I move:
That Dáil Éireann approves the following Order in draft:
Double Taxation Relief (Taxes on Income and Capital) (Australia) Order, 1983,
a copy of which Order in draft was laid before the House on the 29th day of November, 1983.
The agreement between Ireland and Australia was signed on behalf of the respective Governments on 31 May 1983 at Canberra. The White Paper containing the text of the convention was laid before both Houses of the Oireachtas by the Minister for Foreign Affairs on 25 October 1983.
Under the Income Tax Act, 1967, an arrangement with a foreign Government to afford relief from double taxation will have force of law in Ireland provided the Government make an order accordingly. Before such an order can be made it must be laid in draft form before Dáil Éireann and a resolution approving it must be passed by the House.
The draft order was laid before the Dáil on 29 November 1983 and contains in its Schedule the text of the agreement. An Explanatory Memorandum which outlines the effects of the agreement has also been circulated.
In relation to Ireland, the agreement will be effective for income tax and capital gains tax for any year of assessment beginning on or after 6 April in the calendar year following that in which the agreement enters into force. For corporation tax purposes the agreement will have effect for any financial year beginning on or after 1 January in the calendar year immediately following that in which the agreement enters into force.
The agreement follows the general principles of the Model Convention published by the Organisation for Economic Co-operation and Development in 1977. Generally, the agreement provides that when double taxation of income or gains arises relief will be given by the country of residence in respect of tax borne on the same income or gains in the country of source. I will briefly outline the main features of the agreement.
Article 4 provides a series of tests, in accordance with the OECD model, to determine for an individual the allocation of residence for the purposes of the agreement to one or other of the countries. This article also provides that where a person other than an individual — for example, a company — is resident in both countries that person will be deemed to be a resident of the country in which its place of effective management is situated.
Article 11 provides for payment to Australian resident portfolio investors of a tax credit in respect of Irish dividends, subject to a tax charge at a rate not exceeding 15 per cent on the aggregate of the dividend and the tax credit. Portfolio investors are investors owning less than ten per cent of the voting power in the dividend paying company. In the case of a direct investor, that is an investor controlling, directly or indirectly, at least 10 per cent of the voting power in the company which pays the dividend, no payment of a tax credit will be made by Ireland.
In the case of dividends paid by an Australian company to an Irish resident, the rate of Australian withholding tax is not to exceed 15 per cent of the gross amount of the dividends
Under Article 14, income or gains arising from the disposal of real property as defined in the article may be taxed in the country in which the property is situated.
Income or gains from the disposal of property, other than real property, will normally be taxable only in the country of residence of the alienator.
Article 19 has a special provision relating to governmental or local authority pensions which secures that such pensions will be taxable only in the country of residence of the individual. The OECD Model Convention and the double taxation arrangements Ireland has negotiated with other countries usually reserve the right to tax these pensions to the country paying the pension. However, a change was included in this agreement to accommodate the Australian approach which is that, as far as possible, pensioners should have to deal with only one tax administration. Other pensions and annuities will, as is normally the case, be taxable in the country of residence.
Article 25 is the general article dealing with the elimination of double taxation. Where elimination of double taxation has not been accomplished by other articles of the agreement or by the domestic law of either country, Article 25 ensures that double taxation does not arise. Broadly, it provides for reciprocal relief of double taxation by means of the "credit method", under which the country of residence allows against its own tax on income or gains from sources in the other country, a credit for the tax of the other country on that income or gain.
In particular, the benefit of Irish tax incentive reliefs for an Australian company with a branch in Ireland will be preserved under the terms of the agreement. This position will also apply to Irish dividends received by Australian companies as under Australian domestic law no tax is effectively charged on these dividends. If there is any change in Australian domestic law in regard to giving relief for dividends, negotiations are to take place to establish new provisions concerning the credit to be allowed by Australia against its tax on the dividends.
Article 29 covers the entry into force of the agreement. The usual provision is made in this Article so that the agreement will enter into force upon an exchange of instruments of ratification between the two countries. This new agreement brings our double taxation arrangements with Australia into line with our arrangements with other countries and with international practice generally.
I recommend that the House approve the draft order.