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Comprehensive taxation agreement between Australia and Poland



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fiPRESStl NO. 35 TREASURER U^ELEASEH NO EMBARGO

STATEMENT BY THE TREASURER. THE HON. P.J. KEATING. MP

COMPREHENSIVE TAXATION AGREEMENT BETWEEN AUSTRALIA AND POLAND

A comprehensive taxation agreement between Australia and Poland for the avoidance of double taxation was signed in Canberra today.

The agreement prevents double taxation by allocating taxing rights between Australia and Poland on all forms of income flows between the two countries. The basis of allocating these rights is substantially similar to that adopted in Australia's other modern double taxation

agreements.

The agreement provides for certain types of income to be taxed in full by the country in which the income has its source. Income dealt with in this manner includes income from real property (including income from the exploration for or exploitation of natural resources), business profits attributable to a "permanent establishment" (that

is, a substantial business presence) which is situated in the country of source, income from employment (except in relation to some visits of short duration), most government remuneration, and income derived by entertainers and athletes.

Other types of income may be taxed only by the country of residence of the recipient. Items falling within this category include shipping or aircraft profits derived from international operations, pensions and annuities, and subject to certain exceptions income derived by an

individual from professional services or other independent activities of a similar character.

Income comprising dividends, interest and royalties may be taxed by both countries. Outgoing dividends will generally be subject to a source country tax rate limit of 15 percent for both countries. Withholding tax will apply

at this rate in Australia on unfranked dividend payments by Australian companies to residents of Poland. A source country tax rate limit of 10 percent will generally apply for both countries in the case of interest and royalties.

Double taxation is to be avoided in respect of these categories of income by the country of residence allowing credit against its tax on the income for the limited tax paid in the source country.

The limit of 10 per cent on the tax of the country of source in respect of interest and royalties derived by a resident of one country from a source in the other will not affect Australia's interest withholding tax, which is payable at the rate of 10 per cent under our domestic

law. However, the limit will result in a reduction in Australian tax on royalties flowing to Poland in cases where the tax payable by assessment on the net royalty would have been greater.

Subject to specific rules in relation to real property, business assets, ships or aircraft, and some shares, capital gains are to be taxed in accordance with the domestic law of each country.

The agreement will enter into.force when the Australian and Polish Governments have exchanged notes advising each other that the last of the necessary constitutional processes to give the agreement the force of law in their

respective countries has been completed. Before that exchange, legislation will be necessary in Australia, to give the agreement the force of law and a Bill for that purpose will be introduced into Parliament as soon as practicable.

Upon entry into force, the agreement will have effect in Australia for withholding tax purposes in respect of income derived on or after 1 January in the calendar year next following that in which the agreement enters into

force. In respect of tax other than withholding tax, the agreement will have effect in Australia 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 it enters into force.

In Poland, the agreement will first have effect for all taxes, in respect of profits, income or gains derived on or after 1 January in the calendar year next following

that in which the agreement enters into force.

Copies of the agreement will be available to interested persons at all principal Taxation Offices.

2 .

CANBERRA '

7 May 1991

CONTACT OFFICER : Ken Allen TELEPHONE : (06) 2751155 (Work) (06) 2921821 (Home)