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Double taxation agreement with Sweden

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NO. 4






A double taxation agreement between Australia and Sweden was signed

today in Canberra.

The agreement is a comprehensive one for the avoidance of double

taxation in relation to all forms of income flowing between the two

countries. The allocation of taxing rights between the countries

accords with that provided for in Australia's other modern double

taxation agreements.

Under the agreement certain types of income may 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

exploitation of natural resources);

. income derived by public entertainers;

. income from employment (except in relation to some visits of S

short duration);

. business profits, where they are attributable to a "permanent

establishment" (that is, a substantial business presence)

which the recipient has in the country of source.

Other types of income may be taxed only by the country of residence

of the recipient. Items falling within this category include

shipping and aircraft profits derived from international operations

and most pensions and annuities.

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A third category of income, comprising dividends, interest and

royalties, may be taxed by both countries, with the country of

source limiting its tax and the country of residence allowing .

credit against its tax on the income for the limited tax of the

source country. The general limits on the source country tax are

15 per cent in the case of dividends and 10 per cent in the case

of interest and royalties b u t , as is customary, these limits will

not apply to income effectively connected with a permanent

establishment or fixed base that a resident of one country has in

the other.

The limit of 10 per cent on the tax of the country of source in

respect of interest derived by a resident of one country from a

source in the other will not affect Australia's interest with­

holding tax, which is payable at the rate of 10 per cent, nor,

since Sweden does not levy any tax on interest derived by

residents of other countries, unless the interest is classified

as business income, will it generally affect interest derived by

residents of Australia from sources in Sweden.

One effect of the limitations will be that royalties derived b y .

residents, of Australia from sources in Sweden, previously fully

taxed in Sweden and exempt from Australian tax, will be taxed at

a reduced rate in Sweden and also taxed in Australia with credit

being allowed for the Swedish tax paid.

Other provisions in the agreement provide for such things as

exchange of information necessary for the purpose of carrying out

of the agreement or of each country's domestic laws, and consulta­

tions between the taxation authorities of the two countries.

The provisions of the agreement will not be effective until it has

entered into force, after all necessary constitutional processes

for it to be given the force of law have been completed by both

countries. Legislation will be necessary to give the agreement

the force of law in Australia and a Bill for that purpose will be

introduced into Parliament as soon as practicable.

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On entering into force, the agreement will have effect in Australia,

for withholding tax purposes, from 1 January in the calendar year

next following that in which it enters into force and, for other

income taxes, from 1 July in that next calendar year. It will

have effect in relation to Swedish taxes from 1 January in the

calendar year next following that in which it enters into force.

Copies of the agreement will be made available to interested persons

at Taxation Offices in the capital cities.


14 January 1981