if the rate of the AIL exceeds 2percent of the gross amount of the interest. Analysis has been conducted to establish plausible impacts on Australian economic activity and consequent tax revenue flowing from implementation of the tax treaty. The existing treaty does not allow taxpayers to seek arbitration. [Article 25, paragraph 6], 2.378 Not all unresolved issues arising from the case are eligible to be resolved through arbitration. Webthe AustralianNew Zealand Double Tax Agreement (AusNZ DTA) deals with this subject. Such items of income will be considered to be derived by a resident of a country to the extent that the item is treated under the taxation laws of that country as income of a resident. 2.389 The purposes for which the exchanged information may be used and the persons to whom it may be disclosed are restricted in a manner which is consistent with the approach taken in the OECD Model. This will reduce compliance costs for residents of one country who are employed by a local branch of an enterprise of the other country by ensuring that their remuneration derived during short visits to that other country is not taxed in that other country. If the case comes under paragraph 1 of Article 24 (Non-Discrimination) of the Convention, the person may present a case to the competent authority of the country of which the person is a national. The Convention will replace the Agreement between the Government of Australia and the Government of NewZealand for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income that was signed in Melbourne on 27January1995, and the Protocol Amending the Agreement between the Government of Australia and the Government of NewZealand for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income that was signed in Melbourne on 15November2005 (together referred to as the existing New Zealand Agreement). Resident status in respect of persons other than individuals determined solely by reference to place of effective management. There was also an unquantifiable but small cost in terms of parliamentary time and drafting resources in enacting the Convention. 2.51 In the Convention, this term is of relevance for taxation of profits from shipping and air transport operations (Article 8 (Shipping and Air Transport)), income, profits or gains from the alienation of ships and aircraft (paragraph 3 of Article 13 (Alienation of Property)) and wages of crew (paragraph 3 of Article 14 (Income from Employment)). These jurisdictions are self-governing states and are not covered by the definition of NewZealand. However, competent authorities are not entitled to request information from the other country which is unlikely to be relevant to the tax affairs of a taxpayer, or to the administration and enforcement of tax laws. The MIT satisfies the conditions in paragraph 7 of Article4 (, The meaning of in the same circumstances and in particular with respect to residence, Non-discrimination and permanent establishments, Deductions for payments to foreign residents, [Article 24, subparagraph5a) and paragraph 6], Transfers of losses within company groups, Rebates, credits and exemptions paid for dividends by a company, It is understood that paragraph g) of paragraph 5 of Article 24 (, Methods of communication between competent authorities, General Agreement on Trade in Services dispute resolution process, Information held by institutions such as banks, other financial institutions or nominees, Information that exists prior to the entry into force of this Convention, Article 27 Assistance in the Collection of Taxes, Restriction on judicial and administrative proceedings, Article 28 Members of Diplomatic Missions and Consular Posts, Diplomatic Privileges and Immunities Act 1967, Consular Privileges and Immunities Act 1972, Obligation for Australia and New Zealand to consult every five years, Date of application for New Zealand taxes, Exchange of Information and Assistance in Collection, Termination of the existing New Zealand Agreement, Second Protocol amending the Agreement between Australia and the Kingdom of Belgium for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income signed at Canberra on 13 October 1977 as amended by the Protocol signed at Canberra on 20 March 1984, Agreement between Australia and the Kingdom of Belgium for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income signed at Canberra on 13 October 1977 as amended by the Protocol signed at Canberra on 20 March 1984, Substitutes new Article 26 (Exchange of Information) into the Agreement, [Article I, paragraph 2 of new Article 26], [Article I, paragraph 4 of new Article 26], Information held by institutions such as banks, other financial institutions, trusts, foundations and nominees, [Article I, paragraph 5 of new Article 26], Information that exists prior to the entry into force of the Second Protocol, Date of entry into force of the Second Protocol, Second Protocol part of the existing tax treaty, Mutual Agreement Procedure in Respect of Transfer Pricing Adjustments, Definition of transfer pricing adjustment, Article 5 Pensions and Retirement Annuities, Article 8 Mutual Agreement Procedure in Respect of Transfer Pricing Adjustments, The existing Australia-New Zealand tax treaty, Australias trade and investment relationship with New Zealand, Option 1: Retain the existing AustraliaNewZealand tax treaty, Option 2: A second limited amending Protocol rely on the existing tax treaty and Protocol measures, Difficulties in quantifying the impacts of tax treaties, Renegotiation provides a better outcome for all stakeholders, Compliance and administrative cost reduction benefits, International Tax Agreements Amendment Bill (No. 2.181 Under subparagraph b) of paragraph 3 of this Article, an exemption applies to dividends: paid by a company in a country (the paying company) to a company in the other country (the receiving company); and. It is not intended that similar limitations on treaty benefits apply to temporary residents of Australia. 2.358 Nothing in this Article prevents either country from treating residents of the other country more favourably than its own residents. However, it is not intended that the words more burdensometaxation would refer only to the quantum of taxation. [Article 24, paragraph 7]. [Article13, paragraph 6]. Payments made from abroad to visiting students or business apprentices for the purposes of their maintenance, education or training will be exempt from tax in the country visited [Article 20]. Imports comprised mainly of crude petroleum, gold, paper and paper board, and alcoholic beverages. This provision ensures that such payments are subject to tax as a royalty payment under the terms of the Royalties Article. 2.21 The third situation deals with cases where income is derived from sources in one country through a third country entity which is treated as fiscally transparent in the other country. Expenses incurred in deriving the dividend income are allowable as a deduction from that income when calculating the taxable income of the non-resident. The necessary economic link between the activities of the enterprise and the country in which the activities are carried on does not exist in these circumstances. 3.11 Under the new Article 26, the range of taxes for which information may be exchanged has been expanded. Income from real property includes natural resource royalties [Article6]. Paragraph 6 of this Article provides for arbitration to be used to assist in resolving those cases. 5.83 The Bill and explanatory materials were the subject of confidential consultation with the Tax Treaties Advisory Panel. 2.225 The phrase for the purposes of its tax, which appears in paragraph 7 of Article 12, refers to the case where a person is a resident of a country under its domestic tax law, even if the person is deemed to be a resident only of the other country for the purposes of the Convention by virtue of paragraph 2, 3 or 5 of Article 4 (Resident). However, the final sentence of this paragraph permits the information to be used for other purposes when the laws of both countries permit this and the tax authority supplying the information authorises such use. Under this Article, the country that would have the primary taxing right if the benefit were ordinary employment income will have the sole taxing right in relation to the fringe benefit. General enquiries may arise and some formal interpretive advice, such as private binding rulings, may be required concerning the application of the Jersey Agreement. The competent authorities are required to reflect that decision in the mutual agreement in respect of the case. who is subordinate to a group having common interests with the payer. Where the time threshold is met, each of the subsidiaries would be deemed to have a permanent establishment through which its activities with respect to the project are conducted. 2.364 If, after consideration by the competent authorities, a solution is reached, it must be implemented in accordance with the provisions of the Article. 5.62 Tax exemptions in respect of withholding taxes, and exclusive taxation of income from employment in the employees resident state in respect of short-term secondments to another country, are likely to reduce compliance and administration costs associated with remitting and claiming credits for such tax. The explanatory memorandum to the Bill noted that the definition would be refined following tax treaty discussions with other countries and industry representatives. 2.312 It is necessary, however, to prescribe a method for relieving double taxation for other classes of income, profits or gains which, under the terms of the Convention, remain subject to tax in both countries. 2.30 No treaty benefits are available under the Convention where the income is exempt from tax in New Zealand on the basis that it is derived by a transitional resident of New Zealand. 2.109 Nevertheless, a fixed place of business that is used for primary production purposes, such as a farm or forestry property, will constitute a permanent establishment. Accordingly, the rate limitation of 10 per cent and the exemption for financial institutions (subparagraphb) of paragraph 3 of this Article) do not apply to such interest in the country in which the interest is sourced. However, a subsidiary company gives rise to a permanent establishment if the subsidiary permits the parent company to operate from its premises such that the tests in paragraph 1 of Article 5 are met, or the subsidiary acts as an agent such that a dependent agent permanent establishment is constituted. The Convention will also impact on the Australian Government and the Australian Taxation Office (ATO). 2.148 If an enterprise which is a resident of one country derives business profits in the other country that are not attributable to a permanent establishment in that other country, the general principle of this Article is that the enterprise will not be liable to tax in the other country on such profits (except where paragraph 7 of this Article applies see the explanation in paragraphs 2.156 and 2.157). He continues to receive his New Zealand pension. The definition of real property covers land, and rights relating to exploration for or exploitation of natural resources. Australia and New Zealand can agree in respect of existing laws or laws that are enacted in the future. 4.35 Article 8 provides for consultation between the competent authorities of the two countries for the purpose of endeavouring to resolve disputes concerning transfer pricing adjustments purportedly made not in accordance with the arms length principle. [Article 3, subparagraph 1(c)], 4.14 Party means Australia or Jersey, as the context requires. Identifiable costs to revenue associated with reductions in the rates of withholding tax and the change to taxing rights for pensions have been estimated as A$142 million over the forward estimates. In respect of any income year beginning on or after 1 January in the calendar year next following the date on which the Agreement enters into force. [Article 5, subparagraph 4b)], 2.116 If an enterprise operates substantial equipment in a country for one or more periods which exceed, in the aggregate, 183 days in any 12month period, the activity will be deemed to be performed through a permanent establishment (unless the activities are of a type described in paragraph 7 of this Article and are of a preparatory or auxiliary nature). in the case where an item of income is taxed in a country in the hands of an entity that is treated as fiscally transparent by the other country, and also taxed in the hands of a resident of that other country as a participant in that entity, by that other country allowing a credit of the tax imposed by the first country [Article23, paragraph3]. it operates substantial equipment (including in natural resource activities) for a period or periods exceeding in the aggregate 183days in any 12-month period. [Article 27, subparagraph8b)], 2.417 The third limitation provides that neither country is obliged to satisfy a request for assistance if the other country has not pursued all reasonable measures of collection or conservancy that are available under its own laws or administrative practice. the shareholding giving rise to the dividends is effectively connected with a permanent establishment in the first country. Eligibility for the treaty benefits will also be subject to the application of the respective anti-avoidance measures contained in the specific Article (in this example, paragraph 9 of Article 10 (Dividends)). 4.23 Tie-breaker rules are included for determining residency, for the purposes of the Jersey Agreement, if a taxpayer qualifies as a dual resident, that is, a resident of both countries in accordance with paragraph1 of Article 4. In this case, an entity which is treated for tax purposes in New Zealand as a resident company, derives royalty income from Australia. 2.388 It is intended that the Article extend to any identical or substantially similar taxes which are subsequently imposed by either country in addition to, or in place of, these taxes. This is especially important where there is no data available or the available data is not of sufficient quality to rely on the traditional transaction methods for the attribution of the arms length profits. In these circumstances, payments from abroad received by the students or business apprentices solely for their maintenance, education or training will be exempt from tax in the country visited. 15percent in all other cases. [Article 27, subparagraph 8e)]. However, such constraints are also placed on New Zealand law makers, providing long-term certainty to taxpayers. Assume Milford Co is now owned by a second NewZealand resident company, Winton Co, and a Japan resident company, Osaka Co. Winton Co is listed on a stock exchange that is a recognised stock exchange within the meaning of Article 3 of the Convention. They also favour a more residence-based taxation treaty policy, lower withholding taxes, time limits on transfer pricing audits and the inclusion of arbitration clauses. 5.46 The Convention provides that the MIT will be entitled to treaty benefits if they are listed on an Australian stock exchange, or more than 80 per cent of the interests in the MIT are held by Australian residents. Thus, for example, an Australian resident pilot employed by a NewZealand airline would be taxable only in Australia on his or her remuneration in respect of services rendered on international flights. This reflects Australias usual practice of providing for taxation of profits from the exploitation of Australian land for the purposes of primary production under Article 7 (Business Profits). The form of the assistance is set out in paragraphs 3 and4 of this Article. 2.306 Although paragraph 3 refers to income arising in a country, rather than the more usual reference to income from sources in a country found in Australias treaties, no difference in meaning is intended. 5.56 Where Australians carry on business activities in New Zealand, the existing treaty prevents New Zealand from taxing the business profits of an Australian resident unless that Australian resident carries on business through a permanent establishment (such as a branch) in NewZealand. 2.397 The provisions relating to assistance in collection in the Convention are identical in effect to those included in the existing NewZealand Agreement by the amending Protocol signed on 15November2005. 2.343 The operation of domestic measures to combat avoidance and evasion is not affected by this Article. ATO staff, taxpayers and tax professionals will need to be made aware of the entry into force of the Jersey Agreement. [Article 5, subparagraph4c)]. [Article 25, paragraph2], 2.360 In the case of Australia, the competent authority is the Commissioner or an authorised representative of the Commissioner.

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