authorities of the Contracting States may communicate with each other directly for the purpose of giving effect to the provisions of this Agreement. ARTICLE 25 Exchange of Information (1) The competent authorities of the Contracting States shall exchange such information as is necessary for the carrying out of this Agreement or of the domestic laws of the Contracting States concerning the taxes to which this Agreement applies insofar as the taxation thereunder is not contrary to this Agreement. The exchange of information is not restricted by Article 1. Any information received by the competent authority of a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes to which this Agreement applies and shall be used only for such purposes. (2) In no case shall the provisions of paragraph (1) be construed so as to impose on the competent authority of a Contracting State the obligation: (a) to carry out administrative measures at variance with the laws or the administrative practice of that or of the other Contracting State; (b) to supply particulars which are not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State; or (c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or to supply information the disclosure of which would be contrary to public policy. ARTICLE 26 Diplomatic and Consular Officials Nothing in this Agreement shall affect diplomatic or consular privileges under the general rules of international law or under the provisions of special international agreements. CHAPTER VI FINAL PROVISIONS ARTICLE 27 Entry into force This Agreement shall enter into force on the first day of the third month next following that in which the Contracting States exchange notes through the diplomatic channel notifying each other that the last of such constitutional processes has been completed as are necessary to give this Agreement the force of law in Australia and in Austria, as the case may be, and thereupon this Agreement shall have effect: (a) in Australia: (i) in respect of withholding tax on income that is derived by a non-resident, in relation to income derived on or after 1 January in the calendar year next following that in which the Agreement enters into force; and (ii) in respect of other Australian tax, in relation to income of any year of income beginning on or after 1 July in the calendar year next following that in which the Agreement enters into force; (b) in Austria: (i) in respect of tax withheld at the source on amounts paid on or after 1 January in the calendar year next following that in which the Agreement enters into force; and (ii) in respect of other Austrian tax for taxable years beginning on or after 1 January in the calendar year next following that in which the Agreement enters into force. ARTICLE 28 Termination This Agreement shall continue in effect indefinitely, but either of the Contracting States may, on or before 30 June in any calendar year beginning after the expiration of 5 years from the date of its entry into force, give to the other Contracting State through the diplomatic channel written notice of termination and, in that event, this Agreement shall cease to be effective: (a) in Australia: (i) in respect of withholding tax on income that is derived by a non-resident, in relation to income derived on or after 1 January in the calendar year next following that in which the notice of termination is given; (ii) in respect of other Australian tax, in relation to income of any year of income beginning on or after 1 July in the calendar year next following that in which the notice of termination is given; (b) in Austria: (i) in respect of tax withheld at the source on amounts paid on or after 1 January in the calendar year next following that in which the notice of termination is given; and (ii) in respect of other Austrian tax for taxable years beginning on or after 1 January in the calendar year next following that in which the notice of termination is given. IN WITNESS WHEREOF the undersigned, duly authorised thereto, have signed this Agreement. DONE in duplicate in Vienna this eighth day of July One thousand nine hundred and eighty-six, in the English and German languages, both texts being equally authentic. |J. R. KELSO |Dr. E. BAUER | |FOR AUSTRALIA |FOR THE REPUBLIC OF AUSTRIA | Schedule 28-Agreement between the Government of Australia and the Government of the People's Republic of China for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income Section 3 The Government of Australia and the Government of the People's Republic of China, Desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, Have agreed as follows: ARTICLE 1 Personal Scope This Agreement shall apply to persons who are residents of one or both of the Contracting State. ARTICLE 2 Taxes Covered 1. The existing taxes to which this Agreement shall apply are: (a) in 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 the Commonwealth of Australia; (b) in China: the income tax imposed under the laws of the People's Republic of China. 2. This Agreement shall also apply to any identical or substantially similar taxes which are imposed after the date of signature of this Agreement 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 which have been made in their respective taxation laws within a reasonable period of time after such changes. ARTICLE 3 General Definitions 1. In this Agreement, 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 sub-paragraph) in respect of which there is for the time being in force, consistently with international law, a law of Australia dealing with the exploitation of any of the natural resources of the seabed and subsoil of the continental shelf; (b) the term "China" means the People's Republic of China and, when used in a geographical sense, it means all the territory of the People's Republic of China, including its territorial sea, in which the laws relating to Chinese tax apply, and any area beyond its territorial sea, within which the People's Republic of China has sovereign rights of exploration for and exploitation of resources of the seabed and its subsoil and superjacent water resources in accordance with international law; (c) the terms "a Contracting State" and "the other Contracting State" mean, as the context requires, Australia or China, the Governments of which have concluded this Agreement; (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 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, as the context requires; (g) the term "tax" means Australian tax or Chinese tax, as the context requires; (h) the term "Australian tax" means tax imposed by Australia, being tax to which this Agreement applies by virtue of Article 2; (i) the term "Chinese tax" means tax imposed by China, being tax to which this Agreement applies by virtue 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 China, the State Taxation Administration or its authorised representative. 2. In this Agreement, the terms "Australian tax" and "Chinese tax" do not include any penalty or interest imposed under the law of either Contracting State relating to the taxes to which this Agreement applies by virtue of Article 2. 3. In the application of this Agreement by a Contracting State, any term not defined in this Agreement shall, unless the context otherwise requires, have the meaning which it has under the laws of that State from time to time in force relating to the taxes to which this Agreement applies. ARTICLE 4 Resident 1. For the purpose of this Agreement, the term resident, in relation to a Contracting State, means a person who is fully liable to tax therein by reason of being a resident of that State under the tax law of that State. 2. A person is not a resident of a Contracting State for the purposes of this Agreement 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, then the status of the person shall be determined in accordance with the following rules: (a) the person shall be deemed to be a resident solely of the Contracting State in which a permanent home is available to the person; (b) if a permanent home is available to the person in both Contracting States, or in neither of them, the person shall be deemed to be a resident solely of the Contracting State with which the person's economic and personal relations are the closer. 4. Where by reason of the provisions of paragraph (1) a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident solely of the Contracting State in which its place of effective management or head office is situated. However, where such a person has its place of effective management in a Contracting State and its head office in the other Contracting State, the person shall be deemed to be a resident solely of that other State. 5. If a company has become a resident of a Contracting State for the principal purpose of enjoying benefits under this Agreement, that company shall not be entitled to any of the benefits of Articles 10, 11 and 12. 6. Where by reason of the provisions of paragraph (1) a company is a resident of Australia and, under a tax agreement between China and a third country, is also a resident of that third country, the company shall not be considered to be a resident of Australia for the purposes of enjoying benefits under this Agreement. ARTICLE 5 Permanent Establishment 1. For the purposes of this Agreement, the term permanent establishment means a fixed place of business through which the business of an enterprise is wholly or partly carried on. 2. The term "permanent establishment" includes especially: (a) a place of management; (b) a branch; (c) an office; (d) a factory; (e) a workshop; (f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources; (g) a farm or forest. 3. The term "permanent establishment" likewise encompasses: (a) a building site, a construction, assembly or installation project, or supervisory activities in connection therewith, but only where that site or project or those activities continue for a period of more than six months; (b) the furnishing of services, including consultancy services, in a Contracting State by an enterprise of the other Contracting State through employees or other personnel engaged by the enterprise for such purpose, but only where those activities continue (for the same or a connected project) within the first-mentioned Contracting State for a period or periods aggregating more than six months within any twelve-month period; and (c) a structure, installation, drilling rig, ship or other equipment used for the exploration for or exploitation of natural resources, or in activities connected with that exploration or exploitation, but only if so used continuously, or those activities continue, for a period of more than three months. 4. 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 carrying on, for the enterprise, any other activity of a preparatory or auxiliary character, such as advertising or scientific research. 5. 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 (6) 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) the person manufactures or processes in that State for the enterprise goods or merchandise belonging to the enterprise. 6. 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 Contracting State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted wholly or almost wholly on behalf of that enterprise, it will not be considered an agent of an independent status within the meaning of this paragraph. 7. 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. ARTICLE 6 Income from Real Property 1. Income from real property may be taxed in the Contracting State in which the real property is situated. 2. In this Article, the term "real property": (a) in the case of Australia, shall have the meaning which it has under the laws of Australia, and shall also include: (i) a lease of land and any other interest in or over land; (ii) a right to receive variable or fixed payments either as consideration for the exploitation of or the right to explore for or exploit, or in respect of the exploitation of, mineral deposits, oil or gas wells, quarries or other places of extraction or exploitation of natural resources; (b) in the case of China, shall have the meaning which it has under the laws of China, and shall also include: (i) property accessory to immovable property and livestock and equipment used in agriculture and forestry; (ii) rights to which the provisions of the general law respecting landed property apply; and (iii) usufruct of immovable property and rights to variable or fixed payments either as consideration for the exploitation of or the right to explore for or exploit, or in respect of the exploitation of, mineral deposits, sources and other natural resources; and (c) shall not include ships or aircraft. 3. Any interest, right or property referred to in any of the sub- paragraphs of paragraph (2) shall be regarded as situated where the land, mineral deposits, oil or gas wells, quarries or natural resources, as the case may be, are situated. 4. The provisions of paragraph (1) shall apply to income from the direct use, letting or use in any other form of real property. 5. The provisions of paragraphs (1), (3) and (4) shall also apply to income from real property of an enterprise and to income from real property used for the performance of independent personal services. 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. Subject to the provisions of paragraph (3), 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 or with other enterprises with which it deals. 3. In the determination of the profits of a permanent establishment, there shall be allowed as deductions, in accordance with the law relating to tax in the Contracting State in which the permanent establishment is situated, expenses which are incurred for the purposes of the permanent establishment (including executive and general administrative expenses so incurred) whether in the State in which the permanent establishment is situated or elsewhere. No such deduction shall be allowed in respect of amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission, for specific services performed or for management, or by way of interest on moneys lent to the permanent establishment. Likewise, no account shall be taken, in the determination of the profits of a permanent establishment, for amounts charged (otherwise than towards remimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission for specific services performed or for management, or by way of interest on moneys lent to the head office of the enterprise or any of its other offices. 4. 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. 5. For the purposes of paragraphs (1) to (4), the profits to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary. 6. Nothing in this Article shall affect the application of any law of a Contracting State relating to the determination of the profits to be attributed to a permanent establishment in cases where the information available to the competent authority of that State is inadequate to determine those profits, provided that that law shall be applied, so far as the information available to the competent authority permits, consistently with the principles of this Article. 7. Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article. 8. Nothing in this Article shall affect the operation of any law of a Contracting State relating to tax imposed on profits from insurance with non-residents provided that if the relevant law in force in either Contracting State at the date of signature of this Agreement 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 any amendment of this paragraph that may be appropriate. 9. Where: (a) a resident of a Contracting State is beneficially entitled, whether directly or indirectly through one or more trusts, 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 has, in accordance with the principles of Article 5, a permanent establishment in that other State, the enterprise carried on by the trustee shall be deemed to be a business carried on in that other State by that resident through a permanent establishment situated therein and the resident's share of business profits shall be attributed to that permanent establishment. ARTICLE 8 Shipping and Air Transport 1. Profits from the operation of ships derived by a resident of a Contracting State shall be taxable only in that State. 2. Notwithstanding the provisions of paragraph (1), such profits may be taxed in the other Contracting State where they are profits from operations of ships confined solely to places in that other State. 3. The provisions of paragraphs (1) and (2) shall also apply to profits from participation in a pool, a joint business or an international operating agency. 4. For the purposes of this Article, profits derived from the carriage by ships of passengers, livestock, mail, goods or merchandise shipped in a Contracting State for discharge at another place in that State shall be treated as profits from operations of ships confined solely to places in that State. 5. Nothing in this Agreement shall affect the operation of the Agreement between the Government of Australia and the Government of the People's Republic of China for the Avoidance of Double Taxation of Income and Revenues Derived by Air Transport Enterprises from International Air Transport signed at Beijing on 22 November 1985. 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 apply between the two enterprises in their commercial or financial relations which differ from those which might be expected to apply between independent enterprises dealing wholly independently with each other, then any profits which, but for those conditions, might have been 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. Nothing in this Article shall affect the application of any law of a Contracting State relating to the determination of the profits to be attributed to an enterprise, including determinations in cases where the information available to the competent authority of that State is inadequate to determine the profits to be attributed to an enterprise, provided that that law shall be applied, so far as it is practicable to do so, consistently with the principles of this Article. 3. Where a Contracting State includes in the profits of an enterprise of that Contracting State-and taxes accordingly-profits on which an enterprise of the other Contracting State has been charged to tax in that other Contracting State, and the profits so included are profits which might have been expected to have accrued to the enterprise of the first- mentioned State if the conditions applying between the two enterprises had been those which might have been expected to apply between independent enterprises, then that other Contracting State shall make an appropriate adjustment to the amount of tax charged therein on those profits. In determining such adjustment, due regard shall be had to the other provisions of this Agreement and the competent authorities of the Contracting States shall, if necessary, consult each other for this purpose. ARTICLE 10 Dividends 1. Dividends which are paid by a company which is a resident of a Contracting State and which are beneficially owned by a resident of the other Contracting State may be taxed in that other State. 2. Such dividends may be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but the tax so charged shall not exceed 15 per cent of the gross amount of the dividends. The provisions of this paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid. 3. The term "dividends" as used in this Article means income from shares or other rights participating in profits and not relating to debt- claims, as well as other income which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident. 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 therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, 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 Contracting State may not impose any tax on the dividends paid by the company, except insofar as such dividends are beneficially owned by a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or fixed base situated in that other State, nor subject the company's undistributed profits to tax even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in that other State. ARTICLE 11 Interest 1. Interest arising in a Contracting State, being interest of which a resident of the other Contracting State is the beneficial owner, may be taxed in that other State. 2. However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but the tax so charged shall not exceed 10 per cent of the gross amount of the interest. 3. The term "interest" in this Article means interest from debt- claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor's profits, and in particular income from Government securities or from bonds or debentures, and all other income that is assimilated to income from money lent by the law, relating to tax, of the Contracting State in which the income arises. 4. The provisions of paragraphs (1) and (2) 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 therein, or performs in that other Contracting State independent personal services from a fixed base situated therein, and the indebtedness in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply. 5. Interest shall be deemed to arise in a Contracting State when the payer is that Contracting State, a political subdivision or a local authority of that State or a person who, by reason of the provisions of paragraph (1) of Article 4, is a resident of that State. Where, however, the person paying the interest, whether the person is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the arrangement under which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated. 6. Where, by reason of a special relationship between the payer and the beneficial owner of the interest, or between both of them and some other person, the amount of the interest paid, having regard to the debt- claim for which it is paid, exceeds the amount which might have been expected to have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such a case, the excess part of the payments shall remain taxable according to the law, relating to tax, of each Contracting State, but subject to the other provisions of this Agreement. ARTICLE 12 Royalties 1. Royalties which arise in a Contracting State and which are beneficially owned by a resident of the other Contracting State may be taxed in that other State. 2. Such royalties may be taxed in the Contracting State in which they arise, and according to the laws of that Contracting State, but the tax so charged shall not exceed 10 per cent of the gross amount of the royalties. 3. The term "royalties" in this Article means payments or credits, whether periodical or not, and however described or computed, to the extent to which they are made as consideration for: (a) the use of, or the right to use, any copyright, patent, design or model, plan, secret formula or process, trademark, or other like property or right; (b) the use of, or the right to use, any industrial, commercial or scientific equipment; (c) the supply of scientific, technical, industrial or commercial know-how or information; (d) the supply of any assistance that is ancillary and subsidiary to, and is furnished as a means of enabling the application or enjoyment of, any such property or right as is mentioned in sub- paragraph (a), any such equipment as is mentioned in sub-paragraph (b) or any such know-how or information as is mentioned in sub- paragraph (c); (e) the use of, or the right to use: (i) motion picture films; (ii) films or video tapes for use in connection with television; or (iii) tapes for use in connection with radio broadcasting; or (f) giving up, wholly or partly, a right relating to the use or supply of any property or right referred to in this paragraph. 4. The provisions of paragraphs (1) and (2) shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties are paid or credited is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply. 5. Royalties shall be deemed to arise in a Contracting State when the payer is that Contracting State, a political subdivision or local authority of that State or a person who, by reason of the provisions of paragraph (1) of Article 4, is a resident of that State. Where, however, the person paying the royalties, whether the person is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties was incurred, and the royalties are borne by that permanent establishment or fixed base, then the royalties shall be deemed to arise in the Contracting State in which the permanent establishment or fixed based is situated. 6. Where, by reason of a special relationship between the payer and the beneficial owner of the royalties or between both of them and some other person, the amount of the royalties paid or credited, having regard to what they are paid or credited for, exceeds the amount which might have been expected to have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such a case, the excess part of the amount of the royalties paid or credited shall remain taxable according to the law, relating to tax, of each Contracting State, but subject to the other provisions of this Agreement. ARTICLE 13 Alienation of Property 1. Income or gains derived by a resident of a Contracting State from the alienation of real property referred to in Article 6 and, as provided in that Article, situated in the other Contracting State may be taxed in that other State. 2. Income or gains from the alienation of property, other than real property referred to in Article 6, that forms part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or pertains to a fixed base available to a resident of the first-mentioned State in that other State for the purpose of performing independent personal services, including income or gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such a fixed base, may be taxed in that other State. 3. Income or gains from the alienation of ships or aircraft operated in international traffic, or of property other than real property referred to in Article 6 pertaining to the operation of those ships or aircraft, shall be taxable only in the Contracting State of which the enterprise which operated those ships or aircraft is a resident. 4. Income or gains derived by a resident of a Contracting State from the alienation of shares or comparable interests in a company, the assets of which consist wholly or principally of real property in the other Contracting State of a kind referred to in Article 6, may be taxed in that other State. 5. Nothing in this Agreement affects the application of a law of a Contracting State relating to the taxation of gains of a capital nature derived from the alienation of property other than that to which any of paragraphs (1), (2), (3) and (4) apply. ARTICLE 14 Independent Personal Services 1. Income derived by an individual who is a resident of a Contracting State in respect of professional services or other independent activities of a similar character shall be taxable only in that State except in one of the following circumstances, when the income may also be taxed in the other Contracting State: (a) if the individual has a fixed base regularly available to him or her in the other Contracting State for the purpose of performing his or her activities; in such a case, only so much of the income as is attributable to that fixed base may be taxed in that other Contracting State; or (b) if the individual's stay in the other Contracting State is for a period or periods exceeding in the aggregate 183 days in any consecutive period of 12 months; in such a case, only so much of the income as is derived from his or her activities performed in that other State may be taxed in that other State. 2. The term "professional services" includes especially those performed in the exercise of independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants. ARTICLE 15 Dependent Personal Services 1. Subject to the provisions of Articles 16, 18, 19, 20 and 21, salaries, wages and other similar remuneration derived by an individual who is a resident of a Contracting State in respect of an employment shall be taxable only in that Contracting State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived from that exercise may be taxed in that other State. 2. Notwithstanding the provisions of paragraph (1), remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first- mentioned State if: (a) the recipient is present in the other Contracting State for a period or periods not exceeding in the aggregate 183 days in any consecutive period of 12 months; (b) the remuneration is paid by, or on behalf of, an employer who is not a resident of that other State; and (c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in that other State. 3. Notwithstanding the provisions of paragraphs (1) and (2), remuneration derived in respect of an employment excercised aboard a ship or aircraft operated by an enterprise of a Contracting State in international traffic, shall be taxable only in the Contracting State of which the enterprise is a resident. ARTICLE 16 Directors' Fees Directors' fees and similar payments derived by a person who is a resident of a Contracting State in the person's capacity as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other State. ARTICLE 17 Artistes and Athletes 1. Notwithstanding the provisions of Articles 14 and 15, income derived by residents of a Contracting State as entertainers (such as theatrical, motion picture, radio or television artistes and musicians and athletes) from their personal activities as such exercised in the other Contracting State may be taxed in that other State. 2. Where income in respect of the personal activities of an entertainer as such accrues not to that entertainer but to another person, that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer are exercised. 3. Notwithstanding the provisions of paragraphs (1) and (2), income derived by entertainers who are residents of a Contracting State from their activities as such exercised in the other Contracting State under a plan of cultural exchange between the Governments of the Contracting States shall be exempt from tax in that other Contracting State. ARTICLE 18 Pensions Subject to the provisions of paragraph (2) of Article 19, pensions paid to a resident of a Contracting State in consideration of past employment, and payments made to a resident of that State under the social security system of the other Contracting State, shall be taxable only in the first-mentioned State. ARTICLE 19 Government Service 1. (a) Remuneration, other than a pension, paid by a Contracting State or a political subdivision or local authority of that State to an individual in respect of services rendered in the discharge of functions of a governmental nature shall be taxable only in that Contracting State. (b) However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that other State and the individual is a resident of that other State who: (i) is a citizen or national of that other State; or (ii) did not become a resident of that other State solely for the purpose of rendering the services. 2. (a) Any pension paid by, or out of funds created by, a Contracting State or a political subdivision or local authority of that State to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State. (b) However, such pension shall be taxable only in the other Contracting State if the individual is a resident of, and a citizen or national of, that other State. 3. The provisions of paragraphs (1) and (2) shall not apply to remuneration or pensions in respect of services rendered in connection with any trade or business carried on by a Contracting State or a political subdivision or local authority of that State. In such a case, the provisions of Articles 15, 16, 17 or 18, as the case may be, shall apply. ARTICLE 20 Professors and Teachers 1. Where a professor or teacher who is a resident of a Contracting State visits the other Contracting State for a period not exceeding two years for the purpose of teaching or carrying out advanced study or research at a university, college, school or other educational institution in that other State, any remuneration the person receives for such teaching, advanced study or research shall be exempt from tax in that other State to the extent to which that remuneration is, or upon the application of this Article will be, subject to tax in the first-mentioned State. 2. This Article shall not apply to remuneration which a professor or teacher receives for conducting research if the research is undertaken primarily for the private benefit of a specific person or persons. ARTICLE 21 Students and Trainees 1. Where a student or trainee, 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 his or her education or training, receives payments from sources outside that other State for the purpose of his or her maintenance, education or training, those payments shall be exempt from tax in that other State. 2. In respect of grants, scholarships and remuneration not covered by paragraph (1), a student or trainee described in paragraph (1) shall, in addition, be entitled during his or her education or training to the same exemptions, reliefs or reductions in respect of taxes available to residents of the State which he or she is visiting. ARTICLE 22 Other Income 1. Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Agreement shall be taxable only in that State. 2. The provisions of paragraph (1) shall not apply to income other than income from real property as defined in paragraph (2) of Article 6, if the beneficial owner of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the income is paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply. 3. Notwithstanding the provisions of paragraphs (1) and (2), items of income of a resident of a Contracting State not dealt with in the foregoing articles of this Agreement and arising in the other Contracting State may be taxed in that other State. ARTICLE 23 Methods of Elimination of Double Taxation 1. In China, double taxation shall be eliminated as follows: (a) Where a resident of China derives income from Australia, the amount of tax on that income payable in Australia in accordance with the provisions of this Agreement may be credited against the Chinese tax imposed on that resident. The amount of credit, however, shall not exceed the amount of the Chinese tax on that income computed in accordance with the taxation laws and regulations of China. (b) Where the income derived from Australia is a dividend paid by a company which is a resident of Australia to a company which is a resident of China and which owns not less than 10 per cent of the shares of the company paying the dividend, the credit shall take into account the tax paid to Australia by the company paying the dividend in respect of its income. 2. Subject to the provisions of the law of Australia from time to time in force which relate to the allowance of a credit against Australian tax of tax paid in a country outside Australia (which shall not affect the general principle hereof), Chinese tax paid under the law of China and in accordance with this Agreement, whether directly or by deduction, in respect of income derived by a person who is a resident of Australia from sources in China shall be allowed as a credit against Australian tax payable in respect of that income. 3. Where a company which is a resident of China and is not a resident of Australia for the purposes of Australian tax pays a dividend to a company which is a resident of Australia and which controls directly or indirectly not less than 10 per cent of the voting power of the first- mentioned company, the credit referred to in paragraph (2) shall include the Chinese tax paid by that first-mentioned company in respect of that portion of its profits out of which the dividend is paid. 4. For the purpose of paragraphs (2) and (3), Chinese tax paid shall include an amount equivalent to the amount of any Chinese tax forgone. 5. In paragraph (4), the term Chinese tax forgone means, subject to paragraph (6), an amount which, under the law of China relating to Chinese tax and in accordance with this Agreement, would have been payable as Chinese tax on income but for an exemption from, or reduction of, Chinese tax on that income in accordance with: (a) Articles 5 and 6 of the Income Tax Law of the People's Republic of China concerning Joint Ventures with Chinese and Foreign Investment and Article 3 of the Detailed Rules and Regulations for the Implementation of the Income Tax Law of the People's Republic of China concerning Joint Ventures with Chinese and Foreign Investment; (b) Articles 4 and 5 of the Income Tax Law of the People's Republic of China concerning Foreign Enterprises; (c) Articles I, II, III, IV and X of Part I, Articles I, II, III and IV of Part II and Articles I, II and III of Part III of the interim provisions of the State Council of the People's Republic of China on reduction in or exemption from enterprise income tax and the consolidated industrial and commercial tax for special economic zones and fourteen coastal cities; (d) Articles 12 and 19 of the State Council Regulations for the Encouragement of Investment in the Development of Hainan Island; (e) Articles 8, 9 and 10 of the State Council Regulations concerning the Encouragement of Foreign Investment; and (f) Articles 1, 2 and 3 of the interim provisions of the Ministry of Finance of the People's Republic of China regarding (reduction in or exemption from) enterprise income tax and industrial and commercial consolidated tax for encouraging foreign investment in the coastal open economic areas; insofar as they were in force on, and have not been modified since, the date of signature of this Agreement, or have been modified only in minor respects so as not to affect their general character and any other provision which may subsequently be made granting an exemption from or reduction of tax which the Treasurer of Australia and the Commissioner of the State Taxation Administration of China agree from time to time in letters exchanged for this purpose to be of a substantially similar character, if that provision has not been modified thereafter or has been modified only in minor respects so as not to affect its general character. 6. In the application of paragraph (5) in relation to dividend, interest and royalty income to which Articles 10, 11 and 12 respectively apply, the amount of Chinese tax shall be deemed to be the amount equal to: (a) in the case of dividends, 15 per cent of the gross amount of those dividends; (b) in the case of interest, 10 per cent of the gross amount of that interest; and (c) in the case of royalties, 15 per cent of the gross amount of those royalties, but only where the rate of tax levied under the law of China, other than a provision specified in paragraph (5), is not less than 15 per cent. 7. Paragraphs (4), (5) and (6) shall apply only in relation to income derived in any of the first ten years of income in relation to which this Agreement has effect by virtue of sub-paragraph (a) (ii) of Article 27 and in any later year of income that may be agreed by the Treasurer of Australia and the Commissioner of the State Taxation Administration of China in letters exchanged for this purpose. 8. For the purposes of this Article, profits, income or gains derived by a resident of a Contracting State which are taxed in the other Contracting State in accordance with this Agreement shall be deemed to be income arising from sources in that other State. ARTICLE 24 Mutual Agreement Procedure 1. Where a person considers that the actions of the competent authority of one or both of the Contracting States result or will result for the person in taxation not in accordance with the provisions of this Agreement, the person may, irrespective of the remedies provided by the domestic law of those States, present a case to the competent authority of the Contracting State of which the person is a resident. The case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the provisions of this Agreement. 2. The competent authority shall endeavour, if the claim appears to it to be justified and if it is not itself able to arrive at a satisfactory solution, to resolve the case by agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation which is not in accordance with the provisions of this Agreement. Any agreement reached shall be implemented notwithstanding any time limits in the domestic law of the Contracting States. 3. The competent authorities of the Contracting States shall endeavour to resolve by agreement any difficulties or doubts arising as to the application of this Agreement. 4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of giving effect to the provisions of this Agreement. ARTICLE 25 Exchange of Information 1. The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this Agreement or of the domestic laws of the Contracting States concerning taxes covered by this Agreement, insofar as the taxation thereunder is not contrary to this Agreement, in particular for the prevention of avoidance or evasion of such taxes. Any information received by the competent authority of a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) involved in the assessment or collection of, the enforcement of prosecution in respect of, or the determination of appeals in relation to, the taxes covered by this Agreement and shall be used only for such purposes. 2. In no case shall the provisions of paragraph (1) be construed so as to impose on the competent authority of a Contracting State the obligation: (a) to carry out administrative measures at variance with the laws or the administrative practice of that or of the other Contracting State; (b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State; (c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information the disclosure of which would be contrary to public policy. ARTICLE 26 Diplomatic Agents and Consular Officers Nothing in this Agreement shall affect the fiscal privileges of diplomatic agents or consular officers under the general rules of international law or under the provisions of special agreements. ARTICLE 27 Entry into Force This Agreement shall enter into force on the date on which the Contracting States exchange notes through the diplomatic channel notifying each other that the last of such things has been done as is necessary to give this Agreement the force of law in Australia and in China, as the case may be, and thereupon this Agreement shall have effect: (a) in Australia: (i) in respect of withholding tax on income that is derived by a non-resident, in relation to income derived on or after 1 July in the calendar year next following that in which the Agreement enters into force; (ii) in respect of other Australian tax, in relation to income of any year of income beginning on or after 1 July in the calendar year next following that in which the Agreement enters into force; (b) in China: in respect of income derived during any taxable year beginning on or after 1 January next following that in which this Agreement enters into force. ARTICLE 28 Termination This Agreement shall continue in effect indefinitely, but either of the Contracting States may, on or before 30 June in any calendar year beginning after the expiration of 5 years from the date of its entry into force, give to the other Contracting State through the diplomatic channel written notice of termination and, in that event, this Agreement shall cease to be effective: (a) in Australia: (i) in respect of withholding tax on income that is derived by a non-resident, in relation to income derived on or after 1 July in the calendar year next following that in which the notice of termination is given; (ii) in respect of other Australian tax, in relation to income of any year of income beginning on or after 1 July in the calendar year next following that in which the notice of termination is given; (b) in China: in relation to income of any taxable year beginning on or after 1 January next following that in which the notice of termination is given. IN WITNESS WHEREOF the undersigned, duly authorised thereto, have signed this Agreement. DONE in duplicate at Canberra this 17th day of November One thousand nine hundred and eighty-eight in the English and Chinese languages, both texts being equally authentic. |P. J. KEATING |QIAN QICHEN | |FOR THE GOVERNMENT OF |FOR THE GOVERNMENT OF | |AUSTRALIA |THE PEOPLE'S REPUBLIC | |OF CHINA | | Schedule 29-Agreement between Australia and the Independent State of Papua New Guinea for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income Section 3 Australia and the Independent State of Papua New Guinea, Recognising the importance of measures to strengthen their relationship in accordance with the Joint Declaration of Principles Guiding Relations between Papua New Guinea and Australia, including the principle that cooperation and exchanges between the two countries shall be mutually beneficial and based on full participation by both countries; Re-affirming their desire to maintain and strengthen trade, investment and private sector cooperation between the two countries; and Desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, Have agreed as follows: ARTICLE 1 Personal Scope This Agreement 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 Agreement shall apply are: (a) in Australia: the income tax, and the petroleum resource rent tax in respect of offshore projects, imposed under the federal law of the Commonwealth of Australia; (b) in Papua New Guinea: the income tax imposed under the law of Papua New Guinea, including: (i) the salary or wages tax; (ii) the additional profits tax upon taxable additional profits from mining operations; (iii) the additional profits tax upon taxable additional profits from petroleum operations; (iv) the specific gains tax upon taxable specific gains; and (v) the dividend withholding tax upon taxable dividend income. 2. This Agreement shall also apply to any identical or substantially similar taxes which are imposed under the federal law of the Commonwealth of Australia or under the law of Papua New Guinea after the date of signature of this Agreement 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 which are made in the laws of their respective States relating to the taxes to which this Agreement applies. ARTICLE 3 General Definitions 1. In this Agreement, 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 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 sub-paragraphs (i) to (vi) inclusive) in respect of which there is for the time being in force, consistently with international law, a law of Australia dealing with the exploitation of any of the natural resources of the sea-bed and subsoil of the continental shelf; (b) the term "Papua New Guinea" means the Independent State of Papua New Guinea and, when used in a geographical sense, includes any area adjacent to the territorial limits of Papua New Guinea in respect of which there is for the time being in force, consistently with international law, a law of Papua New Guinea dealing with the exploitation of any of the natural resources of the continental shelf, its sea-bed and subsoil; (c) the terms "Contracting State", "one of the Contracting States" and "other Contracting State" mean Australia or Papua New Guinea, 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 terms "enterprise of one of the Contracting States" and "enterprise of the other Contracting States" mean an enterprise carried on by a resident of Australia or an enterprise carried on by a resident of Papua New Guinea, as the context requires; (g) the term "tax" means Australian tax or Papua New Guinea tax, as the context requires; (h) the term "Australian tax" means tax imposed by Australia, being tax to which this Agreement applies by virtue of Article 2; (i) the term "Papua New Guinea tax" means tax imposed by Papua New Guinea, being tax to which this Agreement applies by virtue of Article 2; (j) the term "competent authority" means, in the case of Australia, the Commissioner of Taxation or an authorized representative of the Commissioner and, in the case of Papua New Guinea, the Chief Collector of Taxes or an authorized representative of the Chief Collector of Taxes. 2. In this Agreement, the terms "Australian tax" and "Papua New Guinea tax" do not include any penalty or interest imposed under the law of either Contracting State relating to the taxes to which this Agreement applies by virtue of Article 2. 3. In the application of this Agreement by a Contracting State, any term not defined in this Agreement shall, unless the context otherwise requires, have the meaning which it has under the laws of that State from time to time in force relating to the taxes to which this Agreement applies. ARTICLE 4 Residence 1. For the purposes of this Agreement, a person is a resident of one of the Contracting States: (a) in the case of Australia, if the person is a resident of Australia for the purposes of Australian tax; and (b) in the case of Papua New Guinea, if the person is a resident of Papua New Guinea for the purposes of Papua New Guinea tax. 2. A person is not a resident of a Contracting State for the purposes of this Agreement 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, then the status of the person shall be determined in accordance with the following rules: (a) the person shall be deemed to be a resident solely of the Contracting State in which a permanent home is available to the person; (b) if a permanent home is available to the person in both Contracting States, or in neither of them, the person shall be deemed to be a resident solely of the Contracting State in which the person has an habitual abode; (c) if the person has an habitual abode in both Contracting States, or if the person does not have an habitual abode in either of them, the person shall be deemed to be a resident solely of the Contracting State with which the person's personal and economic relations are the closer. 4. Where by reason of the provisions of paragraph 1 a company is a resident of both Contracting States, then its status shall be determined in accordance with the following rules: (a) it shall be deemed to be a resident solely of the Contracting State in which its place of central management and control is situated; (b) if its place of central management and control is not situated in either Contracting State, it shall be deemed to be a resident solely of the Contracting State in which it was incorporated. 5. Where a trust estate is treated by the laws of both Contracting States relating to tax as a resident or a resident trust estate, it shall not be treated, for the purposes of this Agreement, as a resident of either State. ARTICLE 5 Permanent Establishment 1. For the purposes of this Agreement, the term "permanent establishment", in relation to an enterprise, 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, an oil or gas well, a quarry or any other place of extraction of natural resources; (g) an agricultural, pastoral or forestry property; (h) a building site or construction, installation or assembly project which exists for more than 90 days. 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 one of the Contracting States and to carry on business through that permanent establishment if: (a) it carries on supervisory activities in that State for more than 90 days in connection with a building site, or a construction, installation or assembly project which is being undertaken, in that State; (b) substantial equipment is being used in that State by, for or under contract with the enterprise; or (c) services are furnished in that State, including consultancy services through employees or other personnel engaged by the enterprise for such purposes, and those activities continue for the same or a connected project within that State for a period or periods aggregating more than 90 days in any year of income. 5. A person acting in one of the Contracting States on behalf of an enterprise of the other Contracting State-other than an agent of an independent status to whom paragraph 6 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 mere purchase of goods or merchandise for the enterprise; (b) the person has no such authority, but habitually maintains in that State a stock of goods or merchandise from which the person regularly delivers in that State goods or merchandise on behalf of the enterprise; or (c) in so acting, the person manufactures or processes in that State for the enterprise goods or merchandise belonging to the enterprise. 6. An enterprise of one of the Contracting States 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 person who is a broker, general commission agent or any other agent of an independent status and is acting in the ordinary course of the person's business as such a broker or agent. 7. The fact that a company which is a resident of one of the Contracting States 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. 8. The principles set forth in the preceding paragraphs of this Article shall be applied in determining for the purposes of this Agreement whether there is a permanent establishment outside both Contracting States, and whether an enterprise, not being an enterprise of one of the Contracting States, has a permanent establishment in one of the Contracting States. ARTICLE 6 Income from Real Property 1. Income from real property may be taxed in the Contracting State in which the real property is situated. 2. In this Article, the term "real property", in relation to one of the Contracting States, has the meaning which it has under the laws of that State and also includes: (a) a lease of land and any other interest in or over land including a right to explore for mineral, oil or gas deposits or other natural resources, and a right to mine such deposits or resources; and (b) a right to receive variable or fixed payments either as consideration for the exploitation of or the right to explore for or exploit, or in respect of the exploitation of, mineral, oil or gas deposits, quarries or other places of extraction or exploitation of natural resources. 3. Any interest or right referred to in paragraph 2 shall be regarded as situated where the land, mineral, oil or gas deposits, quarries or natural resources, as the case may be, are situated or where the exploration may take place. 4. The provisions of paragraphs 1 and 3 shall also apply to income from real property of an enterprise and to income from real property used for the performance of professional services. ARTICLE 7 Business Profits 1. The profits of an enterprise of one of the Contracting States 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: (a) that permanent establishment; or (b) sales within that other Contracting State of goods or merchandise of the same or a similar kind as those sold, or other business activities within that other State of the same or a similar kind as those carried on, through that permanent establishment, if, on the basis of the information available to the competent authority of that other State, it may reasonably be concluded that those sales or business activities would not have been made or carried on but for the existence of that permanent establishment or the continued provision by it of good or services. 2. Subject to the provisions of paragraph 3, where an enterprise of one of the Contracting States 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 or with other enterprises with which it deals. 3. In the determination of the profits of a permanent establishment, there shall be allowed as deductions expenses of the enterprise, being expenses which are incurred for the purposes of the permanent establishment (including executive and general administrative expenses so incurred) and which would be deductible if the permanent establishment were an independent entity which paid those expenses, whether incurred in the Contracting State in which the permanent establishment is situated or elsewhere. 4. 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. 5. Nothing in this Article shall affect the application of any law of a Contracting State relating to the determination of the tax liability of a person in cases where the information available to the competent authority of that State is inadequate to determine the profits to be attributed to a permanent establishment, provided that that law shall be applied, so far as the information available to the competent authority permits, consistently with the principles of this Article. 6. Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article. 7. Nothing in this Article shall affect the operation of: (a) any law of a Contracting State relating to tax imposed on profits from insurance with non-residents; or (b) the law of Papua New Guinea relating to: (i) the specific gains tax upon taxable specific gains; or (ii) the taxation of income derived by a foreign contractor from a prescribed contract within the meaning of that law, where, in accordance with this Agreement, that contractor is a resident of Australia with a permanent establishment in Papua New Guinea, provided that if the relevant law in force in either Contracting State or in Papua New Guinea, as the case may be, at the date of signature of this Agreement 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 any amendment of this paragraph that may be appropriate. 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 that other State by that resident through a permanent establishment situated therein and that share of business profits shall be attributed to that permanent establishment. ARTICLE 8 Ships and Aircraft 1. Profits from the operation of ships or aircraft derived by a resident of one of the Contracting States shall be taxable only in that State. 2. Notwithstanding the provisions of paragraph 1, such profits may be taxed in the other Contracting State where they are profits from operations of ships or aircraft confined solely to places in that other State. 3. The provisions of paragraphs 1 and 2 shall apply in relation to the share of the profits from the operation of ships or aircraft derived by a resident of one of the Contracting States through participation in a pool service, in a joint transport operating organization or in an international operating agency. 4. For the purposes of this Article, profits derived from the carriage by ships or aircraft of passengers, livestock, mail, goods or merchandise shipped in a Contracting State for discharge at another place in that State shall be treated as profits from operations of ships or aircraft confined solely to places in that State. ARTICLE 9 Associated Enterprises 1. Where: (a) an enterprise of one of the Contracting States 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 one of the Contracting States and an enterprise of the other Contracting State, and in either case conditions operate between the two enterprises in their commercial or financial relations which differ from those which might be expected to operate between independent enterprises dealing wholly independently with one another, then any profits which, but for those conditions, might have been 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. Nothing in this Article shall affect the application of any law of a Contracting State relating to the determination of the tax liability of a person, including determinations in cases where the information available to the competent authority of that State is inadequate to determine the income to be attributed to an enterprise, provided that that law shall be applied, so far as it is practicable to do so, consistently with the principles of this Article. 3. Where profits on which an enterprise of one of the Contracting States has been charged to tax in that State are also included, by virtue of paragraph 1 or 2, in the profits of an enterprise of the other Contracting State and charged to tax in that other State, and the profits so included are profits which might have been expected to have accrued to that enterprise of the other State if the conditions operative between the enterprises had been those which might have been expected to have operated between independent enterprises dealing wholly independently with one another, then the first-mentioned State shall make an appropriate adjustment to the amount of tax charged on those profits in the first- mentioned State. In determining such an adjustment, due regard shall be had to the other provisions of this Agreement and for this purpose the competent authorities of the Contracting States shall if necessary consult each other. ARTICLE 10 Dividends 1. Dividends paid by a company which is a resident of one of the Contracting States for the purposes of its tax, being dividends to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State. 2. Such dividends may 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, in Papua New Guinea, 20 per cent and, in Australia, 15 per cent, of the gross amount of the dividends. 3. The term dividends in this Article means income from shares and other income assimilated to income from shares by the law, relating to tax, of the Contracting State of which the company making the distribution is a resident for the purposes of its tax. 4. The provisions of paragraph 2 shall not apply if the person beneficially entitled to the dividends, being a resident of one of the Contracting States, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In any such case the provisions of Article 7 or Article 14, as the case may be, shall apply. 5. Dividends paid by a company which is a resident of one of the Contracting States, being dividends to which a person who is not a resident of the other Contracting State is beneficially entitled, shall be exempt from tax in that other State except insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or fixed base situated in that other State. Provided that 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 Papua New Guinea for the purposes of Papua New Guinea tax. 6. The amount of specific gains tax imposed by Papua New Guinea in respect of the disposal by a resident of Australia of shares in a company that is a resident of Papua New Guinea shall not exceed an amount equivalent to 20 per cent of that proportion of the total dividend to which the vendor would have been entitled in respect of those shares had the company declared a dividend to the extent of its undistributed profits within the meaning of the law of Papua New Guinea relating to Papua New Guinea tax. ARTICLE 11 Interest 1. Interest arising in one of the Contracting States, being interest to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State. 2. Such interest may 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. 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, and interest from any other form of indebtedness as well as all other income assimilated to income from money lent by the law, relating to tax, of the Contracting State in which the income arises. 4. The provisions of paragraph 2 shall not apply if the person beneficially entitled to the interest, being a resident of one of the Contracting States, carries on business in the other Contracting State, in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the indebtedness in respect of which the interest is paid is effectively connected with: (a) such permanent establishment or fixed base; or (b) business activities referred to in sub-paragraph 1 (b) of Article 7, in which case the provisions of Article 7 or Article 14, as the case may be, shall apply. 5. Interest shall be deemed to arise in a Contracting State when the payer is that State itself or a political subdivision or local authority of that State or a person who is a resident of that State for the purposes of its tax. Where, however, the person paying the interest, whether the person is a resident of one of the Contracting States or not, has in one of the Contracting States or outside both Contracting States a permanent establishment or fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated. 6. Where, owing to a special relationship between the payer and the person beneficially entitled to the interest, or between both of them and some other person, the amount of the interest paid, having regard to the indebtedness for which it is paid, exceeds the amount which might have been expected to have been agreed upon by the payer and the person so entitled in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In that case, the excess part of the amount of the interest paid shall remain taxable according to the law, relating to tax, of each Contracting State, but subject to the other provisions of this Agreement. ARTICLE 12 Royalties 1. Royalties arising in one of the Contracting States, being royalties to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State. 2. Such royalties may be taxed in the Contracting State in which they arise, 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 royalties. 3. The term "royalties" in this Article means payments or credits, whether periodical or not, and however described or computed, to the extent to which they are made as consideration for: (a) the use of, or the right to use, any copyright, patent, design or model, plan, secret formula or process, trademark, or other like property or right; (b) the use of, or the right to use, any industrial, commercial or scientific equipment; (c) the supply of scientific, technical, industrial or commercial knowledge or information; (d) the supply of any assistance that is ancillary and subsidiary to, and is furnished as a means of enabling the application or enjoyment of, any such property or right as is mentioned in sub- paragraph (a), any such equipment as is mentioned in sub- paragraph (b) or any such knowledge or information as is mentioned in sub-paragraph (c); (e) the use of, or the right to use: (i) motion picture films; (ii) films or video tapes for use in connection with television; or (iii) tapes for use in connection with radio broadcasting; or (f) total or partial forbearance in respect of the use or supply of any property or right referred to in this paragraph. 4. The provisions of paragraph 2 shall not apply if the person beneficially entitled to the royalties, being a resident of one of the Contracting States, carries on business in the other Contracting State, in which the royalties arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the property or right in respect of which the royalties are paid or credited is effectively connected with: (a) such permanent establishment or fixed base; or (b) business activities referred to in sub-paragraph 1 (b) of Article 7, in which case the provisions of Article 7 or Article 14, as the case may be, shall apply. 5. Royalties shall be deemed to arise in a Contracting State when the payer is that State itself or a political subdivision or local authority of that State or a person who is a resident of that State for the purposes of its tax. Where, however, the person paying the royalties, whether the person is a resident of one of the Contracting States or not, has in one of the Contracting States or outside both Contracting States a permanent establishment or fixed base in connection with which the liability to pay the royalties was incurred, and the royalties are borne by the permanent establishment or fixed base, then the royalties shall be deemed to arise in the State in which the permanent establishment or fixed base is situated. 6. Where a special relationship exists between the payer and the person beneficially entitled to the royalties, or between both of them and some other person, and (a) the basis on which the payment or credit is made would not commonly be found in the absence of such relationship: the amount of the royalties paid or credited may be taxed in the Contracting State in which they arise and according to the law, relating to tax, of that State, but subject to the other provisions of this Agreement; or (b) the amount of the royalties paid or credited, having regard to what they are paid or credited for, exceeds the amount which might have been expected to have been agreed upon by the payer and the person so entitled in the absence of such relationship: the provisions of this Article shall apply only to the last-mentioned amount. In that case, the excess part of the amount of the royalties paid or credited shall remain taxable according to the law, relating to tax, of each Contracting State, but subject to the other provisions of this Agreement. ARTICLE 13 Alienation of Property 1. Income or gains derived by a resident of one of the Contracting States from the alienation of real property referred to in Article 6 and, as provided in that Article, situated in the other Contracting State may be taxed in that other State. 2. Income or gains from the alienation of property, other than real property referred to in Article 6, that forms part of the business property of a permanent establishment which an enterprise of one of the Contracting States has in the other Contracting State or pertains to a fixed base available to a resident of the first-mentioned State in that other State for the purpose of performing independent personal services, including income or gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such a fixed base, may be taxed in that other State. 3. Income or gains from the alienation of ships or aircraft operated in international traffic, or of property (other than real property referred to in Article 6) pertaining to the operation of those ships or aircraft, shall be taxable only in the Contracting State of which the enterprise which operated those ships or aircraft is a resident. 4. Income or gains derived by a resident of one of the Contracting States from the alienation of shares or comparable interests in a company, the assets of which consist wholly or principally of real property in the other Contracting State of a kind referred to in Article 6 and, as provided in that Article, situated in that other State, may be taxed in that other State. 5. Nothing in this Article affects the application of a law of a Contracting State relating to the taxation of gains of a capital nature derived from the alienation of property other than that to which any of paragraphs 1, 2, 3, and 4 apply. ARTICLE 14 Independent Personal Services 1. Income derived by an individual who is a resident of one of the Contracting States in respect of professional services or other independent activities of a similar character shall be taxable only in that State unless: (a) a fixed base is regularly available to the individual in the other Contracting State for the purpose of performing the individual's activities. If such a fixed base is available to the individual, the income may be taxed in the other State but only so much of it as is attributable to activities exercised from that fixed base; (b) the income is derived from a resident of that other Contracting State or a permanent establishment in that other Contracting State and exceeds an amount of $A8,000 or its equivalent in Papua New Guinea Kina in any one 12 month period. In that case so much of the income as is derived from that individual's activities in that other Contracting State may be taxed in that State; or (c) that individual's stay in that other Contracting State exceeds 90 days in any year of income. In that case so much of the income as is derived from that individual's activities in that other Contracting State may be taxed in that State. 2. The term "professional services" includes services performed in the exercise of independent scientific, literary, artistic, educational or teaching activities as well as in the exercise of the independent activities of physicians, lawyers, engineers, architects, dentists and accountants. ARTICLE 15 Dependent Personal Services 1. Subject to the provisions of Articles 16, 18, 19 and 20, salaries, wages, gratuities and other similar remuneration, including payments made in consequence of the termination of employment, derived by an individual who is a resident of one of the Contracting States in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived from that exercise may be taxed in that other State. 2. Notwithstanding the provisions of paragraph 1, remuneration derived by an individual who is a resident of one of the Contracting States in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if: (a) the recipient is present in that other State for a period or periods not exceeding in the aggregate 90 days in the year of income of that other State; (b) the remuneration is paid by, or on behalf of, an employer who is not a resident of that other State; (c) the remuneration is not deductible in determining taxable profits of a permanent establishment or a fixed base which the employer has in that other State; and (d) the remuneration is, or upon the application of this Article will be, subject to tax in the first-mentioned State. 3. Notwithstanding the preceding provisions of this Article, remuneration in respect of an employment exercised aboard a ship or aircraft operated in international traffic by a resident of one of the Contracting States may be taxed in that State. ARTICLE 16 Directors' Fees Directors' fees and similar payments derived by a person who is a resident of one of the Contracting States in the person's capacity as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other State. ARTICLE 17 Entertainers 1. Notwithstanding the provisions of Articles 14 and 15, income derived by entertainers (such as theatrical, motion picture, radio or television artistes and musicians and athletes) from their personal activities as such may be taxed in the Contracting State in which these activities are exercised. 2. Where income in respect of the personal activities of an entertainer as such accrues not to that entertainer but to another person, that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer are exercised. ARTICLE 18 Pensions and Annuities 1. Pensions (including government pensions) and annuities paid to a resident of one of the Contracting States shall be taxable only in that State. 2. The term "annuity" means a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time under an obligation to make the payments in return for adequate and full consideration in money or money's worth. 3. Any alimony or other maintenance payment arising in one of the Contracting States and paid to a resident of the other Contracting State shall be taxable only in the first-mentioned State. ARTICLE 19 Government Service 1. Remuneration, other than a pension or annuity, paid by one of the Contracting States or a political subdivision or local authority of that State to any individual in respect of services rendered in the discharge of government functions shall be taxable only in that State. However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that other State and the recipient is a resident of that other State who: (a) is a citizen or national of that State; or (b) did not become a resident of that State solely for the purpose of performing the services. 2. The provisions of paragraph 1 shall not apply to remuneration in respect of services rendered in connection with any trade or business carried on by one of the Contracting States or a political subdivision or local authority of that State. In such a case, the provisions of Article 15 or Article 16, as the case may be, shall apply. ARTICLE 20 Students Where a student, who is a resident of one of the Contracting States 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 his or her education, receives payments from sources outside that other State for the purpose of his or her maintenance or education, those payments shall be exempt from tax in that other State. ARTICLE 21 Income Not Expressly Mentioned 1. Items of income of a resident of one of the Contracting States which are not expressly mentioned in the foregoing Articles of this Agreement shall be taxable only in that State. 2. However, any such income derived by a resident of one of the Contracting States from sources in the other Contracting State may also be taxed in that other State. 3. The provisions of paragraph 1 shall not apply to income derived by a resident of one of the Contracting States where that income is effectively connected with a permanent establishment or fixed base situated in the other Contracting State. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply. ARTICLE 22 Miscellaneous 1. Subject to the provisions of paragraph 3, income or gains derived by a resident of one of the Contracting States which, under any one or more of Articles 6 to 8, Articles 10 to 19 and Article 21, may be taxed in the other Contracting State shall for the purposes of the law of that other Contracting State relating to its tax be deemed to be income from sources in that other Contracting State. 2. Income or gains derived by a resident of one of the Contracting States which, under any one or more of Articles 6 to 8, Articles 10 to 19 and Article 21, may be taxed in the other Contracting State shall for the purposes of Article 23 and of the law of the first-mentioned Contracting State relating to its tax be deemed to be income from sources in that other Contracting State. 3. The provisions of paragraph 1 shall not apply in relation to interest, to which Article 11 applies and to which a resident of Australia is beneficially entitled, until such time as the law of Papua New Guinea relating to Papua New Guinea tax provides for source rules, in relation to interest, consistent with those provisions. 4. Where a resident of one of the Contracting States derives income directly or indirectly from or in relation to fisheries activities carried on within the Protected Zone of the Torres Strait, that income may be taxed only by that State. 5. In paragraph 4, the term "Protected Zone" has the same meaning that it has in the Treaty made between Australia and the Independent State of Papua New Guinea concerning Sovereignty and Maritime Boundaries in the area between the two Countries, and signed at Sydney on 18 December 1978. ARTICLE 23 Methods of Elimination of Double Taxation 1. Subject to the provisions of the law of Australia from time to time in force which relate to the allowance of a credit against Australian tax of tax paid in a country outside Australia (which shall not affect the general principle hereof), Papua New Guinea tax paid under the law of Papua New Guinea and in accordance with this Agreement, whether directly or by deduction, in respect of income derived by a person who is a resident of Australia from sources in Papua New Guinea shall be allowed as a credit against Australian tax payable in respect of that income. 2. Where a company which is a resident of Papua New Guinea and is not a resident of Australia for the purposes of Australian tax pays a dividend to a company which is a resident of Australia and which controls directly or indirectly not less than 10 per cent of the voting power of the first- mentioned company, the credit referred to in paragraph 1 shall include the Papua New Guinea tax paid by that first-mentioned company in respect of that portion of its profits out of which the dividend is paid. 3. For the purpose of paragraphs 1 and 2, Papua New Guinea tax paid shall include an amount equivalent to the amount of any Papua New Guinea tax forgone. 4. In paragraph 3, the term "Papua New Guinea tax forgone" means an amount which, under the law of Papua New Guinea relating to Papua New Guinea tax and in accordance with this Agreement, would have been payable as Papua New Guinea tax on income but for an exemption from, or a reduction of, Papua New Guinea tax on that income resulting from the operation of those provisions of the laws of Papua New Guinea which the Treasurer of Australia and the Minister for Finance and Planning of Papua New Guinea agree from time to time in letters exchanged for this purpose to be provisions to which this paragraph applies. Subject to its terms, such an agreement on applicable provisions shall be valid for as long as those provisions are not modified after the date of that agreement or have been modified only in minor respects so as not to affect their general character. 5. Paragraph 3 and 4 shall apply only in relation to those years of income that may be agreed by the Treasurer of Australia and the Minister for Finance and Planning of Papua New Guinea in letters exchanged for this purpose. 6. Subject to the provisions of the law of Papua New Guinea from time to time in force which relate to the allowance of a credit against Papua New Guinea tax of tax paid in a country outside Papua New Guinea (which shall not affect the general principle hereof), tax paid under the law of Australia and in accordance with this Agreement, whether directly or by deduction, in respect of income derived by a person who is a resident of Papua New Guinea for the purposes of the law of Papua New Guinea relating to Papua New Guinea tax from sources in Australia (not including, in the case of a dividend, tax paid in respect of the profits out of which the dividend is paid) shall be allowed as a credit against Papua New Guinea tax payable in respect of that income. ARTICLE 24 Mutual Agreement Procedure 1. Where a person who is a resident of one of the Contracting States considers that the actions of the competent authority of one or both of the Contracting States result or will result in taxation for the person not in accordance with this Agreement, the person may, notwithstanding the remedies provided by the national laws of those States, present a case to the competent authority of the Contracting State of which the person is a resident. The case must be presented within three years from the first notification of the action giving rise to taxation not in accordance with this Agreement. 2. The competent authority shall endeavour, if the claim appears to it to be justified and if it is not itself able to arrive at an appropriate solution, to resolve the case with the competent authority of the other Contracting State, with a view to the avoidance of taxation not in accordance with this Agreement. The solution so reached shall be implemented notwithstanding any time limits in the national laws of the Contracting States. 3. The competent authorities of the Contracting States shall jointly endeavour to resolve any difficulties or doubts arising as to the application of this agreement. 4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of giving effect to the provisions of this Agreement. ARTICLE 25 Exchange of Information 1. The competent authorities of the Contracting States shall exchange such information as is necessary for the carrying out of this Agreement or of the domestic laws of the Contracting States concerning the taxes to which this Agreement applies insofar as the taxation thereunder is not contrary to this Agreement. The exchange of information is not restricted by Article 1. Any information received by the competent authority of a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes to which this Agreement applies and shall be used only for such purposes. 2. In no case shall the provisions of paragraph 1 be construed so as to impose on the competent authority of a Contracting State the obligation: (a) to carry out administrative measures at variance with the laws or the administrative practice of that or of the other Contracting State; (b) to supply particulars which are not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State; (c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or to supply information the disclosure of which would be contrary to public policy. ARTICLE 26 Diplomatic and Consular Officials Nothing in this Agreement shall affect the fiscal privileges of diplomatic or consular officials under the general rules of international law or under the provisions of special international agreements. ARTICLE 27 Entry into Force This Agreement shall enter into force on the date on which the Contracting States exchange notes through the diplomatic channel notifying each other that the last of such things has been done as is necessary to give this Agreement the force of law in Australia and in Papua New Guinea, as the case may be, and thereupon this Agreement shall have effect: (a) in Australia: (i) in respect of withholding tax on income that is derived by a non-resident, in relation to income derived on or after 1 July in the calendar year next following that in which the Agreement enters into force; (ii) in respect of other Australian tax, in relation to income or gains of any year of income beginning on or after 1 July in the calendar year next following that in which the Agreement enters into force; (b) in Papua New Guinea: (i) in respect of withholding tax on income that is derived by a non-resident, in relation to income derived on or after 1 January in the calendar year next following that in which the Agreement enters into force; (ii) in respect of other Papua New Guinea tax, in relation to income or gains of any year of income beginning on or after 1 January in the calendar year next following that in which the Agreement enters into force. ARTICLE 28 Termination This Agreement shall continue in effect indefinitely, but either of the Contracting States may, on or before 30 June in any calendar year beginning after the expiration of 5 years from the date of its entry into force, give to the other Contracting State through the diplomatic channel written notice of termination and, in that event, this Agreement shall cease to be effective: (a) in Australia: (i) in respect of withholding tax on income that is derived by a non-resident, in relation to income derived on or after 1 July in the calendar year next following that in which the notice of termination is given; (ii) in respect of other Australian tax, in relation to income or gains of any year of income beginning on or after 1 July in the calendar year next following that in which the notice of termination is given; (b) in Papua New Guinea: (i) in respect of withholding tax on income that is derived by a non-resident, in relation to income derived on or after 1 January in the calendar year next following that in which the notice of termination is given; (ii) in respect of other Papua New Guinea tax, in relation to income or gains of any year of income beginning on or after 1 January in the calendar year next following that in which the notice of termination is given. IN WITNESS WHEREOF the undersigned, duly authorized thereto, have signed this Agreement. DONE in duplicate at Canberra this 24th day of May, One thousand nine hundred and eighty-nine in the English language. |P. J. KEATING |RABBIE NAMALIU | |FOR AUSTRALIA |FOR THE INDEPENDENT STATE | | |OF PAPUA NEW GUINEA | Schedule 30-Agreement between Australia and the Kingdom of Thailand for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income Section 3 Australia and the Kingdom of Thailand, Desiring to conclude an Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, Have agreed as follows: ARTICLE 1 Personal Scope This Agreement 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 Agreement applies are- (a) in the case of Thailand: (i) the income tax; and (ii) the petroleum income tax; (b) 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 the Commonwealth of Australia. 2. This Agreement shall also apply to any identical or substantially similar taxes which are imposed by either Contracting State after the date of signature of this Agreement 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 which have been made in their respective laws relating to the taxes to which this Agreement applies. ARTICLE 3 General Definitions 1. In this Agreement, unless the context otherwise requires- (a) the term "Thailand" means the Kingdom of Thailand and includes any area adjacent to the territorial waters of the Kingdom of Thailand which by Thai legislation, and in accordance with international law, has been or may hereafter be designated as an area within which the rights of the Kingdom of Thailand with respect to the seabed and subsoil and their natural resources may be exercised; (b) 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 or of the said Territories in respect of which there is for the time being in force, consistently with international law, a law of Australia dealing with the exploitation of any of the natural resources of the seabed and subsoil of the continental shelf; (c) the terms "Contracting State", "one of the Contracting States" and "the other Contracting State" mean, as the context requires, Thailand or Australia; (d) the term "person" includes an individual, an estate, a company and any other body of persons which is treated as an entity for tax purposes; (e) the term "company" means any body corporate or any entity which is treated as a body corporate or company under the taxation laws of the respective Contracting States; (f) the terms "enterprise of one of the Contracting States" and "enterprise of the other Contracting State" mean an enterprise carried on by a resident of Australia or an enterprise carried on by a resident of Thailand, as the context requires; (g) the term "tax" means Australian tax or Thai tax as the context requires; (h) the term "Australian tax" means tax imposed by Australia, being tax to which this Agreement applies by virtue of Article 2; (i) the term "Thai tax" means tax imposed by Thailand, being tax to which this Agreement applies by virtue of Article 2; (j) the term "competent authority" means, in the case of Australia, the Commissioner of Taxation or the authorized representative of the Commissioner, and in the case of Thailand, the Minister of Finance or the authorized representative of the Minister. 2. In this Agreement, in relation to the taxes to which this Agreement applies by virtue of Article 2, the term "Australian tax" does not include any penalty or interest imposed under the law of Australia and the term "Thai tax" does not include any surcharge for late payment or any penalty imposed under the law of Thailand. 3. In the application of this Agreement by a Contracting State, any term not defined in this Agreement shall, unless the context otherwise requires, have the meaning which it has under the laws of that Contracting State from time to time in force relating to the taxes to which this Agreement applies. 4. Where under this Agreement income is relieved from tax in one of the Contracting States and, under the law in force in the other Contracting State a person, in respect of the said income, is subject to tax by reference to the amount thereof which is remitted to or received in that other State and not by reference to the full amount thereof, then the relief to be allowed under this Agreement in the firstmentioned State shall apply only to so much of the income as is remitted to or received in the other State. ARTICLE 4 Residence 1. For the purposes of this Agreement, a person is a resident of one of the Contracting States: (a) in the case of Australia, if the person is a resident of Australia for the purposes of Australian tax; and (b) in the case of Thailand, if the person is a resident of Thailand for the purposes of Thai tax. 2. A person is not a resident of a Contracting State for the purposes of this Agreement if the person is liable to tax in that State in respect only of income from a source in that State. 3. Where by reason of the preceding provisions, an individual is a resident of both Contracting States, the status of the person shall be determined in accordance with the following rules, applied in the order in which they are set out: (a) the person shall be deemed to be a resident solely of the Contracting State in which a permanent home is available to the person; (b) if a permanent home is available to the person in both Contracting States, or in neither of them, the person shall be deemed to be a resident solely of the Contracting State in which the person has an habitual abode; (c) if the person has an habitual abode in both Contracting States, or in neither of them, the person shall be deemed to be a resident solely of the Contracting State with which the person's personal and economic relations are the closer. 4. For the purposes of the last preceding paragraph, an individual's citizenship or nationality of a Contracting State shall be a factor in determining the degree of the person's personal and economic relations with that Contracting State. 5. 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 it is incorporated, created or organized. ARTICLE 5 Permanent Establishment 1. For the purposes of this Agreement, the term permanent establishment means a fixed place of business through which the business of an 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, an oil or gas well, a quarry or any other place of extraction of natural resources; (g) a building site, a construction project, an installation project, an assembly project, or supervisory activities in connection therewith where such site, project or activities or any two or more of them continues or continue for more than 6 months; (h) a warehouse in relation to a person providing storage facilities for others; (i) the furnishing of services, including consultancy services, by a resident of one of the Contracting States through employees or other personnel, provided activities of that nature continue (for the same or a connected project) within the other Contracting State for a period or periods aggregating more than 183 days within any 12 month period; (j) 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; or (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 one of the Contracting States and to carry on business through that permanent establishment if substantial equipment is being used in that State by, for or under contract with the enterprise. 5. A person acting in one of the Contracting States on behalf of an enterprise of the other Contracting State-other than a broker, general commission agent or any other agent of an independent status to whom paragraph 6 applies-shall be deemed to be a permanent establishment of that enterprise in the firstmentioned State if the person: (a) 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; (b) in so acting, manufactures or processes in that State for the enterprise goods or merchandise belonging to the enterprise; (c) habitually maintains in the first mentioned State a stock of goods or merchandise belonging to the enterprise from which the person regularly fills orders on behalf of the enterprise; or (d) habitually secures orders in the first mentioned State, wholly or almost wholly for the enterprise, or for the enterprise and other enterprises which are controlled by it or have a controlling interest in it. 6. An enterprise of one of the Contracting States 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. For this purpose, an agent shall not be considered to be an agent of an independent status if the agent carries on in that other State an activity described in paragraph 5 wholly or almost wholly for the enterprise or for the enterprise and any one or more enterprises which are controlled by it or have a controlling interest in it. 7. The fact that a company which is a resident of one of the Contracting States 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. 8. The principles set forth in paragraphs 1 to 7 inclusive shall be applied in determining for the purposes of paragraph 5 of Article 11 and paragraph 6 of Article 12 whether there is a permanent establishment outside both Contracting States, and whether an enterprise, not being an enterprise of one of the Contracting States, has a permanent establishment in one of the Contracting States. ARTICLE 6 Income from Real Property 1. Income from real property may be taxed in the Contracting State in which the real property is situated. 2. In this Article, the term "real property": (a) in the case of Australia, has the meaning which it has under the laws of Australia, and shall also include: (i) a lease of land and any other interest in or over land, whether improved or not; and (ii) a right to receive variable or fixed payments as consideration for the exploitation of or the right to explore for or exploit, or in respect of the exploitation of, mineral deposits, oil or gas wells, quarries or other places of extraction or exploitation of natural resources; and (b) in the case of Thailand, means immovable property according to the laws of Thailand, and shall also include: (i) property accessory to immovable property; (ii) rights to which the provisions of the general law respecting landed property apply; (iii) usufruct of immovable property; and (iv) a right to receive variable or fixed payments as consideration for the exploitation of or the right to explore for or exploit, or in respect of the exploitation of, mineral deposits, oil or gas wells, quarries or other places of extraction or exploitation of natural resources. Ships, boats and aircraft shall not be regarded as real property. 3. A lease of land, any other interest in or over land and any right referred to in any of the subparagraphs of paragraph 2, shall be regarded as situated where the land, mineral deposits, oil or gas wells, quarries or natural resources, as the case may be, are situated, or where the exploration may take place. 4. The provisions of paragraph 1 shall apply to income derived from the direct use, letting or use in any other form of real property. 5. The provisions of paragraphs 1, 3 and 4 shall also apply to the income from real property of an enterprise and to income from real property used for the performance of professional services. ARTICLE 7 Business Profits 1. The profits of an enterprise of one of the Contracting States 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: (a) that permanent establishment; or (b) sales within that other Contracting State of goods or merchandise of the same or a similar kind as those sold, or other business activities of the same or a similar kind as those carried on, through that permanent establishment if the sale or the business activities had been made or carried on in that way with a view to avoiding taxation in that other State. 2. Subject to the provisions of paragraph 3, where an enterprise of one of the Contracting States 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 or with other enterprises with which it deals. 3. In the determination of the profits of a permanent establishment, there shall be allowed as deductions expenses of the enterprise, being expenses which are incurred for the purposes of the permanent establishment (including executive and general administrative expenses so incurred) and which would be deductible if the permanent establishment were an independent entity which paid those expenses, whether incurred in the Contracting State in which the permanent establishment is situated or elsewhere. 4. 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. 5. If the information available to the taxation authority of a Contracting State is inadequate to determine the profits to be attributed to the permanent establishment of an enterprise, nothing in this Article shall affect the application of any law of that State relating to the determination of the tax liability of a person provided that that law shall be applied, so far as the information available to the taxation authority permits, consistently with the principles of this Article. 6. Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article. 7. The profits of an enterprise of one of the Contracting States from the carrying on in the other Contracting State of a business of any form of 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 business, and Article 24 shall apply for the elimination of double taxation as if the profits so taxed were attributable to a permanent establishment of the enterprise in the State imposing the tax. 8. Where: (a) a resident of a Contracting State is beneficially entitled, whether directly or indirectly through one or more trusts, 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 has, in accordance with the principles of Article 5, a permanent establishment in that other State, the enterprise carried on by the trustee shall be deemed to be a business carried on in that other State by that resident through a permanent establishment situated therein and the resident's share of business profits shall be attributed to that permanent establishment. ARTICLE 8 Shipping and Aircraft 1. Income or profits from the operation of aircraft derived by a resident of one of the Contracting States shall be taxable only in that State. 2. Income or profits from the operation of ships derived by a resident of one of the Contracting States may be taxed in that Contracting State and may also be taxed in the other State, but the tax so charged in the other State shall be reduced by an amount equal to one half of the amount which would be payable in respect of that income or those profits but for this paragraph. 3. Notwithstanding the provisions of paragraph 1, such income or profits may be taxed in the other Contracting State, where they are income or profits from the operation of aircraft confined solely to places in that other State; and notwithstanding the provisions of paragraph 2 such income or profits may be taxed in the other Contracting State without reduction, where they are income or profits from the operation of ships confined solely to places in that other State. 4. The provisions of paragraphs 1, 2 and 3 shall apply in relation to the share of income or profits from the operation of ships or aircraft derived by a resident of one of the Contracting States through participation in a pool service, in a joint transport operating organisation or in an international operating agency. 5. For the purposes of this Article, profits derived from the carriage by ships or aircraft of passengers, livestock, mail, goods or merchandise shipped in a Contracting State for discharge at another place in that State shall be treated as profits from the operation of ships or aircraft confined solely to places in that State. ARTICLE 9 Associated Enterprises 1. Where: (a) an enterprise of one of the Contracting States 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 one of the Contracting States and an enterprise of the other Contracting State, and in either case conditions operate between the two enterprises in their commercial or financial relations which differ from those which might be expected to operate between independent enterprises dealing wholly independently with one another, then any profits which, but for those conditions, might have been 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. Notwithstanding the provisions of this Article, an enterprise of one of the Contracting States may be taxed by that State as if this Article had not come into effect but, so far as it is practicable to do so, in accordance with the principles of this Article. 3. Where profits on which an enterprise of one of the Contracting States has been charged to tax in that State are also included, by virtue of paragraph 1 or 2, in the profits of an enterprise of the other Contracting State and taxed accordingly, and the profits so included are profits which might have been expected to have accrued to that enterprise of the other State if the conditions operative between the enterprises had been those which might have been expected to have operated between independent enterprises dealing wholly independently with one another, then the first mentioned State shall make an appropriate adjustment to the amount of tax charged on those profits in the first mentioned State. In determining such an adjustment, due regard shall be had to the other provisions of this Agreement in relation to the nature of the income, and for this purpose the competent authorities of the Contracting States shall if necessary consult each other. ARTICLE 10 Dividends 1. Dividends paid by a company which is a resident of one of the Contracting States for the purposes of its tax, being dividends to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State. 2. Such dividends may be taxed in the Contracting State of which the company paying the dividends is a resident, and according to the law of that State, but, if the beneficial owner of the dividends is a company, excluding a partnership, which holds directly at least 25 per cent of the capital of the former company, the tax so charged shall not exceed: (a) 15 per cent of the gross amount of the dividends if the company paying the dividends engages in an industrial undertaking; and (b) 20 per cent of the gross amount of the dividends in other cases. 3. The term dividends in this Article means income from shares and other income assimilated to income from shares by the taxation law of the Contracting State of which the company making the distribution is a resident. 4. The provisions of paragraphs 1 and 2 shall not apply if the person beneficially entitled to the dividends, being a resident of one of the Contracting States, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply. 5. Dividends paid by a company which is a resident of one of the Contracting States, being dividends to which a person who is not a resident of the other Contracting State is beneficially entitled, shall be exempt from tax in that other State except insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or fixed base situated in that other State. However, 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 Thailand for the purposes of Thai tax. 6. Nothing in this Agreement shall be construed as preventing one of the Contracting States from imposing, in accordance with its domestic law, a tax on profits remitted by a permanent establishment of an enterprise of the other Contracting State situated in the first mentioned Contracting State. 7. The term "industrial undertaking" means- (a) any undertaking engaged in: (i) manufacturing, assembling or processing; (ii) construction, civil engineering or shipbuilding; (iii) production of electricity, hydraulic power or gas; (iv) the supply of water; or (v) agriculture, forestry or fisheries or the carrying on of a plantation; (b) any other undertaking entitled to the privileges accorded under the laws of Thailand on the promotion of industrial investment; and (c) any other undertaking which may be declared to be an "industrial undertaking" for the purpose of this Article by the competent authority of Thailand. ARTICLE 11 Interest 1. Interest arising in one of the Contracting States, being interest to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State. 2. Such interest may 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: (a) 10 per cent of the gross amount of the interest if it is interest to which any financial institution (including an insurance company) is beneficially entitled; and (b) in all other cases, 25 per cent of the gross amount of the interest. 3. 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, and interest from any other form of indebtedness as well as all other income assimilated to income from money lent by the taxation law of the Contracting State in which the income arises. 4. The provisions of paragraphs 1 and 2 shall not apply if the person beneficially entitled to the interest, being a resident of one of the Contracting States, carries on business in the other Contracting State, in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the indebtedness in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply. 5. Interest shall be deemed to arise in a Contracting State when the payer is that State itself or a political or administrative subdivision of that State or a local authority of that State or a person who is a resident of that State for the purposes of its tax. Where, however, the person paying the interest, whether a resident of a Contracting State or not, has in a Contracting State or outside both Contracting States a permanent establishment or fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated. 6. Where, owing to a special relationship between the payer and the person beneficially entitled to the interest, or between both of them and some other person, the amount of the interest paid, having regard to the indebtedness for which it is paid, exceeds the amount which might have been expected to have been agreed upon by the payer and the person so entitled in the absence of such relationship, the provisions of this Article shall apply only to the last mentioned amount. In that case, the excess part of the amount of the interest paid shall remain taxable according to the law of each Contracting State, but subject to the other provisions of this Agreement. 7. Interest derived from the investment of official reserves by the Government of a Contracting State or by a bank performing central banking functions in a Contracting State, shall be exempt from tax in the other Contracting State. ARTICLE 12 Royalties 1. Royalties arising in one of the Contracting States, being royalties to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State. 2. Such royalties may be taxed in the Contracting State in which they arise, and according to the law of that State, but the tax so charged shall not exceed 15 per cent of the gross amount of the royalties. 3. The term royalties in this Article means payments or credits, whether periodical or not, and however described or computed, to the extent to which they are made as consideration for: (a) the use of, or the right to use, any copyright, patent, design or model, plan, secret formula or process, trademark or other like property or right; (b) the use of, or the right to use, any industrial, commercial or scientific equipment; (c) the supply of scientific, technical, industrial or commercial knowledge or information; (d) the supply of any assistance that is ancillary and subsidiary to, and is furnished as a means of enabling the application or enjoyment of, any such property or right as is mentioned in subparagraph (paragraph (a), any such equipment as is mentioned in subparagraph (paragraph (b) or any such knowledge or information as is mentioned in subparagraph (paragraph (c); (e) the use of, or the right to use- (i) motion picture films; (ii) films or video tapes for use in connection with television; or (iii) tapes for use in connection with radio broadcasting; or (f) total or partial forbearance in respect of the use of a property or right referred to in this paragraph. 4. Income derived from the alienation of property or rights mentioned in paragraph 3 may be taxed in the Contracting State in which the income arises, but the tax so charged shall not exceed 15 per cent of the gross amount of the income. 5. The provisions of paragraphs 1, 2 and 4 shall not apply if the person beneficially entitled to the royalties or the income mentioned in paragraph 4, being a resident of one of the Contracting States, carries on business in the other Contracting State, in which the royalties or income arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties or income are paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply. 6. Royalties and the income mentioned in paragraph 4 shall be deemed to arise in a Contracting State when the payer is that State itself or a political or administrative subdivision of that State or a local authority of that State or a person who is a resident of that State for the purposes of its tax. Where, however, the person paying the royalties or income, whether the person is a resident of one of the Contracting States or not has in a Contracting State or outside both Contracting States a permanent establishment or fixed base in connection with which the liability to pay the royalties or income was incurred, and such royalties or income are borne by the permanent establishment or fixed base, then such royalties or income shall be deemed to arise in the State in which the permanent establishment or fixed base is situated. 7. Where, owing to a special relationship between the payer and the person beneficially entitled to the royalties or the income mentioned in paragraph 4, or between both of them and some other person, the amount of the royalties or income paid, having regard to what they are paid for, exceeds the amount which might have been expected to have been agreed upon by the payer and the person so entitled in the absence of such relationship, the provisions of this Article shall apply only to the last mentioned amount. In that case, the excess part of the amount of the royalties or income paid shall remain taxable according to the law of each Contracting State, but subject to the other provisions of this Agreement. 8. For the purposes of this Article "paid" includes credited and "payer" and "person paying" have the corresponding meanings. ARTICLE 13 Alienation of Property 1. Income or gains derived by a resident of a Contracting State from the alienation of real property referred to in Article 6 and, as provided in that Article, situated in the other Contracting State may be taxed in that other State. 2. Income or gains from the alienation of property, other than real property referred to in Article 6, that forms part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or pertains to a fixed base available to a resident of the first mentioned State in that other State for the purpose of performing independent personal services, including income or gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such a fixed base, may be taxed in that other State. 3. Income or gains from the alienation of ships or aircraft operated in international traffic, or of property other than real property referred to in Article 6 pertaining to the operation of those ships or aircraft, shall be taxable only in the Contracting State of which the enterprise which operated those ships or aircraft is a resident. 4. Income or gains derived by a resident of a Contracting State from the alienation of shares or comparable interests in a company, the assets of which consist wholly or principally of real property in the other Contracting State of a kind referred to in Article 6, may be taxed in that other State. 5. Nothing in this Agreement affects the application of a law of a Contracting State relating to the taxation of gains of a capital nature derived from the alienation of property other than that to which any of paragraphs 1, 2, 3 and 4 apply. ARTICLE 14 Independent Personal Services 1. Income derived by an individual who is a resident of one of the Contracting States in respect of professional services or other independent activities of a similar character shall be taxable only in that State unless the services or activities are performed in the other Contracting State. If the services or activities are so performed, such income as is derived in respect thereof may be taxed in that other State. 2. Notwithstanding the provisions of paragraph 1, income derived by an individual who is a resident of one of the Contracting States in respect of professional services or other independent activities of a similar character performed in the other Contracting State shall be taxable only in the first mentioned State if: (a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in the tax year or year of income, as the case may be, of that other State; (b) the recipient does not have a fixed base available in the other State for the purpose of performing the activities of the recipient for a period or periods exceeding in the aggregate 183 days in such year; and (c) the income is not deductible in determining taxable profits of an enterprise or a permanent establishment situated in that other State. 3. The term "professional services" includes services performed in the exercise of independent scientific, literary, artistic, educational or teaching activities as well as in the exercise of the independent activities of physicians, lawyers, engineers, architects, dentists and accountants. ARTICLE 15 Dependent Personal Services 1. Subject to the provisions of Articles 16, 18, 19 and 20, salaries, wages and other similar remuneration derived by an individual who is a resident of one of the Contracting States in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived from that exercise may be taxed in that other State. 2. Notwithstanding the provisions of paragraph 1, remuneration derived by an individual who is a resident of one of the Contracting States in respect of an employment exercised in the other Contracting State shall be taxable only in the first mentioned State if: (a) the recipient is present in that other State for a period or periods not exceeding in the aggregate 183 days in the tax year or year of income, as the case may be, of that other State; (b) the remuneration is paid by, or on behalf of, an employer who is not a resident of that other State; and (c) the remuneration is not deductible in determining taxable profits of a permanent establishment or a fixed base which the employer has in that other State. 3. Notwithstanding the preceding provisions of this Article, remuneration in respect of an employment exercised aboard a ship or aircraft operated in international traffic by a resident of one of the Contracting States may be taxed in that Contracting State. ARTICLE 16 Directors' Fees Directors' fees and similar payments derived by a resident of one of the Contracting States in the capacity of the resident as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other State. ARTICLE 17 Entertainers 1. Notwithstanding the provisions of Articles 14 and 15, income derived by entertainers (such as theatrical, motion picture, radio or television artistes, musicians and athletes) from their personal activities as such may be taxed in the Contracting State in which these activities are exercised. 2. Where income in respect of the personal activities of an entertainer as such accrues not to that entertainer but to another person, that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer are exercised. 3. Notwithstanding the provisions of Article 7, where the activities mentioned in paragraph 1 are provided in one of the Contracting States by an enterprise of the other Contracting State, the profits derived from providing these activities by such an enterprise may be taxed in the first mentioned State unless the enterprise is substantially supported by public funds of the other State, including any political subdivision, local authority or statutory body thereof, in connection with the provision of such activities. 4. The provisions of paragraphs 1 and 2 shall not apply to income derived from activities performed in a Contracting State by entertainers if the visit to that Contracting State is substantially supported by public funds of the other Contracting State, including any political subdivision, local authority or statutory body thereof. ARTICLE 18 Pensions and Annuities 1. Subject to the provisions of Article 19, pensions and annuities paid to a resident of one of the Contracting States shall be taxable only in that State. 2. The term "annuity" means a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time under an obligation to make the payments in return for adequate and full consideration in money or money's worth. ARTICLE 19 Government Service 1. Remuneration (other than a pension) paid by one of the Contracting States or a political subdivision of that State or a local authority of that State to any individual in respect of services rendered in the discharge of governmental functions shall be taxable only in that State. However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that other State and the recipient is a resident of that other State who: (a) is a citizen or national of that other State; or (b) did not become a resident of that other State solely for the purpose of performing the services. 2. Any pension paid to an individual in respect of services rendered in the discharge of governmental functions to one of the Contracting States or a political subdivision of that State or a local authority of that State shall be taxable only in that State. Such pension shall, however, be taxable only in the other Contracting State if the recipient is a resident of, and a citizen or national of, that other State. 3. The provisions of paragraphs 1 and 2 shall not apply to remuneration or a pension in respect of services rendered in connection with any trade or business carried on by one of the Contracting States or a political subdivision of one of the States or a local authority of one of the States. In such a case, the provisions of Article 15, 16 or 18, as the case may be shall apply. ARTICLE 20 Professors and Teachers 1. A professor or teacher who is a resident of one of the Contracting States and who visits the other Contracting State, at the invitation of any university, college, school or other similar educational institution situated in the other Contracting State and which is recognised by the competent authority of that other State, for a period not exceeding two years solely for the purpose of teaching or research or both at such educational institution shall be taxable only in the first mentioned State on any remuneration for such teaching or research. 2. This Article shall not apply to remuneration which a professor or teacher receives for conducting research if the research is undertaken primarily for the private benefit of a specific person or persons. ARTICLE 21 Students and Trainees Where a student or trainee, who is a resident of one of the Contracting States or who was a resident of that State immediately before visiting the other Contracting State and who is temporarily present in the other State solely for the purpose of education or training, receives payments from sources outside the other State for the purposes of maintenance, education or training of the student or trainee, those payments shall be exempt from tax in the other State. ARTICLE 22 Income Not Expressly Mentioned 1. Items of income of a resident of one of the Contracting States which are not expressly mentioned in the foregoing Articles of this Agreement shall be taxable only in that Contracting State. 2. However, if such income is derived by a resident of one of the Contracting States from sources in the other Contracting State, such income may also be taxed in the Contracting State in which it arises. 3. The provisions of paragraph 1 shall not apply to income derived by a resident of one of the Contracting States where that income is effectively connected with a permanent establishment or fixed base situated in the other Contracting State. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply. ARTICLE 23 Source of Income Income derived by a resident of one of the Contracting States which, under any one or more of Articles 6 to 8, 10 to 17 and 22, may be taxed in the other Contracting State shall, for the purposes of Article 24 and of the income tax law of that other State, be deemed to be income from sources in that other State. ARTICLE 24 Methods of Elimination of Double Taxation 1. Subject to the provisions of the law of Australia from time to time in force which relate to the allowance of a credit against Australian tax of tax paid in a country outside Australia (which shall not affect the general principle hereof), Thai tax paid under the law of Thailand and in accordance with this Agreement, whether directly or by deduction, in respect of income derived by a person who is a resident of Australia from sources in Thailand shall be allowed as a credit against Australian tax payable in respect of that income. 2. Where a company, which is a resident of Thailand and is not a resident of Australia for the purposes of Australian tax, pays a dividend to a company which is a resident of Australia and which controls directly or indirectly not less than 10 per cent of the voting power of the first mentioned company, the credit referred to in paragraph 1 shall include the Thai tax paid by that first mentioned company in respect of that portion of its profits out of which the dividend is paid. 3. For the purposes of paragraphs 1 and 2, Thai tax paid shall include an amount equivalent to the amount of any tax forgone which, under the law of Thailand and in accordance with this Agreement, would have been payable as tax on income but for an exemption from, or a reduction of, tax on that income resulting from the operation of: (a) sections 31, 33, 34, 35 (2), (3), (4), or 36 (4) of the Investment Promotion Act B.E. 2520 insofar as those provisions were in force on, and have not been modified since, the date of signature of this Agreement, or have been modified only in minor respects so as not to affect their general character; or (b) any other provision which may subsequently be made granting an exemption from or reduction of tax which the authorised representatives of the Government of Australia and of the Government of the Kingdom of Thailand agree in writing to be of a substantially similar character, provided that such provisions are not modified thereafter or are modified only in minor respects so as not to affect their general character. 4. The provisions of paragraph 3 shall apply only in relation to income derived in any of the first 10 years of income in relation to which this Agreement has effect by virtue of subparagraph (paragraph (a) (ii) of Article 28 and in any later year of income that may be agreed in an exchange of letters for this purpose by the authorised representatives of the Government of Australia and of the Government of the Kingdom of Thailand. 5. In the case of Thailand, Australian tax payable in respect of income from sources within Australia shall be allowed as a credit against Thai tax payable in respect of that income. The credit shall not, however, exceed that part of the Thai tax, as computed before the credit is given which is appropriate to such item of income. ARTICLE 25 Mutual Agreement Procedure 1. Where a person who is a resident of one of the Contracting States considers that the actions of the taxation authority of one or both of the Contracting States result or will result for the person in taxation not in accordance with this Agreement, the person may, notwithstanding the remedies provided by the domestic laws of those States, present a case to the competent authority of the Contracting State of which the person is a resident. The case must be presented within three years from the first notification of the action. 2. The competent authority shall endeavour, if the taxpayer's claim appears to be justified and if the competent authority is unable to arrive at an appropriate solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation not in accordance with this Agreement. 3. The competent authorities of the Contracting States shall jointly endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of this Agreement. 4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of giving effect to the provisions of this Agreement. ARTICLE 26 Exchange of Information 1. The competent authorities of the Contracting States shall exchange such information as is necessary for the carrying out of this Agreement or of the domestic laws of the Contracting States concerning the taxes to which this Agreement applies insofar as the taxation thereunder is not contrary to this Agreement. The exchange of information is not restricted by Article 1. Any information received by the competent authority of a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes to which this Agreement applies and shall be used only for such purposes. 2. In no case shall the provisions of paragraph 1 be construed so as to impose on a Contracting State the obligation: (a) to carry out administrative measures at variance with the laws or the administrative practice of that or of the other Contracting State; (b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State; or (c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or to supply information the disclosure of which would be contrary to public policy. ARTICLE 27 Diplomatic and Consular Officials Nothing in this Agreement shall affect the fiscal privileges of diplomatic or consular officials under the general rules of international law or under the provisions of special agreements. ARTICLE 28 Entry into Force 1. This Agreement shall enter into force upon the last of the dates on which the Contracting States have exchanged notes through the diplomatic channel indicating that the necessary procedures to give this Agreement the force of law have been completed in Australia and Thailand, as the case may be, and thereupon the Agreement shall have effect- (a) in Australia: (i) in respect of withholding tax on income that is derived by a non-resident, in relation to income derived on or after 1 January in the calendar year next following that in which the notes are exchanged; (ii) in respect of other Australian tax, in relation to income of any year of income beginning on or after 1 July in the calendar year next following that in which the notes are exchanged; (b) in Thailand: (i) in respect of withholding taxes, on income derived by a non- resident on or after 1 January in the calendar year next following that in which the notes are exchanged; (ii) in respect of other taxes, on income of the calendar years or accounting periods beginning on or after 1 January in the calendar year next following that in which the notes are exchanged. ARTICLE 29 Termination This Agreement shall continue in effect indefinitely, but either of the Contracting States, may, on or before 30 June in any calendar year after the fifth year following that in which the Agreement entered into force, give to the other Contracting State through the diplomatic channel written notice of termination and, in that event, this Agreement shall cease to have effect- (a) in Australia: (i) in respect of withholding tax on income that is derived by a non-resident, in relation to income derived on or after 1 January in the calendar year next following that in which the notice of termination is given; (ii) in respect of other Australian tax, in relation to income of any year of income beginning on or after 1 July in the calendar year next following that in which the notice of termination is given; (b) in Thailand: (i) in respect of withholding taxes, on income derived by a non- resident on or after 1 January in the calendar year next following that in which the notice of termination is given; (ii) in respect of other taxes, on income of the calendar years or accounting periods beginning on or after 1 January in the calendar year next following that in which the notice of termination is given. IN WITNESS WHEREOF the undersigned, being duly authorized, have signed this Agreement. DONE in duplicate at Canberra this 31st day of August One thousand nine hundred and eighty-nine in the English and Thai languages, each text being equally authentic. |P. J. KEATING |SUBIN PINKAYAN | |FOR AUSTRALIA |FOR THE KINGDOM OF THAILAND | Schedule 31-Agreement between Australia and the Democratic Socialist Republic of Sri Lanka for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income Section 3 Australia and the Democratic Socialist Republic of Sri Lanka, Desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, Have agreed as follows: ARTICLE 1 Personal Scope This Agreement 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 Agreement shall apply are: (a) in Australia: (i) the income tax; and (ii) the tax in respect of profits from offshore petroleum projects, imposed under the federal law of the Commonwealth of Australia; (b) in Sri Lanka: the income tax, including the income tax based on the turnover of enterprises licensed by the Greater Colombo Economic Commission. (2) This Agreement shall also apply to any identical or substantially similar taxes which are imposed under the federal law of the Commonwealth of Australia or the law of the Democratic Socialist Republic of Sri Lanka after the date of signature of this Agreement 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 which have been made in the laws of their respective States relating to the taxes to which this Agreement applies. ARTICLE 3 General Definitions (1) For the purposes of this Agreement, 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 exploitation of any of the natural resources of the sea-bed and subsoil of the continental shelf; (b) the term "Sri Lanka" means the Democratic Socialist Republic of Sri Lanka, including any area outside the territorial sea of Sri Lanka which in accordance with international law has been or may hereafter be designated, under the laws of Sri Lanka concerning the Continental Shelf, as an area within which the rights of Sri Lanka with respect to the waters, sea-bed and subsoil and the natural resources may be exercised; (c) the terms "Contracting State", "one of the Contracting States" and "other Contracting State" mean Australia or Sri Lanka, 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 terms "enterprise" of one of the Contracting States and enterprise of the other Contracting State mean an enterprise carried on by a resident of Australia or an enterprise carried on by a resident of Sri Lanka, as the context requires; (g) the term "tax" means Australian tax or Sri Lanka tax, as the context requires; (h) the term "Australian tax" means tax imposed by Australia, being tax to which this Agreement applies by virtue of Article 2; (i) the term "Sri Lanka tax" means tax imposed by Sri Lanka, being tax to which this Agreement applies by virtue of Article 2; (j) the term "competent authority' means, in the case of Australia, the Commissioner of Taxation or an authorized representative of the Commissioner and, in the case of Sri Lanka, the Commissioner General of Inland Revenue. (2) In this Agreement, the terms "Australian tax" and "Sri Lanka tax" do not include any penalty or interest imposed under the law of either Contracting State relating to the taxes to which this Agreement applies by virtue of Article 2. (3) In the application of this Agreement by a Contracting State, any term not defined in this Agreement shall, unless the context otherwise requires, have the meaning which it has under the laws of that State from time to time in force relating to the taxes to which this Agreement applies. ARTICLE 4 Residence (1) For the purposes of this Agreement, a person is a resident of one of the Contracting States if that person is a resident of that State for the purposes of its tax. (2) A person shall not be treated as a resident of a Contracting State for the purposes of this Agreement 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, then the status of the person shall be determined in accordance with the following rules: (a) the person shall be deemed to be a resident solely of the Contracting State in which a permanent home is available to the person; (b) if a permanent home is available to the person in both Contracting States, or in neither of them, the person shall be deemed to be a resident solely of the Contracting State in which the person has an habitual abode; (c) if the person has an habitual abode in both Contracting States or does not have an habitual abode in either of them, the person shall be deemed to be a resident solely of the Contracting State with which his or her personal and economic relations are the closer. (4) In determining for the purposes of paragraph (3) the Contracting State with which an individual's personal and economic relations are the closer, the matters to which regard may be had shall include the citizenship of the individual. (5) Where by reason of the provisions of paragraph (1), a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident solely of the Contracting State in which its place of effective management is situated. ARTICLE 5 Permanent Establishment (1) For the purposes of this Agreement, the term "permanent establishment", in relation to an enterprise, 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, an oil or gas well, a quarry or any other place of extraction of natural resources; (g) an agricultural, pastoral or forestry property. (3) The term "permanent establishment" likewise encompasses: (a) a building site, construction, assembly or installation project, or an installation or drilling rig or ship used for the exploration for or development of natural resources, including supervisory activities in connection therewith rendered by the same person only if that site, project or use continues or those activities continue for more than 183 days; (b) the furnishing of services, including consultancy services, in one of the Contracting States by an enterprise through employees or other personnel engaged by the enterprise for such purposes, but only where activities of that nature continue (for the same or a connected project) within that Contracting State for a period or periods aggregating more than 183 days within any twelve month period. (4) An enterprise shall be deemed to have a permanent establishment in one of the Contracting States and to carry on business through that permanent establishment if substantial equipment is being used in that State by, for or under contract with the enterprise. (5) A person acting in one of the Contracting States 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; (b) the person has no such authority, but habitually maintains in the first-mentioned State a stock of goods or merchandise from which he or she regularly delivers goods or merchandise on behalf of the enterprise; (c) in so acting, the person manufactures or processes in that State for the enterprise goods or merchandise belonging to the enterprise; (d) the person's activities consist wholly or principally of securing orders in the first-mentioned State for the enterprise or for the enterprise and other enterprises which are controlled by it or have a controlling interest in it. (6) 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 occasional delivery of goods or merchandise belonging to the enterprise; (b) the maintenance of stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or occasional 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. (7) An enterprise of one of the Contracting States 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 person who is a broker, general commission agent or any other agent of an independent status and 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 one of the Contracting States 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 (5) 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 one of the Contracting States, has a permanent establishment in one of the Contracting States. ARTICLE 6 Income from Real Property (1) Income from real 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 laws of Australia and shall include: (i) a lease of land and any other interest in or over land, whether improved or not; and (ii) a right to receive variable or fixed payments either as consideration for the working of or the right to work or explore for, or in respect of exploitation of, mineral deposits, oil and gas wells, quarries or other places of extraction or exploitation of natural resources; and (b) in the case of Sri Lanka, means such property which, according to the laws of Sri Lanka, is immovable property and shall include: (i) property accessory to immovable property; (ii) rights to which the provisions of the general law respecting landed property apply; and (iii) 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) A lease of land, any other interest in or over land and any rights or property referred to in any of the sub-paragraphs of paragraph (2) shall be regarded as situated where the land, mineral deposits, mineral sources, oil or gas wells, quarries, natural resources or property, as the case may be, are situated. (4) The provisions of paragraph (1) shall apply to income derived from the direct use, letting or use in any other form of real property. (5) The provisions of paragraphs (1), (3) and (4) shall also apply to the income from real property of an enterprise and to income from real property used for the performance of independent personal services. ARTICLE 7 Business Profits (1) The profits of an enterprise of one of the Contracting States 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: (a) that permanent establishment; or (b) sales within that other Contracting State of goods or merchandise of the same or a similar kind as those sold, or other business activities of the same or a similar kind as those carried on, through that permanent establishment if the sales or the business activities had been made or carried on in that way with a view to avoiding taxation in that other State. (2) Subject to the provisions of paragraph (3), where an enterprise of one of the Contracting States 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 or with other enterprises with which it deals. (3) In the determination of the profits of a permanent establishment, there shall be allowed as deductions, in accordance with the law relating to tax in the Contracting State in which the permanent establishment is situated, expenses which are incurred for the purposes of the business of the permanent establishment (including executive and general administrative expenses so incurred), whether in the State in which the permanent establishment is situated or elsewhere. No such deduction shall be allowed in respect of any amounts paid (otherwise than towards reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission, for specific services performed or for management, or by way of interest on moneys lent to the permanent establishment. Likewise, no account shall be taken, in the determination of the profits of a permanent establishment, of amounts charged (otherwise than towards reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission, for specific services performed or for management. (4) 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. (5) Nothing in this Article shall affect the application of any law of a Contracting State relating to the determination of the tax liability of a person in cases where the information available to the competent authority of that State is inadequate to determine the profits to be attributed to a permanent establishment, provided that that law shall be applied, so far as the information available to the competent authority permits, consistently with the principles of this Article. (6) Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article. (7) For the purposes of the preceding paragraphs, the profits to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary. (8) Nothing in this Article shall affect the operation of any law of a Contracting State relating to tax imposed on profits from insurance with non-residents provided that if the relevant law in force in either Contracting State at the date of signature of this Agreement 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 any amendment of this paragraph that may be appropriate. (9) Where: (a) a resident of Sri Lanka 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 Australia by the trustee of a trust estate other than a trust estate that is treated in Australia 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 Australia, the enterprise carried on by the trustee shall be deemed to be a business carried on in Australia by that resident through a permanent establishment situated therein and that share of business profits shall be attributed to that permanent establishment. ARTICLE 8 Ships and Aircraft (1) Profits from the operation of ships or aircraft derived by a resident of one of the Contracting States shall be taxable only in that State. (2) Notwithstanding the provisions of paragraph (1), such profits may be taxed in the other Contracting State where: (a) they are profits from operations of ships or aircraft confined solely to places in that other State; or (b) they are profits, other than profits to which sub-paragraph (a) applies, from operations of ships in that other State, in which case the tax payable in that other State shall not exceed the lesser of: (i) half the amount which would be payable in respect of those profits but for this sub-paragraph; and (ii) the lowest amount, if any, of Sri Lanka tax that may be imposed on profits of the same kind derived under similar circumstances by a resident of a third State. (3) The provisions of paragraphs (1) and (2) shall apply in relation to the share of the profits from the operation of ships or aircraft derived by a resident of one of the Contracting States through participation in a pool service, in a joint transport operating organisation or in an international operating agency. (4) For the purposes of this Article, profits derived from the carriage by ships or aircraft of passengers, livestock, mail, goods or merchandise shipped in a Contracting State for discharge at another place in that State shall be treated as profits from operations of ships or aircraft confined solely to places in that State. ARTICLE 9 Associated Enterprises (1) Where: (a) an enterprise of one of the Contracting States 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 one of the Contracting States and an enterprise of the other Contracting State, and in either case conditions operate between the two enterprises in their commercial or financial relations which differ from those which might be expected to operate between independent enterprises dealing wholly independently with one another, then any profits which, but for those conditions, might have been 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) Nothing in this Article shall affect the application of any law of a Contracting State relating to the determination of the tax liability of a person, including determinations in cases where the information available to the competent authority of that State is inadequate to determine the income to be attributed to an enterprise, provided that that law shall be applied, so far as it is practicable to do so, consistently with the principles of this Article. (3) Where profits on which an enterprise of one of the Contracting States has been charged to tax in that State are also included, by virtue of paragraph (1) or (2), in the profits of an enterprise of the other Contracting State and charged to tax in that other State, and the profits so included are profits which might have been expected to have accrued to that enterprise of the other State if the conditions operative between the enterprises had been those which might have been expected to have operated between independent enterprises dealing wholly independently with one another, then the first-mentioned State shall make an appropriate adjustment to the amount of tax charged on those profits in the first- mentioned State. In determining such an adjustment, due regard shall be had to the other provisions of this Agreement and for this purpose the competent authorities of the Contracting States shall if necessary consult each other. ARTICLE 10 Dividends (1) Dividends paid by a company which is a resident of one of the Contracting States for the purposes of its tax, being dividends to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State. (2) Such dividends may 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 15 per cent of the gross amount of the dividends. (3) The term "dividends" in this Article means income from shares and other income assimilated to income from shares by the law, relating to tax, of the Contracting State of which the company making the distribution is a resident for the purposes of its tax. (4) The provisions of paragraph (2) shall not apply if the person beneficially entitled to the dividends, being a resident of one of the Contracting States, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In any such case the provisions of Article 7 or Article 14, as the case may be, shall apply. (5) Dividends paid by a company which is a resident of one of the Contracting States, being dividends to which a person who is not a resident of the other Contracting State is beneficially entitled, shall be exempt from tax in that other State except insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or fixed base situated in that other State. Provided that 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 Sri Lanka for the purposes of Sri Lanka tax. ARTICLE 11 Interest (1) Interest arising in one of the Contracting States, being interest to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State. (2) Such interest may 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) 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, and interest from any other form of indebtedness as well as all other income assimilated to income from money lent by the law, relating to tax, of the Contracting State in which the income arises. (4) The provisions of paragraph (2) shall not apply if the person beneficially entitled to the interest, being a resident of one of the Contracting States, carries on business in the other Contracting State, in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the indebtedness in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply. (5) Interest shall be deemed to arise in a Contracting State when the payer is that State itself or a political subdivision or local authority of that State or a person who is a resident of that State for the purposes of its tax. Where, however, the person paying the interest, whether the person is a resident of one of the Contracting States or not, has in one of the Contracting States or outside both Contracting States a permanent establishment or fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated. (6) Where, owing to a special relationship between the payer and the person beneficially entitled to the interest, or between both of them and some other person, the amount of the interest paid, having regard to the indebtedness for which it is paid, exceeds the amount which might have been expected to have been agreed upon by the payer and the person so entitled in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In that case, the excess part of the amount of the interest paid shall remain taxable according to the law, relating to tax, of each Contracting State, but subject to the other provisions of this Agreement. ARTICLE 12 Royalties (1) Royalties arising in one of the Contracting States, being royalties to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State. (2) Such royalties may be taxed in the Contracting State in which they arise, 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 royalties. (3) The term "royalties" in this Article means payments or credits, whether periodical or not, and however described or computed, to the extent to which they are made as consideration for: (a) the use of, or the right to use, any copyright, patent, design or model, plan, secret formula or process, trademark, or other like property or right; (b) the use of, or the right to use, any industrial, commercial or scientific equipment; (c) the supply of scientific, technical, industrial or commercial knowledge or information; (d) the supply of any assistance that is ancillary and subsidiary to, and is furnished as a means of enabling the application or enjoyment of, any such property or right as is mentioned in subparagraph (paragraph (a), any such equipment as is mentioned in sub- paragraph (b) or any such knowledge or information as is mentioned in sub-paragraph (c); (e) the use of, or the right to use: (i) motion picture films; (ii) films or video tapes for use in connection with television; or (iii) tapes for use in connection with radio broadcasting; or (f) total or partial forbearance in respect of the use or supply of any property or right referred to in this paragraph. (4) The provisions of paragraph (2) shall not apply if the person beneficially entitled to the royalties, being a resident of one of the Contracting States, carries on business in the other Contracting State, in which the royalties arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the property or right in respect of which the royalties are paid or credited is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply. (5) Royalties shall be deemed to arise in a Contracting State when the payer is that State itself or a political subdivision or local authority of that State or a person who is a resident of that State for the purposes of its tax. Where, however, the person paying the royalties, whether the person is a resident of one of the Contracting States or not, has in one of the Contracting States or outside both Contracting States a permanent establishment or fixed base in connection with which the liability to pay the royalties was incurred, and the royalties are borne by the permanent establishment or fixed base, then the royalties shall be deemed to arise in the State in which the permanent establishment or fixed base is situated. (6) Where, owing to a special relationship between the payer and the person beneficially entitled to the royalties, or between both of them and some other person, the amount of the royalties paid or credited, having regard to what they are paid or credited for, exceeds the amount which might have been expected to have been agreed upon by the payer and the person so entitled in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In that case, the excess part of the amount of the royalties paid or credited shall remain taxable according to the law, relating to tax, of each Contracting State, but subject to the other provisions of this Agreement. ARTICLE 13 Alienation of Property (1) Income or gains derived by a resident of one of the Contracting States from the alienation of real property referred to in Article 6 and, as provided in that Article, situated in the other Contracting State, may be taxed in that other State. (2) Income or gains from the alienation of property, other than real property referred to in Article 6, that forms part of the business property of a permanent establishment which an enterprise of one of the Contracting States has in the other Contracting State or pertains to a fixed base available to a resident of the first-mentioned State in that other State for the purpose of performing independent personal services, including income or gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such a fixed base, may be taxed in that other State. (3) Income or gains from the alienation of ships or aircraft operated in international traffic, or of property other than real property referred to in Article 6 pertaining to the operation of those ships or aircraft, shall be taxable only in the Contracting State of which the enterprise which operated those ships or aircraft is a resident. (4) Income or gains derived by a resident of one of the Contracting States from the alienation of shares or comparable interests in a company, the assets of which consist wholly or principally of real property in the other Contracting State of a kind referred to in Article 6, may be taxed in that other State. (5) Gains of a capital nature derived by a resident of one of the Contracting States from the alienation of any property other than that referred to in paragraphs (1) to (4) inclusive may be taxed in the other Contracting State according to the laws of that other State relating to its tax. ARTICLE 14 Independent Personal Services (1) Income derived by an individual who is a resident of one of the Contracting States in respect of professional services or other independent activities of a similar character shall be taxable only in that State. However if that individual: (a) has a fixed base regularly available in the other Contracting State for the purpose of performing those activities; or (b) in a year of income or year of assessment, as the case may be, is present in that other Contracting State for a period or periods amounting to or exceeding 183 days, so much of the income derived by the individual as is attributable to those activities may be taxed in that other State. (2) The term "professional services" includes services performed in the exercise of independent scientific, literary, artistic, educational or teaching activities as well as in the exercise of the independent activities of physicians, lawyers, engineers, architects, dentists and accountants. ARTICLE 15 Dependent Personal Services (1) Subject to the provisions of Articles 16, 18 and 19 salaries, wages and other similar remuneration derived by an individual who is a resident of one of the Contracting States in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived from that exercise may be taxed in that other State. (2) Notwithstanding the provisions of paragraph (1), remuneration derived by an individual who is a resident of one of the Contracting States in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if: (a) the recipient is present in that other State for a period or periods not exceeding in the aggregate 183 days in the year of income or in the year of assessment, as the case may be, of that other State; (b) the remuneration is paid by, or on behalf of, an employer who is not a resident of that other State; and (c) the remuneration is not deductible in determining taxable profits of a permanent establishment or a fixed base which the employer has in that other State. (3) Notwithstanding the preceding provisions of this Article, remuneration in respect of an employment exercised aboard a ship or aircraft operated in international traffic by a resident of one of the Contracting States may be taxed in that State. ARTICLE 16 Directors' Fees Directors' fees and similar payments derived by a person who is a resident of one of the Contracting States in the person's capacity as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other State. ARTICLE 17 Entertainers (1) Notwithstanding the provisions of Articles 14 and 15, income derived by entertainers (such as theatrical, motion picture, radio or television artistes, or musicians, or athletes) from their personal activities as such may be taxed in the Contracting State in which these activities are exercised. (2) Where income in respect of personal activities exercised by an entertainer as such accrues not to that entertainer but to another person, that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer are exercised. (3) Notwithstanding the provisions of paragraph (1), income derived by an entertainer from his or her personal activities as such in one of the Contracting States shall be taxable only in the other Contracting State if those activities in the first-mentioned State are supported substantially from the public funds of that other State or of one of its political subdivisions or local authorities. (4) Notwithstanding the provisions of paragraph (2) and Articles 7, 14 and 15, where income in respect of personal activities exercised by an entertainer as such in one of the Contracting States accrues not to that entertainer but to another person, that income shall be taxable only in the other Contracting State if that other person is supported substantially from the public funds of that other State or of one of its political subdivisions or local authorities, or if that person is a non-profit organisation of that other State. ARTICLE 18 Pensions and Annuities (1) Pensions (other than pensions to which Article 19 applies) and annuities paid to a resident of one of the Contracting States shall be taxable only in that State. (2) The term annuity means a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time under an obligation to make the payments in return for adequate and full consideration in money or money's worth. (3) Any alimony or other maintenance payment arising in one of the Contracting States and paid to a resident of the other Contracting State shall be taxable only in the first-mentioned State. ARTICLE 19 Government Service (1) Remuneration, other than a pension or annuity, paid by one of the Contracting States or a political subdivision or local authority of that State to any individual in respect of services rendered in the discharge of governmental functions shall be taxable only in that State. However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that other State and the recipient is a resident of that other State who: (a) is a citizen or national of that State; or (b) did not become a resident of that State solely for the purpose of performing the services. (2) (a) Any pension paid by, or out of funds created by, one of the Contracting States or a political subdivision or local authority of that State to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State. (b) However, such pension shall be taxable only in the other Contracting State if the individual is a resident of, and a citizen or national of, that other State. (3) The provisions of Articles 15, 16 and 18 shall apply to remuneration and pensions in respect of services rendered in connection with a business carried on by a Contracting State or a political subdivision or local authority of that Contracting State. ARTICLE 20 Students Where a student, who is a resident of one of the Contracting States 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 his or her education, receives payments from sources outside that other State for the purpose of his or her maintenance or education, those payments shall be exempt from tax in that other State. ARTICLE 21 Income Not Expressly Mentioned (1) Items of income of a resident of one of the Contracting States which are not expressly mentioned in the foregoing Articles of this Agreement shall be taxable only in that State. (2) However, any such income derived by a resident of one of the Contracting States from sources in the other Contracting State may also be taxed in that other State. (3) The provisions of paragraph (1) shall not apply to income derived by a resident of one of the Contracting States where that income is effectively connected with a permanent establishment or fixed base situated in the other Contracting State. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply. ARTICLE 22 Source of Income (1) Income derived by a resident of Sri Lanka which, under any one or more of Articles 6 to 8, Articles 10 to 19 and Article 21, may be taxed in Australia shall for the purposes of the law of Australia relating to Australian tax be deemed to be income from sources in Australia. (2) Profits, income or gains derived by a resident of Australia which, under any one or more of Articles 6 to 8, Articles 10 to 19 and Article 21, may be taxed in Sri Lanka shall for the purposes of paragraph (1) of Article 23 and of the law of Australia relating to Australian tax be deemed to be income from sources in Sri Lanka. ARTICLE 23 Methods of Elimination of Double Taxation (1) Subject to the provisions of the law of Australia from time to time in force which relate to the allowance of a credit against Australian tax of tax paid in a country outside Australia (which shall not affect the general principle hereof), Sri Lanka tax paid under the law of Sri Lanka and in accordance with this Agreement, whether directly or by deduction, in respect of income derived by a person who is a resident of Australia from sources in Sri Lanka (including, in the case of a dividend paid by a company which is a resident of Sri Lanka and is not a resident of Australia to a company which is a resident of Australia and which controls directly or indirectly at least 10 per cent of the voting power of the first- mentioned company, the Sri Lanka tax paid by the company in respect of profits out of which the dividend is paid) shall be allowed as a credit against Australian tax payable in respect of that income. (2) (a) For the purposes of paragraph (1), Sri Lanka tax paid shall include an amount equivalent to the amount of any Sri Lanka tax forgone. (b) For the purposes of the law of Australia relating to Australian tax, an amount of income referred to in paragraph (3) shall be increased by the amount of any Sri Lanka tax forgone in respect of that income. (3) For the purposes of paragraph (2), the term Sri Lanka tax forgone means an amount which, under the laws of Sri Lanka and in accordance with this Agreement, would have been payable as Sri Lanka tax on income but for any exemption from, or reduction of, Sri Lanka tax on that income in accordance with those provisions of the law of Sri Lanka relating to Sri Lanka tax which are agreed in letters exchanged from time to time between the Treasurer of Australia and the Minister of Finance and Planning of Sri Lanka for the purposes of this paragraph. (4) Paragraphs (2) and (3) shall apply only in relation to income derived in the first five years of income in relation to which this Agreement has effect by virtue of sub-paragraph (a) (ii) of Article 27 and in any later years of income that may be agreed by the Contracting States in letters exchanged for this purpose. (5) Subject to the provisions of the law of Sri Lanka regarding the allowance as a credit against Sri Lanka tax of tax payable in a country outside Sri Lanka (which shall not affect the general principle hereof), Australian tax payable under the law of Australia and in accordance with this Agreement, whether directly or by deduction, on income derived by a person who is a resident of Sri Lanka from sources within Australia shall be allowed as a credit against any Sri Lanka tax payable on such income, such tax being an amount computed before the credit is given. Where such income is a dividend paid by a company which is a resident of Australia to a company which is a resident of Sri Lanka and which owns not less than 10 per cent of the voting shares of the company paying the dividend, the credit shall take into account Australian tax payable by that company in respect of its income out of which the dividend is paid. (6) Where a resident of one of the Contracting States derives income which, in accordance with the provisions of this Agreement shall be taxable only in the other Contracting State, the first-mentioned State may take that income into account in calculating the amount of its tax payable on the remaining income of that resident. ARTICLE 24 Mutual Agreement Procedure (1) Where a person who is a resident of one of the Contracting States considers that the actions of the competent authority of one or both of the Contracting States result or will result for the person in taxation not in accordance with this Agreement, the person may, notwithstanding the remedies provided by the national laws of those States, present a case to the competent authority of the Contracting State of which the person is a resident. The case must be presented within three years from the first notification of the action giving rise to taxation not in accordance with this Agreement. (2) The competent authority shall endeavour, if the claim appears to it to be justified and if it is not itself able to arrive at an appropriate solution, to resolve the case with the competent authority of the other Contracting State, with a view to the avoidance of taxation not in accordance with this Agreement. The solution so reached shall be implemented notwithstanding any time limits in the national laws of the Contracting States. (3) The competent authorities of the Contracting States shall jointly endeavour to resolve any difficulties or doubts arising as to the application of this Agreement. (4) The competent authorities of the Contracting States may communicate with each other directly for the purpose of giving effect to the provisions of this Agreement. ARTICLE 25 Exchange of Information (1) The competent authorities of the Contracting States shall exchange such information as is necessary for the carrying out of this Agreement or of the domestic laws of the Contracting States concerning the taxes to which this Agreement applies insofar as the taxation thereunder is not contrary to this Agreement, as well as to prevent fiscal evasion in relation to such taxes. The exchange of information is not restricted by Article 1. Any information received by the competent authority of a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes to which this Agreement applies and shall be used only for such purposes. (2) In no case shall the provisions of paragraph (1) be construed so as to impose on the competent authority of a Contracting State the obligation: (a) to carry out administrative measures at variance with the laws or the administrative practice of that or of the other Contracting State; (b) to supply particulars which are not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State; (c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or to supply information the disclosure of which would be contrary to public policy. ARTICLE 26 Diplomatic and Consular Officials Nothing in this Agreement shall affect the fiscal privileges of diplomatic or consular officials under the general rules of international law or under the provisions of special international agreements. ARTICLE 27 Entry into Force (1) This Agreement shall enter into force on the date on which the Contracting States exchange notes through the diplomatic channel notifying each other that the last of such things has been done as is necessary to give this Agreement the force of law in Australia and in Sri Lanka, as the case may be, and thereupon this Agreement shall have effect: (a) in Australia: (i) in respect of withholding tax on income that is derived by a non-resident, in relation to income derived on or after 1 July in the calendar year next following that in which the Agreement enters into force; (ii) in respect of other Australian tax, in relation to income of any year of income beginning on or after 1 July in the calendar year next following that in which the Agreement enters into force. (b) in Sri Lanka: in respect of income assessable for any year of assessment commencing on or after 1 April in the calendar year next following that in which the Agreement enters into force. ARTICLE 28 Termination This Agreement shall continue in effect indefinitely, but either of the Contracting States may, on or before 30 June in any calendar year beginning after the expiration of 5 years from the date of its entry into force, give to the other Contracting State through the diplomatic channel written notice of termination and, in that event, this Agreement shall cease to be effective: (a) in Australia: (i) in respect of withholding tax on income that is derived by a non-resident, in relation to income derived on or after 1 July in the calendar year next following that in which the notice of termination is given; (ii) in respect of other Australian tax, in relation to income of any year of income beginning on or after 1 July in the calendar year next following that in which the notice of termination is given; (b) in Sri Lanka: in respect of income assessable for any year of assessment commencing on or after 1 April in the calendar year next following that in which the notice of termination is given. IN WITNESS WHEREOF the undersigned, duly authorised thereto, have signed this Agreement. DONE in duplicate at Canberra on this eighteenth day of December, One thousand nine hundred and eighty nine in the English and Sinhala languages, both texts being equally authentic. |FOR AUSTRALIA: |FOR SRI LANKA: | |PAUL KEATING |WICKREMA WEEASOORIA | NOTE ABOUT RECTIFICATION OF THE SRI LANKAN AGREEMENT 1. In an exchange of Notes dated 9 and 14 August 1990, the Government of Australia and the Government of the Democratic Socialist Republic of Sri Lanka agreed to regard the text of the English language alternate of the Sri Lankan agreement as rectified ab initio as follows: In Article 3 (1) (a), adding a line between the Coral Sea Islands Territory, and the passage of words beginning and includes any area and ending with the continental shelf; in Article 3 (1) (a) (vi), so that the passage of words becomes a part of Article 3 (1) (a) and is no longer a part of Article 3 (1) (a) (vi); In Article 6 (2), reducing the indent of the last sentence so that the sentence becomes part of Article 6 (2) and is no longer a part of Article 6 (2) (b); In Article 15 (2) (b) inserting the word and after State; in the last line of the subparagraph; and In Article 17 (1) inserting a comma after the word theatrical in line 2 of the subparagraph.. 2. These rectifications have been incorporated in the text of the copy of the agreement that is set out in this Act. (The line references relate to the original text of the agreement). Schedule 32-Agreement between Australia and Fiji for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income Section 3 Australia and Fiji, DESIRING to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, HAVE AGREED as follows: ARTICLE 1 Personal Scope This Agreement 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 Agreement shall apply are: (a) in 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 the Commonwealth of Australia; and (b) in Fiji: the income tax (including basic tax and normal tax, the nonresident dividend withholding tax;, the interest withholding tax, the royalty withholding tax and the dividend tax) and the land sales tax. (2) This Agreement shall also apply to any identical or substantially similar taxes which are imposed under the federal law of the Commonwealth of Australia or the law of Fiji after the date of signature of this Agreement 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 which have been made in the laws of their respective States relating to the taxes to which the Agreement applies, within a reasonable period of time after those changes. ARTICLE 3 General Definitions (1) In this Agreement, 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 exploitation of any of the natural resources of the seabed and subsoil of the continental shelf; (b) the term "Fiji" means the Islands of Fiji, including the Island of Rotuma and its dependencies, and includes all areas of water which, consistently with international law, have been, or may after the date of this Agreement be, designated under the laws of Fiji as areas over which the sovereignty of Fiji may be exercised with respect to the sea, the seabed and its subsoil and the natural resources thereof; (c) the terms "Contracting State", "one of the Contracting States" and "other Contracting State" mean Australia or Fiji, 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 for tax purposes; (f) the terms "enterprise" of one of the Contracting States and enterprise of the other Contracting State mean an enterprise carried on by a resident of Australia or an enterprise carried on by a resident of Fiji, as the context requires; (g) the term "tax" means Australian tax or Fiji tax, as the context requires; (h) the term "Australian tax" means tax imposed by Australia, being tax to which this Agreement applies by virtue of Article 2; (i) the term "Fiji tax" means tax imposed by Fiji, being tax to which this Agreement applies by virtue of Article 2; and (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 Fiji, the Commissioner of Inland Revenue or an authorised representative of the Commissioner. (2) In this Agreement, the terms "Australian tax" and "Fiji tax" do not include any penalty or interest imposed under the law of either Contracting State relating to the taxes to which this Agreement applies by virtue of Article 2. (3) In the application of the provisions of this Agreement by a Contracting State, any term not defined in this Agreement shall, unless the context otherwise requires, have the meaning which it has under the laws of that State from time to time in force relating to the taxes to which this Agreement applies by virtue of Article 2. (4) In determining, for the purposes of Article 10, 11 or 12, whether dividends, interest or royalties are beneficially owned by a resident of one of the Contracting States, dividends, interest or royalties derived by a trustee during a year of income in respect of which the trustee is subject to tax in that State shall be treated as being beneficially owned by that trustee to the extent to which, as at the end of the year of income, residents of that State had any interest, whether vested or contingent, in that income and no person other than residents of that State could, by the exercise of a power conferred on any person, obtain such an interest. ARTICLE 4 Residence (1) For the purposes of this Agreement, a person is a resident of one of the Contracting States: (a) in the case of Australia, subject to the provisions of paragraph (2), if the person is a resident of Australia for the purposes of Australian tax; and (b) in the case of Fiji, if the person is a resident of Fiji for the purposes of Fiji tax. (2) A person is not a resident of a Contracting State for the purposes of this Agreement 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 an individual is a resident of both Contracting States, then the status of that person shall be determined in accordance with the following rules: (a) the person shall be deemed to be a resident solely of the Contracting State in which a permanent home is available to the person; (b) if a permanent home is available to the person in both Contracting States, or in neither of them, the person shall be deemed to be a resident solely of the Contracting State in which the person has an habitual abode; and (c) if the person has an habitual abode in both Contracting States or does not have an habitual abode in either of them, the person shall be deemed to be a resident solely of the Contracting State with which the person's personal and economic relations are the closer. (4) In determining for the purposes of paragraph (3) the Contracting State with which an individual's personal and economic relations are the closer, the matters to which regard may be had shall include the citizenship of the individual. (5) Where by reason of the provisions of paragraph (1) a person other than an individual is a resident of both Contracting States, then the person's status shall be determined as follows: (a) it shall be deemed to be a resident of the Contracting State in which it is incorporated or otherwise constituted; and (b) if it is not incorporated or otherwise constituted in either of the Contracting States, it shall be deemed to be a resident of the Contracting State in which its place of effective management is situated. ARTICLE 5 Permanent Establishment (1) For the purposes of this Agreement, the term "permanent establishment" means a fixed place of business through which the business of an enterprise is wholly or partly carried on. (2) The term "permanent establishment" includes especially: (a) a place of management; (b) a branch; (c) an office; (d) a factory; (e) a workshop; (f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources; (g) an agricultural, pastoral or forestry property; and (h) a building site or construction, installation or assembly project which exists for more than six months. (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 fixed place of business solely for the purpose of purchasing goods or merchandise, or for collecting information, for the enterprise; or (d) 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 one of the Contracting States and to carry on business through that permanent establishment if: (a) 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; (b) substantial equipment is being used or installed in that State by, for or under contract with the enterprise; or (c) it furnishes services, including consultancy services, through employees or other personnel engaged by it for such purpose, but only where activities of that nature continue within that State for a period or periods aggregating more than six months within any twelve month period. (5) A person acting in one of the Contracting States on behalf of an enterprise of the other Contracting State-other than an agent of an independent status to whom paragraph (6) applies-shall be deemed to be a permanent establishment of that enterprise in the firstmentioned 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; (b) there is maintained in that State a stock of goods or merchandise belonging to the enterprise from which the person habitually fills orders on behalf of the enterprise; or (c) in so acting, the person manufactures or processes in that Contracting State for the enterprise goods or merchandise belonging to the enterprise. (6) An enterprise of one of the Contracting States 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 person who is a broker, general commission agent or any other agent of an independent status and is acting in the ordinary course of the person's business as such a broker or agent. (7) The fact that a company which is a resident of one of the Contracting States 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. (8) The principles set forth in the preceding paragraphs of this Article shall be applied in determining for the purposes of paragraph (5) 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 one of the Contracting States, has a permanent establishment in one of the Contracting States. ARTICLE 6 Income from Real Property (1) Income from real property may be taxed in the Contracting State in which the real property is situated. (2) In this Article, the term "real property", in relation to one of the Contracting States, has the meaning which it has under the laws of that State and also includes: (a) a lease of land and any other interest in or over land whether improved or not; and (b) a right to receive variable or fixed payments either as consideration for the exploitation of or the right to explore for or exploit, or in respect of the exploitation of, standing timber or any mineral, oil or gas deposits, quarries or other places of extraction or exploitation of natural resources. (3) Any interest or right referred to in paragraph (2) shall be regarded as situated where the land, standing timber, mineral, oil or gas deposits, quarries or natural resources, as the case may be, are situated or where the exploration may take place. (4) The provisions of paragraphs (1) and (3) shall also apply to income from real property of an enterprise and to income from real property used for the performance of professional services. ARTICLE 7 Business Profits (1) The profits of an enterprise of one of the Contracting States shall be taxable only in that Contracting 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 Contracting State, but only so much of them as is attributable to: (a) that permanent establishment; or (b) sales within that other State of goods or merchandise of the same or a similar kind as those sold, or other business activities of the same or a similar kind as those carried on, through that permanent establishment, if the sale or the business activities had been made or carried on in that way with a view to avoiding taxation in that other State. (2) Subject to the provisions of paragraph (3), where an enterprise of one of the Contracting States 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 or with other enterprises with which it deals. (3) In the determination of the profits of a permanent establishment, there shall be allowed as deductions expenses of the enterprise, being expenses which are incurred for the purposes of the permanent establishment (including executive and general administrative expenses so incurred) and which would be deductible if the permanent establishment were an independent entity which paid those expenses, whether incurred in the Contracting State in which the permanent establishment is situated or elsewhere. (4) 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. (5) 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, nothing in this Article shall affect the application of any law of that Contracting State relating to the determination of the tax liability of a person, 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. (6) Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article. (7) Nothing in this Article shall affect the operation of any law of a Contracting State relating to taxation of profits from insurance with nonresidents provided that, if the relevant law in force in either Contracting State at the date of signature of this Agreement 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 any amendment of this paragraph that may be appropriate. (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 Australia, 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 therein and that share of business profits shall be attributed to that permanent establishment. ARTICLE 8 Shipping and Air Transport (1) Profits from the operation of ships or aircraft derived by a resident of one of the Contracting States shall be taxable only in that State. (2) Notwithstanding the provisions of paragraph (1), such profits may be taxed in the other Contracting State where they are profits from operations of ships or aircraft confined solely to places in that other State. (3) The provisions of paragraphs (1) and (2) shall apply in relation to the share of the profits from the operation of ships or aircraft derived by a resident of one of the Contracting States through participation in a pool service, in a joint transport operating organisation or in an international operating agency. (4) For the purposes of this Article, profits derived from the carriage by ships or aircraft of passengers, livestock, mail, goods or merchandise shipped in a Contracting State for discharge at another place in that State shall be treated as profits from operations of ships or aircraft confined solely to places in that State. ARTICLE 9 Associated Enterprises (1) Where: (a) an enterprise of one of the Contracting States 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 one of the Contracting States and an enterprise of the other Contracting State, and in either case conditions operate between the two enterprises in their commercial or financial relations which differ from those which might be expected to operate between independent enterprises dealing wholly independently with one another, then any profits which, but for those conditions, might have been 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, nothing in this Article shall affect the application of any law of that State relating to the determination of the tax liability of a person, 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) Notwithstanding the provisions of this Article, an enterprise of one of the Contracting States may be taxed by that State as if this Article had not come into effect, so far as it is practicable to do so, in accordance with the principles of this Article. (4) Where profits on which an enterprise of one of the Contracting States has been charged to tax in that State are also included, by virtue of paragraph (1), (2) or (3), in the profits of an enterprise of the other Contracting State and taxed accordingly, and the profits so included are profits which might have been expected to have accrued to that enterprise of the other State if the conditions operative between the enterprises had been those which might have been expected to have operated between independent enterprises dealing wholly independently with one another, then the firstmentioned State shall make an appropriate adjustment to the amount of tax charged on those profits in the firstmentioned State. In determining such an adjustment, due regard shall be had to the other provisions of this Agreement and for this purpose the competent authorities of the Contracting States shall if necessary consult each other. (5) The provisions of paragraph (4) relating to an appropriate adjustment are not applicable after the expiration of six years from the end of the year of assessment or year of tax in respect of which a Contracting State has charged to tax the profits to which the adjustment would relate. ARTICLE 10 Dividends (1) Dividends paid by a company which is a resident of one of the Contracting States for the purposes of its tax, being dividends to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State. (2) Such dividends may 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 20 per cent of the gross amount of the dividends. (3) The term "dividends" in this Article means income from shares and other income assimilated to income from shares by the law, relating to tax, of the Contracting 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 person beneficially entitled to the dividends, being a resident of one of the Contracting States, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply. (5) Dividends paid by a company which is a resident of one of the Contracting States, being dividends to which a person who is not a resident of the other Contracting State is beneficially entitled, shall be exempt from tax in that other State except insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or fixed base situated in that other State. Provided that 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 Fiji for the purposes of Fiji tax. (6) Nothing in this Agreement shall be construed as preventing one of the Contracting States from imposing, on the income of a company which is a resident of the other Contracting State, tax in addition to the taxes referred to in Article 2 in relation to the firstmentioned State which are payable by a company which is a resident of the firstmentioned State, provided that any such additional tax shall not exceed 20 per cent of the amount by which the taxable income of the firstmentioned company of a year of income exceeds the tax payable on that taxable income to the firstmentioned State. Any tax payable to one of the Contracting States on the undistributed profits of a company which is a resident of the other Contracting State shall be calculated as if that company were not liable to the additional tax referred to in this paragraph and had paid dividends of such amount that tax equal to the amount of the additional tax would have been payable on the dividends in accordance with paragraph (2). ARTICLE 11 Interest (1) Interest arising in one of the Contracting States, being interest to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State. (2) Such interest may 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) 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, and interest from any other form of indebtedness as well as all other income assimilated to income from money lent by the law, relating to tax, of the Contracting State in which the income arises. (4) The provisions of paragraphs (1) and (2) shall not apply if the person beneficially entitled to the interest, being a resident of one of the Contracting States, carries on business in the other Contracting State, in which the interest arises, through a permanent establishment situated therein, or performs in that other Contracting State independent personal services from a fixed base situated therein, and the indebtedness in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply. (5) Interest shall be deemed to arise in a Contracting State when the payer is that State itself or a political subdivision or local authority of that State or a person who is a resident of that State for the purposes of its tax. Where, however, the person paying the interest, whether the person is a resident of one of the Contracting States or not, has in one of the Contracting States or outside both Contracting States a permanent establishment or fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated. (6) Where, owing to a special relationship between the payer and the person beneficially entitled to the interest, or between both of them and some other person, the amount of the interest paid, having regard to the indebtedness for which it is paid, exceeds the amount which might have been expected to have been agreed upon by the payer and the person so entitled in the absence of such relationship, the provisions of this Article shall apply only to the lastmentioned amount. In that case, the excess part of the amount of the interest paid shall remain taxable according to the law, relating to tax, of each Contracting State, but subject to the other provisions of this Agreement. ARTICLE 12 Royalties (1) Royalties arising in one of the Contracting States, being royalties to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State. (2) Such royalties may be taxed in the Contracting State in which they arise, and according to the law of that State, but the tax so charged shall not exceed 15 per cent of the gross amount of the royalties. (3) The term "royalties" in this Article means payments or credits, whether periodical or not, and however described or computed, to the extent to which they are made as consideration for: (a) the use of, or the right to use, any copyright, patent, design or model, plan, secret formula or process, trademark, or other like property or right; (b) the use of, or the right to use, any industrial (including agricultural), commercial or scientific equipment; (c) the supply of scientific, technical, industrial (including agricultural) or commercial knowledge or information; (d) the supply of any assistance that is ancillary and subsidiary to, and is furnished as a means of enabling the application or enjoyment of, any such property or right of the kinds mentioned in subparagraph (paragraph (a), any such equipment as is mentioned in subparagraph (paragraph (b) or any such knowledge or information as is mentioned in subparagraph (paragraph (c); (e) the use of, or the right to use: (i) motion picture films; (ii) films or video tapes for use in connection with television; or (iii) tapes for use in connection with radio broadcasting; (f) the supply by a resident of one of the Contracting States of management services in the other Contracting State; or (g) total or partial forbearance in respect of the use of a property or right referred to in this paragraph. (4) The provisions of paragraphs (1) and (2) shall not apply if the person beneficially entitled to the royalties, being a resident of one of the Contracting States, carries on business in the other Contracting State, in which the royalties arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties are paid or credited is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply. (5) Royalties shall be deemed to arise in a Contracting State when the payer is that State itself or a political subdivision or local authority of that State or a person who is a resident of that State for the purposes of its tax. Where, however, the person paying the royalties, whether the person is a resident of one of the Contracting States or not, has in one of the Contracting States or outside both Contracting States a permanent establishment or fixed base in connection with which the liability to pay the royalties was incurred, and the royalties are borne by the permanent establishment or fixed base, then the royalties shall be deemed to arise in the State in which the permanent establishment or fixed base is situated. (6) Where, owing to a special relationship between the payer and the person beneficially entitled to the royalties or between both of them and some other person, the amount of the royalties paid or credited, having regard to what they are paid or credited for, exceeds the amount which might have been expected to have been agreed upon by the payer and the person so entitled in the absence of such relationship, the provisions of this Article shall apply only to the lastmentioned amount. In that case, the excess part of the amount of the royalties paid or credited shall remain taxable according to the law, relating to tax, of each Contracting State, but subject to the other provisions of this Agreement. ARTICLE 13 Alienation of Property (1) Income, profits or gains derived by a resident of one of the Contracting States from the alienation of real property as defined in Article 6 and, as provided in that Article, situated in the other Contracting State may be taxed in that other State. (2) Income, profits or gains from the alienation of property, other than real property as defined in Article 6, that forms part of the business property of a permanent establishment which an enterprise of one of the Contracting States has in the other Contracting State, including income, profits or gains from the alienation of such a permanent establishment (alone or with the whole enterprise), may be taxed in that other State. (3) Income, profits or gains from the alienation of ships or aircraft operated in international traffic, or of property other than real property as defined in Article 6 pertaining to the operation of those ships or aircraft, shall be taxable only in the Contracting State of which the enterprise which operated those ships or aircraft is a resident. (4) Income, profits or gains derived by a resident of one of the Contracting States from the alienation of shares or comparable interests in a company, the assets of which consist wholly or principally of real property as defined in Article 6 in the other Contracting State, may be taxed in that other State. (5) Nothing in this Agreement affects the application of a law of a Contracting State relating to the taxation of profits or gains of a capital nature derived from the alienation of property other than that to which any of paragraphs (1), (2), (3) and (4) apply. ARTICLE 14 Independent Personal Services (1) Income derived by an individual who is a resident of one of the Contracting States in respect of professional services or other independent activities of a similar character shall be taxable only in that State. However if such an individual: (a) has a fixed base regularly available to the individual in the other Contracting State for the purpose of performing the individual's activities; (b) in a year of income, stays in that other Contracting State for a period or periods aggregating 183 days or more for the purpose of performing the individual's activities; or (c) in a year of income, derives gross remuneration (including expenses reimbursed to or borne on behalf of the individual or the value of any benefit provided in connection with those services or activities) in respect of the individual's activities in that other State, that is paid by a resident of that other State or is deductible in determining taxable profits of a permanent establishment or a fixed base situated in that other State and that exceeds eight thousand Australian dollars or its equivalent in Fijian dollars, so much of the income derived by the individual as is attributable to activities so performed may be taxed in that other State. (2) The Treasurer of Australia and the Minister of Finance of Fiji may agree in letters exchanged for the purpose to variations in the amount specified in subparagraph (paragraph (1) (c) and any variations so agreed shall have effect according to the tenor of the letters. (3) The term "professional services" includes services performed in the exercise of independent scientific, literary, artistic, educational or teaching activities, as well as in the exercise of independent activities of physicians, lawyers, engineers, architects, dentists and accountants. ARTICLE 15 Dependent Personal Services (1) Subject to the provisions of Articles 16, 18, 19 and 20, salaries, wages and other similar remuneration derived by an individual who is a resident of one of the Contracting States in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived from that exercise may be taxed in that other State. (2) Notwithstanding the provisions of paragraph (1), remuneration derived by an individual who is a resident of one of the Contracting States in respect of an employment exercised in the other Contracting State shall be taxable only in the firstmentioned State if: (a) the recipient is present in that other State for a period or periods not exceeding in the aggregate 90 days in the year of income of that other State; and (b) the remuneration is, or upon the application of this Article will be, subject to tax in the firstmentioned State. (3) Notwithstanding the preceding provisions of this Article, remuneration in respect of an employment exercised aboard a ship or aircraft operated in international traffic by a resident of one of the Contracting States may be taxed in that State. ARTICLE 16 Directors' Fees Directors' fees and similar payments derived by a resident of one of the Contracting States as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other State. ARTICLE 17 Entertainers (1) Notwithstanding the provisions of Articles 14 and 15, income derived by entertainers (such as theatrical, motion picuture, radio or television artistes and musicians and athletes) from their personal activities as such may be taxed in the Contracting State in which those activities are exercised. (2) Where income in respect of the personal activities of an entertainer as such accrues not to that entertainer but to another person, that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer are exercised. (3) The provisions of paragraphs (1) and (2) shall not apply to income derived from activities exercised in one of the Contracting States by entertainers if the visit to that State is wholly or substantially supported by public funds of the other Contracting State, or a political subdivision, local authority or statutory body thereof. ARTICLE 18 Pensions and Annuities (1) Pensions (other than pensions to which Article 19 applies) and annuities paid to a resident of one of the Contracting States shall be taxable only in that State. (2) The term "annuity" means a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time under an obligation to make the payments in return for adequate and full consideration in money or money's worth. (3) Any alimony or other maintenance payment arising in one of the Contracting States and paid to a resident of the other Contracting State shall be taxable only in the firstmentioned State. ARTICLE 19 Government Service (1) Remuneration (including a pension or annuity) paid by one of the Contracting States or a political subdivision or local authority of that State to any individual in respect of services rendered in the discharge of governmental functions shall be taxable only in that State. However, such remuneration, not being a pension or annuity, shall be taxable only in the other Contracting State if the services are rendered in that other State and the recipient is a resident of that other State who: (a) is a citizen of that State; or (b) did not become a resident of that State solely for the purpose of performing the services. (2) The provisions of paragraph (1) shall not apply to remuneration, including a pension or annuity, in respect of services rendered in connection with any trade or business carried on by one of the Contracting States or a political subdivision or local authority of that State. In such a case, the provisions of Article 15, 16 or 18, as the case may be, shall apply. ARTICLE 20 Professors and Teachers (1) Remuneration which a professor or teacher who is a resident of one of the Contracting States and who visits the other Contracting State for a period not exceeding two years for the purpose of teaching or carrying out advanced study or research at a university, college, school or other educational institution, receives for those activities shall be taxable only in the firstmentioned State. (2) This Article shall not apply to remuneration which a professor or teacher receives for conducting research if the research is undertaken primarily for the private benefit of a specific person or persons. ARTICLE 21 Australian Government's Bilateral Aid to Fiji Notwithstanding anything elsewhere in this Agreement, income derived by any person from the participation in any capacity whatsoever of that person in the Australian Government's Bilateral Aid Program to Fiji shall be exempt from Fiji tax if: (a) that person is not a resident of Fiji for the purposes of Fiji tax, or is a resident of Fiji for the purposes of Fiji tax solely for the purpose of such participation; and (b) that income is derived from the aid fund and is, or upon the application of this Article will be, subject to tax in Australia. ARTICLE 22 Students and Trainees Where a student or trainee, who is a resident of one of the Contracting States 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 his or her education or training, receives payments from sources outside that other State for the purpose of the student's or trainee's maintenance, education or training, those payments shall be exempt from tax in that other State. ARTICLE 23 Income Not Expressly Mentioned (1) Items of income of a resident of one of the Contracting States which are not expressly mentioned in the foregoing Articles of this Agreement shall be taxable only in that State. (2) However, any such income derived by a resident of one of the Contracting States from sources in the other Contracting State may also be taxed in that other State. (3) The provisions of paragraph (1) shall not apply to income derived by a resident of one of the Contracting States where that income is effectively connected with a permanent establishment or fixed base situated in the other Contracting State. In such a case, the provisions of Article 7 or 14, as the case may be, shall apply. ARTICLE 24 Source of Income (1) Profits, income or gains derived by a resident of one of the Contracting States which, under any one or more of Articles 6 to 8 and 10 to 19 and Article 23 may be taxed in the other Contracting State, shall for the purposes of the law, relating to tax, of that other Contracting State be deemed to be income from sources in that other State. (2) Profits, income or gains derived by a resident of one of the Contracting States which, under any one or more of Articles 6 to 8, 10 to 19 and Article 23 may be taxed in the other Contracting State, shall for the purposes of Article 25 and of the law, relating to tax, of the firstmentioned State be deemed to be income from sources in the other State. ARTICLE 25 Elimination of Double Taxation (1) Subject to any provisions of the law of Fiji which may from time to time be in force and which relate to the allowance of a credit against Fiji tax of tax paid in a country outside Fiji (which shall not affect the general principale hereof), Australian tax paid under the law of Australia and consistently with this Agreement, whether directly or by deduction, in respect of income derived by a resident of Fiji from sources in Australia shall be allowed as a credit against Fiji tax payable in respect of that income. (2) (a) Subject to the provisions of the law of Australia from time to time in force which relate to the allowance of a credit against Australian tax of tax paid in a country outside Australia (which shall not affect the general principle hereof), Fiji tax paid under the law of Fiji and in accordance with this Agreement, whether directly or by deduction, in respect of income derived by a person who is a resident of Australia from sources in Fiji shall be allowed as a credit against Australian tax payable in respect of that income. (b) Where a company which is a resident of Fiji and is not a resident of Australia for the purposes of Australian tax pays a dividend to a company which is a resident of Australia and which controls directly or indirectly not less than 10 per cent of the voting power of the firstmentioned company, the credit referred to in paragraph (1) shall include the tax paid by the firstmentioned company in respect of that portion of its profits out of which the dividend is paid. (3) For the purposes of paragraph (2), Fiji tax paid shall include an amount equivalent to the amount of any tax forgone which, under the law of Fiji and in accordance with this Agreement, would have been payable as tax on income but for an exemption from, or a reduction of, tax on that income resulting from the operation of: (a) (i) subsection 8 (1) of the Hotels Aid Act 1964 (Cap. 215); or (ii) paragraph 8 (6) (c), paragraph 9 (3) (h), subsection 10A (6), paragraph (a), (b), (d) or (f) of subsection 16 (2) or subsection 16 (4) or (5) of the Income Tax Act 1974, insofar as those provisions were in force on, and have not been modified since, the date of signature of this Agreement, or have been modified only in minor respects so as not to affect their general character; or (b) any other provision which may subsequently be made granting an exemption from or reduction of tax which the authorised representatives of the Governments of Australia and Fiji agree in writing to be of a substantially similar character, provided that such provisions are not modified there after or are modified only in minor respects so as not to affect their general character. (4) The provisions of paragraph (3) shall apply only in relation to income derived in any of the first five years of income in relation to which this Agreement has effect by virtue of subparagraph (paragraph (a) (ii) of Article 29 and in any later year of income that may be agreed in an exchange of letters for this purpose by the authorised representatives of the Governments of Australia and Fiji. ARTICLE 26 Mutual Agreement Procedure (1) Where a person who is a resident of one of the Contracting States considers that the actions of the competent authority of one or both of the Contracting States result or will result for the person in taxation not in accordance with this Agreement, the person may, notwithstanding the remedies provided by the national laws of those States, present a case to the competent authority of the Contracting State of which the person is a resident. The case must be presented within three years from the first notification of the action giving rise to taxation not in accordance with this Agreement. (2) The competent authority shall endeavour, if the claim appears to it to be justified and if it is not itself able to arrive at an appropriate solution, to resolve the case with the competent authority of the other Contracting State, with a view to the avoidance of taxation not in accordance with this Agreement. (3) The competent authorities of the Contracting States shall jointly endeavour to resolve any difficulties or doubts arising as to the application of this Agreement. (4) The competent authorities of the Contracting States may communicate with each other directly for the purpose of giving effect to the provisions of this Agreement. ARTICLE 27 Exchange of Information (1) The competent authorities of the Contracting States shall exchange such information as is necessary for the carrying out of this Agreement or of the domestic laws of the Contracting States concerning the taxes to which this Agreement applies insofar as the taxation thereunder is not contrary to this Agreement. The exchange of information is not restricted by Article 1. Any information received by the competent authority of a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes to which this Agreement applies and shall be used only for such purposes. (2) In no case shall the provisions of paragraph (1) be construed so as to impose on a Contracting State the obligation: (a) to carry out administrative measures at variance with the laws or the administrative practice of that or of the other Contracting State; (b) to supply particulars which are not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State; (c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or to supply information the disclosure of which would be contrary to public policy. ARTICLE 28 Diplomatic and Consular Officials Nothing in this Agreement shall affect the fiscal privileges of diplomatic or consular officials under the general rules of international law or under the provisions of special international agreements. ARTICLE 29 Entry into Force This Agreement shall enter into force on the date on which the Contracting States exchange notes through the diplomatic channel notifying each other that the last of such things has been done as is necessary to give this Agreement the force of law in Australia and in Fiji, as the case may be, and thereupon this Agreement shall have effect: (a) in Australia: (i) in relation to withholding tax on income that is derived by a nonresident, in respect of income derived on or after 1 January in the calendar year immediately following that in which the Agreement enters into force; (ii) in relation to other Australian tax, in respect of income, profits or gains of any year of income beginning on or after 1 July in the calendar year immediately following that in which the Agreement enters into force; (b) in Fiji: in relation to Fiji tax, in respect of income, profits or gains derived during any income year beginning on or after 1 January in the calendar year immediately following that in which the Agreement enters into force. ARTICLE 30 Termination This Agreement shall continue in effect indefinitely, but either of the Contracting States may, on or before 30 June in any calendar year beginning after the expiration of five years from the date of its entry into force, give to the other Contracting State through the diplomatic channel written notice of termination and, in that event, this Agreement shall cease to be effective: (a) in Australia: (i) in relation to withholding tax on income that is derived by a nonresident, in respect of income derived on or after 1 January in the calendar year immediately following that in which the notice of termination is given; (ii) in relation to other Australian tax, in respect of income, profits or gains of any year of income beginning on or after 1 July in the calendar year immediately following that in which the notice of termination is given; (b) in Fiji: in relation to Fiji tax, in respect of income, profits or gains derived during any income year beginning on or after 1 January in the calendar year immediately following that in which the notice of termination is given. IN WITNESS WHEREOF the undersigned, duly authorised thereto, have signed this Agreement. DONE in duplicate at Canberra this fifteenth day of October, One thousand nine hundred and ninety in the English language. |FOR AUSTRALIA: |FOR FIJI: | |Hon. P J Keating |Hon. J N Kamikamica | |Minister of State |Minister of Finance | |for the Treasury |and Economic Planning | |of Australia |for the Government of | | |the Republic of Fiji | Schedule 33-Agreement between Australia and the Republic of Hungary for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income Section 3 Australia and the Republic of Hungary, DESIRING to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, and to further develop and facilitate their economic relations, HAVE AGREED as follows: ARTICLE 1 Personal Scope This Agreement 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 Agreement shall apply are: (a) in Australia:- the income tax, and the petroleum resource rent tax in respect of offshore projects, imposed under the federal law of the Commonwealth of Australia: (b) in Hungary:- the income tax on individuals and the profit taxes, imposed under the law of the Republic of Hungary. (2) This Agreement shall also apply to any identical or substantially similar taxes which are imposed under the federal law of the Commonwealth of Australia or the law of the Republic of Hungary after the date of signature of this Agreement 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 which have been made in the laws of their respective States relating to the taxes to which this Agreement applies within a reasonable period of time after such changes. (3) In this Agreement, the terms "Australian tax" and "Hungarian tax" do not include any penalty or interest imposed under the law of either Contracting State relating to the taxes to which this Agreement applies. ARTICLE 3 General Definitions (1) In this Agreement, 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 exploitation of any of the natural resources of the seabed and subsoil of the continental shelf; (b) the term "Hungary" when used in a geographical sense means the territory of the Republic of Hungary; (c) the terms "a Contracting State", "one of the Contracting States" and "other Contracting State" mean Australia or the Republic of Hungary, 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 terms "enterprise of a Contracting State", "enterprise of one of the Contracting States" and "enterprise of the other Contracting State" mean an enterprise carried on by a resident of Australia or an enterprise carried on by a resident of the Republic of Hungary, as the context requires; (g) the term "tax" means Australian tax or Hungarian tax, as the context requires; (h) the term "Australian tax" means tax imposed by Australia, being tax to which this Agreement applies by virtue of Article 2; (i) the term "Hungarian tax" means tax imposed by the Republic of Hungary, being tax to which this Agreement applies by virtue 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 the Republic of Hungary, the Minister of Finance, or an authorised representative of the Minister. (2) In the application of this Agreement by a Contracting State, any term not defined in this Agreement shall, unless the context otherwise requires, have the meaning which it has under the laws of that State from time to time in force relating to the taxes to which this Agreement applies. ARTICLE 4 Residence (1) For the purposes of this Agreement, a person is a resident of one of the Contracting States: (a) in the case of Australia, if the person is a resident of Australia for the purposes of Australian tax; and (b) in the case of the Republic of Hungary, if the person is liable to tax therein by reason of domicile, residence, place of management or any other criterion of a similar nature. (2) A person is not a resident of a Contracting State for the purposes of this Agreement 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, then the status of the person shall be determined in accordance with the following rules: (a) the person shall be deemed to be a resident solely of the Contracting State in which a permanent home is available to the person; (b) if a permanent home is available to the person in both Contracting States, or in neither of them, the person shall be deemed to be a resident solely of the Contracting State with which the personal and economic relations of the person are the closer (centre of vital interests). (4) Where by reason of the provisions of paragraph (1), a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident solely of the Contracting State in which its place of effective management is situated. ARTICLE 5 Permanent Establishment (1) For the purposes of this Agreement, the term permanent "establishment" means a fixed place of business or production through which the activities of an enterprise are 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, an oil or gas well, a quarry or any other place of extraction of natural resources; (g) a farm or forest; (h) a building site or construction, installation or assembly project which exists for more than 12 months. (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; or (b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery; or (c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise; or (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; or (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; or (f) the maintenance of a fixed place of business solely for any combination of activities mentioned in subparagraphs (paragraphs (a) to (e), provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character. (4) An enterprise shall be deemed to have a permanent establishment in one of the Contracting States and to carry on business through that permanent establishment if: (a) it carries on supervisory activities in that State for more than 12 months in connection with a building site, or a construction, installation or assembly project which is being undertaken in that State; or (b) substantial equipment is being used in that State for more than 12 months by, for or under contract with the enterprise in, or in respect of, the exploration for or the exploitation of natural resources, or in respect of activities connected with such exploration or exploitation. (5) A person acting in one of the Contracting States on behalf of an enterprise of the other Contracting State-other than an agent of an independent status to whom paragraph (6) applies-shall be deemed to be a permanent establishment of that enterprise in the first mentioned State if 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. (6) An enterprise of one of the Contracting States 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 person who is a broker, general commission agent or any other agent of an independent status and is acting in the ordinary course of the person's business as such a broker or agent. (7) 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. (8) The principles set forth in the preceding paragraphs of this Article shall be applied in determining for the purposes of this Agreement whether there is a permanent establishment outside both Contracting States, and whether an enterprise, not being an enterprise of one of the Contracting States, has a permanent establishment in one of the Contracting States. ARTICLE 6 Income from Real Property (1) Income from real property may be taxed in the Contracting State in which the real property is situated. (2) In this Article, the term real property, in relation to one of the Contracting States, has the meaning which it has under the laws of that State and includes: (a) a lease of land and any other interest in or over land, including a right to explore for mineral, oil or gas deposits or other natural resources, and a right to mine such deposits or resources; and (b) a right to receive variable or fixed payments either as consideration for the exploitation of or the right to explore for or exploit, or in respect of the exploitation of, mineral, oil or gas deposits, quarries or other places of extraction or exploitation of natural resources. Ships and aircraft shall not be regarded as real property. (3) Any interest or right referred to in paragraph (2) shall be regarded as situated where the land, mineral, oil or gas deposits, quarries or natural resources, as the case may be, are situated or where the exploration may take place. (4) The provisions of paragraphs (1) and (3) shall also apply to income from real property of an enterprise and to income from real property used for the performance of independent personal services. 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) Subject to the provisions of paragraph (3), 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 or with other enterprises with which it deals. (3) In the determination of the profits of a permanent establishment, there shall be allowed as deductions expenses of the enterprise, being expenses which are incurred for the purposes of the permanent establishment (including executive and general administrative expenses so incurred) and which would be deductible if the permanent establishment were an independent entity which paid those expenses, whether incurred in the Contracting State in which the permanent establishment is situated or elsewhere. (4) 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. (5) Nothing in this Article shall affect the application of any law of a Contracting State relating to the determination of the tax liability of a person in cases where the information available to the competent authority of that State is inadequate to determine the profits to be attributed to a permanent establishment, provided that that law shall be applied, so far as the information available to the competent authority permits, consistently with the principles of this Article. (6) Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article. (7) For the purposes of the preceding paragraphs, the profit to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary. (8) Nothing in this Article shall affect the operation of any law of a Contracting State relating to tax imposed on profits from insurance with non-residents, provided that if the relevant law in force in either Contracting State at the date of signature of this Agreement is varied (otherwise than in minor respects so as not to affect its general character) the Contracting States shall consult with a view to agreeing to any amendment of this paragraph that may be appropriate. (9) 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 the other Contracting 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 therein and that share of business profits shall be attributed to that permanent establishment. ARTICLE 8 Ships, Aircraft and Road Transport Vehicles (1) Profits from the operation of ships, aircraft or road transport vehicles derived by a resident of one of the Contracting States shall be taxable only in that State. (2) Notwithstanding the provisions of paragraph (1), such profits may be taxed in the other Contracting State where they are profits from operations of ships, aircraft or road transport vehicles confined solely to places in that other State. (3) The provisions of paragraphs (1) and (2) shall apply in relation to the share of the profits from the operation of ships, aircraft or road transport vehicles derived by a resident of one of the Contracting States through participation in a pool service, in a joint transport operating organization or in an international operating agency. (4) For the purposes of this Article, profits derived from the carriage by ships, aircraft or road transport vehicles of passengers, livestock, mail, goods or merchandise shipped in a Contracting State for discharge at another place in that State shall be treated as profits from operations of ships, aircraft or road transport vehicles confined solely to places in that State. ARTICLE 9 Associated Enterprises (1) Where: (a) an enterprise of one of the Contracting States 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 one of the Contracting States and an enterprise of the other Contracting State; or (c) a person, acting in a Contracting State on behalf of an enterprise of the other Contracting State, manufactures or processes in the first mentioned State for the enterprise, goods or merchandise belonging to the enterprise, and in any case conditions operate between the two enterprises, or between an enterprise and the person, in their commercial or financial relations which differ from those which might be expected to operate between independent enterprises, or between an independent enterprise and a person, dealing wholly independently with one another, then any profits which, but for those conditions, might have been expected to accrue to one of the enterprises or to the person but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise or of the person and taxed accordingly. (2) Nothing in this Article shall affect the application of any law of a Contracting State relating to the determination of the tax liability of a person, including determinations in cases where the information available to the competent authority of that State is inadequate to determine the income to be attributed to an enterprise or a person, provided that that law shall be applied, so far as it is practicable to do so, consistently with the principles of this Article. (3) Where profits on which an enterprise of one of the Contracting States has been charged to tax in that State are also included, by virtue of paragraph (1) or (2), in the profits of an enterprise or of a person of the other Contracting State and charged to tax in that other State, and the profits so included are profits which might have been expected to have accrued to that enterprise or to that person of the other State if the conditions operative between the enterprises or between an enterprise and the person had been those which might have been expected to have operated between independent enterprises or between an independent enterprise and a person dealing wholly independently with one another, then the first mentioned State shall make an appropriate adjustment to the amount of tax charged on those profits in the first mentioned State. In determining such an adjustment, due regard shall be had to the other provisions of this Agreement and for this purpose the competent authorities of the Contracting States shall if necessary consult each other. 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 to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State. (2) Such dividends may 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 15 per cent of the gross amount of the dividends. (3) The term dividends as used in this Article means income from shares or other rights to participate in profits and not relating to debt claims, as well as other income which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident. (4) The provisions of paragraph (2) shall not apply if the person beneficially entitled to 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 therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In any such case the provisions of Article 7 or Article 14, as the case may be, 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 Contracting State may not impose any tax on the dividends paid by the company, except in so far as such dividends are beneficially owned by a resident of that other State or in so far as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company's undistributed profits to tax even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in that other State. ARTICLE 11 Interest (1) Interest arising in a Contracting State, being interest to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State. (2) Such interest may 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) The term interest in this Article means interest from indebtedness of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor's profits, and in particular, income from government securities or from bonds or debentures, and all other income that is, by the law relating to tax of the Contracting State in which the income arises, assimilated to income from money lent. (4) The provisions of paragraph (2) shall not apply if the person beneficially entitled to 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 therein, or performs in that other State independent personal services from a fixed base situated therein, and the indebtedness in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply. (5) Interest shall be deemed to arise in a Contracting State when the payer is that State itself or a political subdivision or local authority of that State or a person who is a resident of that State for the purposes of its tax. Where, however, the person paying the interest, whether the person is a resident of a Contracting State or not, has in a Contracting State or outside both Contracting States a permanent establishment or fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated. (6) Where, owing to a special relationship between the payer and the person beneficially entitled to the interest, or between both of them and some other person, the amount of the interest paid, having regard to the indebtedness for which it is paid, exceeds the amount which might have been expected to have been agreed upon by the payer and the person so entitled in the absence of such relationship, the provisions of this Article shall apply only to the last mentioned amount. In that case, the excess part of the amount of the interest paid shall remain taxable according to the law, relating to tax, of each Contracting State, but subject to the other provisions of this Agreement. (7) Interest derived from the investment of official reserves by the Government of a Contracting State or by a bank performing central banking functions in a Contracting State shall be exempt from tax in the other Contracting State. ARTICLE 12 Royalties (1) Royalties arising in a Contracting State to which a resident of the other Contracting State is beneficially entitled may be taxed in that other State. (2) Such royalties may be taxed in the Contracting State in which they arise, 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 royalties. (3) The term "royalties" in this Article means payments or credits, whether periodical or not, and however described or computed, to the extent to which they are made as consideration for: (a) the use of, or the right to use, any copyright, patent, design or model, plan, secret formula or process, trademark, or other like property or right; or (b) the use of, or the right to use, any industrial, commercial or scientific equipment; or (c) the supply of scientific, technical, industrial or commercial knowledge or information; or (d) the supply of assistance ancillary and subsidiary to and furnished to enable the application or enjoyment of or the use of, or the right to use or the supply of the items referred to in subparagraphs (paragraphs (a), (b) and (c); or (e) the use of, or the right to use: (i) motion picture films; or (ii) films or video tapes for use in connection with television; or (iii) tapes for use in connection with radio broadcasting; or (f) total or partial forbearance in respect of the use or supply of any property or right referred to in this paragraph. (4) The provisions of paragraph (2) shall not apply if the person beneficially entitled to the royalties, being a resident of a Contracting State, carries on business in the other Contracting State, in which the royalties arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the property or right in respect of which the royalties are paid or credited is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply. (5) Royalties shall be deemed to arise in a Contracting State when the payer is that State itself or a political subdivision or local authority of that State or a person who is a resident of that State for the purposes of its tax. Where, however, the person paying the royalties, whether the person is a resident of a Contracting State or not, has in one of the Contracting States or outside both Contracting States a permanent establishment or fixed base in connection with which the liability to pay the royalties was incurred, and the royalties are borne by the permanent establishment or fixed base, then the royalties shall be deemed to arise in the State in which the permanent establishment or fixed base is situated. (6) Where, owing to a special relationship between the payer and the person beneficially entitled to the royalties, or between both of them and some other person, the amount of the royalties paid or credited, having regard to what they are paid or credited for, exceeds the amount which might have been expected to have been agreed upon by the payer and the person so entitled in the absence of such relationship, the provisions of this Article shall apply only to the last mentioned amount. In that case, the excess part of the amount of the royalties paid or credited shall remain taxable according to the law, relating to tax, of each Contracting State, but subject to the other provisions of this Agreement. ARTICLE 13 Alienation of Property (1) Income or gains derived by a resident of a Contracting State from the alienation of real property referred to in Article 6 and, as provided in that Article, situated in the other Contracting State may be taxed in that other State. (2) Income or gains from the alienation of property, other than real property referred to in Article 6, that forms part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or pertains to a fixed base available to a resident of the first mentioned State in that other State for the purpose of performing independent personal services, including income or gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such a fixed base, may be taxed in that other State. (3) Income or gains from the alienation of ships, aircraft or road transport vehicles operated in international traffic, or of property other than real property referred to in Article 6 pertaining to the operation of those ships, aircraft or road transport vehicles, shall be taxable only in the Contracting State of which the enterprise which operated those ships, aircraft or road transport vehicles is a resident. (4) Income or gains derived by a resident of a Contracting State from the alienation of shares or comparable interests in a company, the assets of which consist wholly or principally of real property in the other Contracting State of a kind referred to in Article 6, may be taxed in that other State. (5) Nothing in this Agreement affects the application of a law of a Contracting State relating to the taxation of gains of a capital nature derived from the alienation of property other than that to which any of paragraphs (1), (2), (3) and (4) apply. ARTICLE 14 Independent Personal Services (1) Income derived by an individual who is a resident of a Contracting State in respect of professional services or other independent activities of a similar character shall be taxable only in that State unless a fixed base is regularly available to the individual in the other Contracting State for the purpose of performing the individual's activities. If such a fixed base is available to the individual, the income may be taxed in the other State but only so much of it as is attributable to activities exercised from that fixed base. (2) The term "professional services" includes services performed in the exercise of independent scientific, literary, artistic, educational or teaching activities as well as in the exercise of the independent activities of physicians, dentists, lawyers, engineers, architects and accountants. ARTICLE 15 Dependent Personal Services (1) Subject to the provisions of Articles 16, 18, 19, 20 and 21, salaries, wages and other similar remuneration derived by an individual who is a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived from that exercise may be taxed in that other State. (2) Notwithstanding the provisions of paragraph (1), remuneration derived by an individual who is a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first mentioned State if: (a) the recipient is present in that other State for a period or periods not exceeding in the aggregate 183 days in the year of income of that other State; (b) the remuneration is paid by, or on behalf of, an employer who is not a resident of that other State; and (c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in that other State. (3) Notwithstanding the preceding provisions of this Article, remuneration in respect of an employment exercised aboard a ship, aircraft or road transport vehicle operated in international traffic by a resident of one of the Contracting States may be taxed in that State. ARTICLE 16 Directors' Fees Directors' fees and similar payments derived by a person who is a resident of one of the Contracting States in the person's capacity as a member of the board of directors or any similar organ of a company which is a resident of the other Contracting State may be taxed in that other State. ARTICLE 17 Entertainers and Athletes (1) Notwithstanding the provisions of Articles 14 and 15, income derived by entertainers (such as theatrical, motion picture, radio or television artistes and musicians and athletes) from their personal activities as such may be taxed in the Contracting State in which these activities are exercised. (2) Where income in respect of the personal activities of an entertainer as such accrues not to that entertainer but to another person, that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer are exercised. (3) The provisions of paragraphs (1) and (2) of this Article shall not apply to income derived from activities performed in a Contracting State by a non-profit organisation or by entertainers or athletes if the visit to that Contracting State is substantially supported by public funds and the activities are not performed for the purposes of profit. ARTICLE 18 Pensions and Annuities (1) Pensions (including government pensions) and annuities paid to a resident of a Contracting State shall be taxable only in that State. (2) The term "annuity" means a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time under an obligation to make the payments in return for adequate and full consideration in money or money's worth. ARTICLE 19 Government Service (1) Remuneration, other than a pension or annuity, paid by a Contracting State or a political subdivision or local authority of that State to any individual in respect of services rendered to it or to one or more of them shall be taxable only in that State. However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that other State and the recipient is a resident of that other State who: (a) is a citizen of that State; or (b) did not become a resident of that State solely for the purpose of performing the services. (2) The provisions of paragraph (1) shall not apply to remuneration in respect of services rendered in connection with any trade or business carried on by one of the Contracting States or a political subdivision or local authority of that State. In such a case, the provisions of Article 15 or Article 16, as the case may be, shall apply. ARTICLE 20 Professors and Teachers (1) Where a professor or teacher who is a resident of a Contracting State visits the other Contracting State for a period not exceeding two years for the purpose of teaching or carrying out advanced study or research at a university, college, school or other educational institution in that other State, any remuneration the person receives for such teaching, advanced study or research shall be exempt from tax in that other State to the extent to which that remuneration is, or upon the application of this Article will be, subject to tax in the first mentioned State. (2) This Article shall not apply to remuneration which a professor or teacher receives for conducting research if the research is undertaken primarily for the private benefit of a specific person or persons. ARTICLE 21 Students and Trainees Where a student or trainee, 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 education or training, receives payments from sources outside that other State for the purpose of maintenance, education, or training, those payments shall be exempt from tax in that other State. ARTICLE 22 Income Not Expressly Mentioned (1) Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Agreement shall be taxable only in that State. (2) The provisions of paragraph (1) shall not apply to income if the beneficial owner of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the income is paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply. (3) Notwithstanding the provisions of paragraphs (1) and (2), items of income of a resident of a Contracting State not dealt with in the foregoing articles of this Agreement and arising in the other Contracting State may be taxed in that other State. ARTICLE 23 Source of Income Income, profits or gains derived by a resident of a Contracting State which, under any one or more of Articles 6 to 8, 10 to 17, 19 and 22, may be taxed in the other Contracting State shall, for the purposes of Article 24 and of the income tax laws of the respective States be deemed to be income from sources in that other State. ARTICLE 24 Methods of Elimination of Double Taxation (1) In the Republic of Hungary double taxation shall be eliminated as follows: (a) where a resident of the Republic of Hungary derives income or gains which, in accordance with the provisions of this Agreement may be taxed in Australia, the Republic of Hungary shall, subject to the provisions of subparagraph (paragraph (b), exempt such income or gains from tax; (b) where a resident of the Republic of Hungary derives items of income which, in accordance with the provisions of Article 10, may be taxed in Australia, the Republic of Hungary shall allow as a deduction from the tax on the income of that resident an amount equal to the tax paid in Australia. Such deduction shall not, however, exceed that part of the tax, as computed before the deduction is given which is attributable to such items of income derived from Australia. (2) In Australia, double taxation shall be eliminated as follows: (a) subject to the provisions of the law of Australia from time to time in force which relate to the allowance of a credit against Australian tax of tax paid in a country outside Australia (which shall not affect the general principle hereof). Hungarian tax paid under the law of the Republic of Hungary and in accordance with this Agreement, whether directly or by deduction, in respect of income derived by a person who is a resident of Australia from sources in Hungary shall be allowed as a credit against Australian tax payable in respect of that income; (b) where a company which is a resident of the Republic of Hungary and is not a resident of Australia for the purposes of Australian tax pays a dividend to a company which is a resident of Australia and which controls directly or indirectly not less than 10 per cent of the voting power of the first mentioned company, the credit referred to in subparagraph (paragraph (a) shall include the tax paid by that first mentioned company in respect of that portion of its profits out of which the dividend is paid. ARTICLE 25 Mutual Agreement Procedure (1) Where a person who is a resident of a Contracting State considers that the actions of the competent authority of one or both of the Contracting States result or will result for the person in taxation not in accordance with this Agreement, the person may, notwithstanding the remedies provided by the national laws of those States, present a case to the competent authority of the Contracting State of which the person is a resident. The case must be presented within three years from the first notification of the action giving rise to taxation not in accordance with this Agreement. (2) The competent authority shall endeavour, if the claim appears to it to be justified and if it is not itself able to arrive at an appropriate solution, to resolve the case with the competent authority of the other Contracting State, with a view to the avoidance of taxation not in accordance with this Agreement. The solution so reached shall be implemented notwithstanding any time limits in the national laws of the Contracting States. (3) The competent authorities of the Contracting States shall jointly endeavour to resolve any difficulties or doubts arising as to the interpretation of this Agreement. In cases which are not provided for, the competent authorities may also consult to identify appropriate ways by which double taxation may be eliminated through amendment of this Agreement. (4) The competent authorities of the Contracting States may communicate with each other directly for the purpose of giving effect to the provisions of this Agreement. ARTICLE 26 Exchange of Information (1) The competent authorities of the Contracting States shall exchange such information as is necessary for the carrying out of this Agreement or of the domestic laws of the Contracting States concerning the taxes to which this Agreement applies in so far as the taxation thereunder is not contrary to this Agreement. The exchange of information is not restricted by Article 1. Any information received by the competent authority of a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes to which this Agreement applies and shall be used only for such purposes. Any information received will be treated as secret on request of the Contracting State giving the information. (2) In no case shall the provisions of paragraph (1) be construed so as to impose on the competent authority of a Contracting State the obligation: (a) to carry out administrative measures at variance with the laws or the administrative practice of that or of the other Contracting State:; or (b) to supply particulars which are not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State:; or (c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or to supply information the disclosure of which would be contrary to public policy. ARTICLE 27 Diplomatic and Consular Officials Nothing in this Agreement shall affect the fiscal privileges of diplomatic or consular officials under the general rules of international law or under the provisions of special international agreements. ARTICLE 28 Entry into Force This Agreement shall enter into force on the date on which the Contracting States exchange notes through the diplomatic channel notifying each other that the last of such things has been done as is necessary to give this Agreement the force of law in Australia and in the Republic of Hungary, as the case may be, and thereupon this Agreement shall have effect: (a) in Australia: (i) in respect of withholding tax on income that is derived by a non-resident, in relation to income derived on or after 1 July in the calendar year next following that in which the Agreement enters into force: (ii) in respect of other Australian tax, in relation to profits, income or gains of any year of income beginning on or after 1 July in the calendar year next following that in which the Agreement enters into force; (b) in the Republic of Hungary: (i) in respect of withholding tax on income that is derived by a non-resident, in relation to income derived on or after 1 January in the calendar year next following that in which the Agreement enters into force; (ii) in respect of other Hungarian tax, in relation to profits, income or gains of any year of income beginning on or after 1 January in the calendar year next following that in which the Agreement enters into force. ARTICLE 29 Termination This Agreement shall continue in effect indefinitely, but either of the Contracting States may, on or before 30 June in any calendar year beginning after the expiration of 5 years from the date of its entry into force, give to the other Contracting State through the diplomatic channel written notice of termination and, in that event, this Agreement shall cease to be effective: (a) in Australia: (i) in respect of withholding tax on income that is derived by a non-resident, in relation to income derived on or after 1 July in the calendar year next following that in which the notice of termination is given; (ii) in respect of other Australian tax, in relation to profits, income or gains of any year of income beginning on or after 1 July in the calendar year next following that in which the notice of termination is given; (b) in the Republic of Hungary: (i) in respect of withholding tax on income that is derived by a non-resident, in relation to income derived on or after 1 January in the calendar year next following that in which the notice of termination is given; (ii) in respect of other Hungarian tax, in relation to profits, income or gains of any year of income beginning on or after 1 January in the calendar year next following that in which the notice of termination is given. IN WITNESS WHEREOF the undersigned, duly authorised thereto, have signed this Agreement. DONE in duplicate at CANBERRA this TWENTY-NINTH day of NOVEMBER One thousand nine hundred and ninety in the English and Hungarian languages, both texts being equally authentic. |PAUL KEATING |GÉZA JESZENSZKY | |FOR AUSTRALIA |FOR THE REPUBLIC OF | | |HUNGARY | Schedule 34-Agreement between Australia and the Republic of Kiribati for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income Section 3 Australia and the Republic of Kiribati. Affirming their desire to maintain and strengthen trade, investment and private sector cooperation between the two countries, and Desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, Have agreed as follows: ARTICLE 1 Personal Scope This Agreement 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 Agreement shall apply are: (a) in 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 Kiribati, the income tax imposed under the law of Kiribati. 2 This Agreement shall also apply to any identical or substantially similar taxes which are imposed under the federal law of Australia or the law of Kiribati after the date of signature of this Agreement 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 which have been made in the laws of their respective States relating to the taxes to which this Agreement applies within a reasonable period of time after those changes. ARTICLE 3 General Definitions 1 In this Agreement, 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 "Kiribati" means the Republic of Kiribati and includes all adjacent areas which, consistently with international law, have been, or may after the date of this Agreement be, designated under the laws of Kiribati as areas over which Kiribati has sovereignty, sovereign rights or jurisdiction in relation to the exploration for and exploitation of the resources of the sea, the seabed and its subsoil; (c) the terms "Contracting State", "one of the Contracting States" and "other Contracting State" mean Australia or Kiribati, 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 terms "enterprise of one of the Contracting States" and "enterprise of the other Contracting State" mean an enterprise carried on by a resident of Australia or an enterprise carried on by a resident of Kiribati, as the context requires; (g) the term "tax" means Australian tax or Kiribati tax, as the context requires, but does not include any penalty or interest imposed under the law of either Contracting State relating to its tax:; (h) the term "Australian tax" means tax imposed by Australia, being tax to which this Agreement applies by virtue of Article 2; (i) the term "Kiribati tax" means tax imposed by the Republic of Kiribati, being tax to which this Agreement applies by virtue 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 Kiribati, the Internal Revenue Board or an authorised representative of the Board. 2 In the application of this Agreement by one of the Contracting States, any term not defined in this Agreement shall, unless the context otherwise requires, have the meaning which it has under the laws of that State from time to time in force relating to the taxes to which this Agreement applies. ARTICLE 4 Residence 1 For the purposes of this Agreement, a person is a resident of one of the Contracting States: (a) in the case of Australia, if the person is a resident of Australia for the purposes of Australian tax; and (b) in the case of Kiribati, if the person is a resident of Kiribati for the purposes of Kiribati tax. 2 A person is not a resident of one of the Contracting States for the purposes of this Agreement 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, then the status of the person shall be determined in accordance with the following rules: (a) the person shall be deemed to be a resident solely of the Contracting State in which a permanent home is available to the person; (b) if a permanent home is available to the person in both Contracting States, or in neither of them, the person shall be deemed to be a resident solely of the Contracting State in which the person has an habitual abode; (c) if the person has an habitual abode in both Contracting States, or if the person does not have an habitual abode in either of them, the person shall be deemed to be a resident solely of the Contracting State with which the person's personal and economic relations are the closer. 4 Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then the person's status shall be determined as follows: (a) it shall be deemed to be a resident of the Contracting State in which it is incorporated or otherwise constituted; (b) if it is not incorporated or otherwise constituted in either of the Contracting States, it shall be deemed to be a resident of the Contracting State in which its place of effective management is situated. ARTICLE 5 Permanent Establishment 1 For the purposes of this Agreement, the term "permanent establishment", in relation to an enterprise, 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, an oil or gas well, a quarry or any other place of extraction of natural resources; (g) an agricultural, pastoral or forestry property; and (h) a building site or construction, installation or assembly project which exists for more than 90 days. 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; or (b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery; or (c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise; or (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; or (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 one of the Contracting States and to carry on business through that permanent establishment if: (a) it carries on supervisory activities in that State for more than 90 days in connection with a building site, or a construction, installation or assembly project, which is being undertaken in that State; or (b) services are furnished in that State, including consultancy, management or administrative services through employees or other personnel engaged by the enterprise or an associated enterprise for such purposes, and those activities continue for the same or a connected project within that State for a period or periods aggregating more than 90 days in any year of income or tax year, as the case may be; or (c) substantial equipment is being used in that State by, for or under contract with the enterprise. 5 A person acting in one of the Contracting States on behalf of an enterprise of the other Contracting State-other than an agent of an independent status to whom paragraph 6 applies-shall be deemed to be a permanent establishment of that enterprise in the firstmentioned 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) notwithstanding the provisions of subparagraphs 3 (a) and 3 (b), the person has no such authority but habitually maintains in that State a stock of goods or merchandise from which the person regularly delivers in that State goods or merchandise on behalf of the enterprise; or (c) in so acting, the person manufactures or processes in that State for the enterprise goods or merchandise belonging to the enterprise. 6 An enterprise of one of the Contracting States 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 person who is a broker, general commission agent or any other agent of an independent status and is acting in the ordinary course of the person's business as such a broker or agent. 7 The fact that a company which is a resident of one of the Contracting States 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. 8 The principles set forth in the preceding paragraphs of this Article shall be applied in determining for the purposes of paragraph 5 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 one of the Contracting States, has a permanent establishment in one of the Contracting States. ARTICLE 6 Income from Real Property 1 Income from real property may be taxed in the Contracting State in which the real property is situated. 2 In this Article, the term "real property", in relation to one of the Contracting States, has the meaning which it has under the laws of that State and includes: (a) 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 (b) 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. 3 Any interest or right referred to in paragraph 2 shall be regarded as situated where the land, mineral, oil or gas deposits, quarries or natural resources, as the case may be, are situated or where the exploration may take place. 4 The provisions of paragraphs 1 and 3 shall also apply to income from real property of an enterprise and to income from real property used for the performance of independent personal services. ARTICLE 7 Business Profits 1 The profits of an enterprise of one of the Contracting States 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: (a) that permanent establishment; or (b) sales within that other Contracting State of goods or merchandise of the same or a similar kind as those sold, or other business activities within that other State of the same or a similar kind as those carried on through that permanent establishment, if, on the basis of the information available to the competent authority of that other State, it may reasonably be concluded that those sales or business activities would not have been made or carried on but for the existence of that permanent establishment or the continued provision by it of goods or services. 2 Subject to the provisions of paragraph 3, where an enterprise of one of the Contracting States carries on business in the other Contracting State through a permanent establishment situated in that other State, 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 or with other enterprises with which it deals. 3 In the determination of the profits of a permanent establishment, there shall be allowed as deductions expenses of the enterprise, being expenses which are incurred for the purposes of the permanent establishment (including executive and general administrative expenses so incurred) and which would be deductible if the permanent establishment were an independent entity which paid those expenses, whether incurred in the Contracting State in which the permanent establishment is situated or elsewhere. 4 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. 5 Nothing in this Article shall affect the application of any law of one of the Contracting States relating to the determination of the tax liability of a person in cases where the information available to the competent authority of that State is inadequate to determine the profits to be attributed to a permanent establishment, provided that that law shall be applied, so far as the information available to the competent authority permits, consistently with the principles of this Article. 6 Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article. 7 Nothing in this Article shall affect the operation of any law of one of the Contracting States relating to tax imposed on profits from insurance with nonresidents provided that if the relevant law in force in either Contracting State at the date of signature of this Agreement 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 any amendment of this paragraph that may be appropriate. 8 Where: (a) a resident of one of the Contracting States 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 from the operation of aircraft derived by a resident of one of the Contracting States shall be taxable only in that State. 2 Profits from the operation of ships derived by a resident of one of the Contracting States may be taxed in that Contracting State and may also be taxed in the other State, but the tax so charged in the other State shall be reduced by an amount equal to one half of the amount which would be payable in respect of those profits but for this paragraph. 3 Notwithstanding the provisions of paragraph 1, such profits may be taxed in the other Contracting State, where they are profits from the operation of aircraft confined solely to places in that other State; and notwithstanding the provisions of paragraph 2, such profits may be taxed in the other Contracting State without reduction, where they are profits from the operation of ships confined solely to places in that other State. 4 The provisions of paragraphs 1, 2 and 3 shall apply in relation to the share of profits from the operation of ships or aircraft derived by a resident of one of the Contracting States through participation in a pool service, in a joint transport operating organisation or in an international operating agency. 5 For the purposes of this Article, profits derived from the carriage by ships or aircraft of passengers, livestock, mail, goods or merchandise shipped in a Contracting State for discharge at another place in that State shall be treated as profits from the operation of ships or aircraft confined solely to places in that State. ARTICLE 9 Associated Enterprises 1 Where: (a) an enterprise of one of the Contracting States 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 one of the Contracting States and an enterprise of the other Contracting State, and in either case conditions operate between the 2 enterprises in their commercial or financial relations which differ from those which might be expected to operate between independent enterprises dealing wholly independently with one another, then any profits which, but for those conditions, might have been 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 Nothing in this Article shall affect the application of any law of one of the Contracting States relating to the determination of the tax liability of a person, including determinations in cases where the information available to the competent authority of that State is inadequate to determine the income to be attributed to an enterprise, provided that that law shall be applied, so far as it is practicable to do so, consistently with the principles of this Article. 3 Where profits on which an enterprise of one of the Contracting States has been charged to tax in that State are also included, by virtue of paragraph 1 or 2, in the profits of an enterprise of the other Contracting State and charged to tax in that other State, and the profits so included are profits which might have been expected to have accrued to that enterprise of the other State if the conditions operative between the enterprises had been those which might have been expected to have operated between independent enterprises dealing wholly independently with one another, then the firstmentioned State shall make an appropriate adjustment to the amount of tax charged on those profits in the firstmentioned State. In determining such an adjustment, due regard shall be had to the other provisions of this Agreement and for this purpose the competent authorities of the Contracting States shall if necessary consult each other. ARTICLE 10 Dividends 1 Dividends paid by a company which is a resident of one of the Contracting States for the purposes of its tax, being dividends to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State. 2 Those dividends may 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 20 per cent of the gross amount of the dividends. 3 The term "dividends" in this Article means income from shares and other income assimilated to income from shares by the law, relating to tax, of the Contracting State of which the company making the distribution is a resident for the purposes of its tax. 4 The provisions of paragraph 2 shall not apply if the person beneficially entitled to the dividends, being a resident of one of the Contracting States, 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, or performs in that other State independent personal services from a fixed base situated in that other State, and the holding in respect of which the dividends are paid is effectively connected with that permanent establishment or fixed base. In that case the provisions of Article 7 or 14, as the case may be, shall apply. 5 Dividends paid by a company which is a resident of one of the Contracting States, being dividends to which a person who is not a resident of the other Contracting State is beneficially entitled, shall be exempt from tax in that other State except in so far as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or fixed base situated in that 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 Kiribati for the purposes of Kiribati tax. ARTICLE 11 Interest 1 Interest arising in one of the Contracting States, being interest to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State. 2 That interest may 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 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 and all other income assimilated to income from money lent by the law, relating to tax, of the Contracting State in which the income arises. 4 The provisions of paragraph 2 shall not apply if the person beneficially entitled to the interest, being a resident of one of the Contracting States, carries on business in the other Contracting State, in which the interest arises, through a permanent establishment situated in that other State, or performs in that other State independent personal services from a fixed base situated in that other State, and the indebtedness in respect of which the interest is paid is effectively connected with that permanent establishment or fixed base. In that case, the provisions of Article 7 or 14, as the case may be, shall apply. 5 Interest shall be deemed to arise in one of the Contracting States when the payer is that State itself or a political subdivision or local authority of that State or a person who is a resident of that State for the purposes of its tax. Where, however, the person paying the interest, whether the person is a resident of one of the Contracting States or not, has in one of the Contracting States or outside both Contracting States a permanent establishment or fixed base in connection with which the indebtedness on which the interest is paid was incurred, and that interest is borne by that permanent establishment or fixed base, then the interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated. 6 Where, owing to a special relationship between the payer and the person beneficially entitled to the interest, or between both of them and some other person, the amount of the interest paid, having regard to the indebtedness for which it is paid, exceeds the amount which might have been expected to have been agreed upon by the payer and the person so entitled in the absence of that relationship, the provisions of this Article shall apply only to the lastmentioned amount. In that case, the excess part of the amount of the interest paid shall remain taxable according to the law, relating to tax, of each Contracting State, but subject to the other provisions of this Agreement. ARTICLE 12 Royalties 1 Royalties arising in one of the Contracting States, being royalties to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State. 2 Those royalties may be taxed in the Contracting State in which they arise, and according to the law of that State, but the tax so charged shall not exceed 15 per cent of the gross amount of the royalties. 3 The term "royalties" in this Article means payments or credits, whether periodical or not, and however described or computed, to the extent to which they are made as consideration for: (a) the use of, or the right to use, any copyright, patent, design or model, plan, secret formula or process, trademark or other like property or right; or (b) the use of, or the right to use, any industrial, commercial or scientific equipment; or (c) the supply of scientific, technical, industrial or commercial knowledge or information; or (d) the supply of any assistance that is ancillary and subsidiary to, and is furnished as a means of enabling the application or enjoyment of, any such property or right as is mentioned in subparagraph (paragraph (a), any such equipment as is mentioned in subparagraph (paragraph (b) or any such knowledge or information as is mentioned in subparagraph (paragraph (c); or (e) the use of, or the right to use: (i) motion picture films; or (ii) films or video tapes for use in connection with television; or (iii) tapes for use in connection with radio broadcasting; or (f) total or partial forbearance in respect of the use or supply of any property or right referred to in this paragraph. 4 The provisions of paragraph 2 shall not apply if the person beneficially entitled to the royalties, being a resident of one of the Contracting States, carries on business in the other Contracting State, in which the royalties arise, through a permanent establishment situated in that other State, or performs in that other State independent personal services from a fixed base situated in that other State, and the property or right in respect of which the royalties are paid or credited is effectively connected with that permanent establishment or fixed base. In that case, the provisions of Article 7 or 14, as the case may be, shall apply. 5 Royalties shall be deemed to arise in one of the Contracting States when the payer is that State itself or a political subdivision or local authority of that State or a person who is a resident of that State for the purposes of its tax. Where, however, the person paying the royalties, whether the person is a resident of one of the Contracting States or not, has in one of the Contracting States or outside both Contracting States a permanent establishment or fixed base in connection with which the liability to pay the royalties was incurred, and the royalties are borne by the permanent establishment or fixed base, then the royalties shall be deemed to arise in the State in which the permanent establishment or fixed base is situated. 6 Where, owing to a special relationship between the payer and the person beneficially entitled to the royalties, or between both of them and some other person, the amount of the royalties paid or credited, having regard to what they are paid or credited for, exceeds the amount which might have been expected to have been agreed upon by the payer and the person so entitled in the absence of such relationship, the provisions of this Article shall apply only to the lastmentioned amount. In that case, the excess part of the amount of the royalties paid or credited shall remain taxable according to the law, relating to tax, of each Contracting State, but subject to the other provisions of this Agreement. ARTICLE 13 Alienation of Property 1 Income, profits or gains derived by a resident of one of the Contracting States from the alienation of real property situated in the other Contracting State may be taxed in that other State. 2 Income, profits or gains from the alienation of property, other than real property, that forms part of the business property of a permanent establishment which an enterprise of one of the Contracting States has in the other Contracting State or pertains to a fixed base available in that other State to a resident of the firstmentioned State for the purpose of performing independent personal services, including income, profits or gains from the alienation of that permanent establishment (alone or with the whole enterprise) or of that fixed base, may be taxed in that other State. 3 Income, profits or gains from the alienation of ships or aircraft operated in international traffic, or of property (other than real property) pertaining to the operation of those ships or aircraft, shall be taxable only in the Contracting State of which the enterprise which operated those ships or aircraft is a resident. 4 Income, profits or gains derived by a resident of one of the Contracting States from the alienation of shares or comparable interests in a company, the assets of which consist wholly or principally of real property situated in the other Contracting State, may be taxed in that other State. 5 Nothing in this Agreement affects the application of a law of one of the Contracting States relating to the taxation of gains of a capital nature derived from the alienation of property other than that to which any of the preceding paragraphs of this Article apply. 6 In this Article, the term "real property" has the same meaning as it has in Article 6. 7 The situation of real property shall be determined for the purposes of this Article in accordance with paragraph 3 of Article 6. ARTICLE 14 Independent Personal Services 1 Income derived by an individual who is a resident of one of the Contracting States in respect of professional services or other independent activities of a similar character shall be taxable only in that State unless: (a) a fixed base is regularly available to the individual in the other Contracting State for the purpose of performing the individual's activities. If such a fixed base is available to the individual, the income may be taxed in the other State but only so much of it as is attributable to activities exercised from that fixed base; or (b) the income is derived from a resident of that other Contracting State or a permanent establishment in that other Contracting State and exceeds an amount of $A8,000 or its equivalent in any other currency in any one 12 month period. In that case so much of the income as is derived from that individual's activities in that other Contracting State may be taxed in that State; or (c) that individual's stay in that other Contracting State exceeds an aggregate of 90 days in any year of income or tax year, as the case may be, of that other State. In that case so much of the income as is derived from that individual's activities in that other Contracting State may be taxed in that State. 2 The Treasurer of Australia and the Minister of Finance and Economic Planning of Kiribati may mutually determine in letters exchanged for the purpose variations in the amount specified in subparagraph 1 (b) and any variations so determined shall have effect according to the tenor of the letters. 3 The term "professional services" includes services performed in the exercise of independent scientific, literary, artistic, educational or teaching activities as well as in the exercise of the independent activities of physicians, lawyers, engineers, architects, dentists and accountants. ARTICLE 15 Dependent Personal Services 1 Subject to the provisions of Articles 16, 18 and 19, salaries, wages and other similar remuneration derived by an individual who is a resident of one of the Contracting States in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived from that exercise may be taxed in that other State. 2 Notwithstanding the provisions of paragraph 1, remuneration derived by an individual who is a resident of one of the Contracting States in respect of an employment exercised in the other Contracting State shall be taxable only in the firstmentioned State if: (a) the recipient is present in that other State for a period or periods not exceeding in the aggregate 90 days in the year of income or tax year, as the case may be, of that other State; and (b) the remuneration is paid by, or on behalf of, an employer who is not a resident of that other State; and (c) the remuneration is not deductible in determining taxable profits of a permanent establishment or a fixed base which the employer has in that other State; and (d) the remuneration is, or upon the application of this Article will be, subject to tax in the firstmentioned State. 3 Notwithstanding the preceding provisions of this Article, remuneration in respect of an employment exercised aboard a ship or aircraft operated in international traffic by a resident of one of the Contracting States may be taxed in that State. ARTICLE 16 Directors' Fees Directors' fees and similar payments derived by a resident of one of the Contracting States as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other State. ARTICLE 17 Entertainers 1 Notwithstanding the provisions of Articles 14 and 15, income derived by entertainers (such as theatrical, motion picture, radio or television artistes, and musicians and athletes) from their personal activities as such may be taxed in the Contracting State in which these activities are exercised. 2 Where income in respect of the personal activities of an entertainer as such accrues not to that entertainer but to another person, that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer are exercised. ARTICLE 18 Pensions and Annuities 1 Pensions (including government pensions) and annuities paid to a resident of one of the Contracting States shall be taxable only in that State. 2 The term "annuity" means a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time under an obligation to make the payments in return for adequate and full consideration in money or money's worth. 3 Any alimony or other maintenance payment arising in one of the Contracting States and paid to a resident of the other Contracting State shall be taxable only in the firstmentioned State. ARTICLE 19 Government Service 1 Remuneration, other than a pension or annuity, paid by one of the Contracting States or a political subdivision or local authority of that State to any individual in respect of services rendered in the discharge of governmental functions shall be taxable only in that State. However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that other State and the recipient is a resident of that other State who: (a) is a citizen or national of that State; or (b) did not become a resident of that State solely for the purpose of performing the services. 2 The provisions of paragraph 1 shall not apply to remuneration in respect of services rendered in connection with any trade or business carried on by one of the Contracting States or a political subdivision or local authority of that State. In that case, the provisions of Article 15 or 16, as the case may be, shall apply. ARTICLE 20 Students and Trainees Where a student or trainee, who is a resident of one of the Contracting States 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 or trainee's education or training, receives payments from sources outside that other State for the purpose of the student's or trainee's maintenance, education, or training, those payments shall be exempt from tax in that other State. ARTICLE 21 Income Not Expressly Mentioned 1 Items of income of a resident of one of the Contracting States which are not expressly mentioned in the foregoing Articles of this Agreement shall be taxable only in that State. 2 However, any such income derived by a resident of one of the Contracting States from sources in the other Contracting State may also be taxed in that other State. 3 The provisions of paragraph 1 shall not apply to income derived by a resident of one of the Contracting States where that income is effectively connected with a permanent establishment or fixed base situated in the other Contracting State. In that case, the provisions of Article 7 or 14, as the case may be, shall apply. ARTICLE 22 Source of Income 1 Income, profits or gains derived by a resident of one of the Contracting States which, under any one or more of Articles 6 to 8, 10 to 19 and 21, may be taxed in the other Contracting State shall for the purposes of the law of that other Contracting State relating to its tax be deemed to be income from sources in that other Contracting State. 2 Income, profits or gains derived by a resident of one of the Contracting States which, under any one or more of Articles 6 to 8, 10 to 19 and 21, may be taxed in the other Contracting State shall for the purposes of Article 23 and of the law of the firstmentioned Contracting State relating to its tax be deemed to be income from sources in the other Contracting State. ARTICLE 23 Methods of Elimination of Double Taxation 1 Subject to the provisions of the law of Australia from time to time in force which relate to the allowance of a credit against Australian tax of tax paid in a country outside Australia (which shall not affect the general principle of this Article), Kiribati tax paid under the law of Kiribati and in accordance with this Agreement, whether directly or by deduction, in respect of income derived by a person who is a resident of Australia from sources in Kiribati shall be allowed as a credit against Australian tax payable in respect of that income. 2 Where a company which is a resident of Kiribati and is not a resident of Australia for the purposes of Australian tax pays a dividend to a company which is a resident of Australia and which controls directly or indirectly not less than 10 per cent of the voting power of the firstmentioned company, the credit referred to in paragraph 1 shall include the Kiribati tax paid by that firstmentioned company in respect of that portion of its profits out of which the dividend is paid. 3 For the purpose of paragraphs 1 and 2, Kiribati tax paid shall include an amount equivalent to any Kiribati tax forgone. 4 In paragraph 3, the term "Kiribati tax forgone" means the amount which, under the law of Kiribati relating to Kiribati tax and in accordance with this Agreement, would have been payable as Kiribati tax on income or a payment but for an exemption from, or reduction of, Kiribati tax on that income or payment resulting from the operation of: (a) section 82 and Schedule 8 or section 90 (4) of the Income Tax Act 1990 in so far as those provisions were in force on, and have not been modified since, the date of signature of this Agreement or have been modified only in minor respects so as not to affect their general character; or (b) any other provision which may subsequently be made granting an exemption from or reduction of tax which the authorised representatives of the Government of Australia and of the Government of Kiribati mutually determine in writing to be of a substantially similar character, provided that such provisions are not modified thereafter or are modified only in minor respects so as not to affect their general character. 5 The provisions of paragraphs 3 and 4 shall not apply in respect of income or a payment attributable to the provision of services provided directly or indirectly to a person who is a resident of Australia, except where the services are in the nature of tourism or communication services or services provided to manufacturing, mining, construction, fishing or agricultural activities carried on in Kiribati. 6 The provisions of paragraphs 3, 4 and 5 shall apply only in relation to income or a payment derived in any of the first 10 years of income in relation to which this Agreement has effect by virtue of subparagraph (paragraph (a) (ii) of Article 27 and in any later year of income that may be mutually determined in an exchange of letters for this purpose by the authorised representatives of the Government of Australia and of the Government of Kiribati. 7 In the case of Kiribati, subject to the provisions of the law of Kiribati from time to time in force which relate to the allowance of a credit against Kiribati tax of tax paid in a country outside Kiribati (which shall not affect the general principle of this Article)., Australian tax paid under the law of Australia and in accordance with this Agreement, whether directly or by deduction, in respect of income derived by a person who is a resident of Kiribati from sources in Australia shall be allowed as a credit against Kiribati tax payable in respect of that income. ARTICLE 24 Mutual Agreement Procedure 1 Where a person who is a resident of one of the Contracting States considers that the actions of the competent authority of one or both of the Contracting States result or will result for the person in taxation not in accordance with this Agreement, the person may, notwithstanding the remedies provided by the national laws of those States, present a case to the competent authority of the Contracting State of which the person is a resident. The case must be presented within 3 years from the first notification of the action giving rise to taxation not in accordance with this Agreement. 2 The competent authority shall endeavour, if the claim appears to it to be justified and if it is not itself able to arrive at an appropriate solution, to resolve the case with the competent authority of the other Contracting State, with a view to the avoidance of taxation not in accordance with this Agreement. The solution so reached shall be implemented notwithstanding any time limits in the national laws of the Contracting States. 3 The competent authorities of the Contracting States shall jointly endeavour to resolve any difficulties or doubts arising as to the application of this Agreement. 4 The competent authorities of the Contracting States may communicate with each other directly for the purpose of giving effect to the provisions of this Agreement. ARTICLE 25