The Minister for Foreign Affairs for the Slovak Republic, Dr Eduard Kukan, and I signed in Canberra today a comprehensive taxation agreement between Australia and the Slovak Republic for the avoidance of double taxation and the prevention of fiscal evasion.
The new tax agreement will assist in the development of our emerging trade and investment links with the Slovak Republic.
I am confident that it will be well received by the business communities in both countries.
The agreement prevents double taxation by allocating taxing rights between Australia and the Slovak Republic in respect of 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 taxation agreements.
The new agreement will enter into force only after the Australian and Slovak Governments have exchanged notes advising each other that the last of the necessary constitutional processes to give the agreement the force of law in both countries has been completed.
See attachment A for details of the agreement.
Copies of the agreement will be available at offices of the Australian Taxation Office (ATO) and can also be accessed via the ATO's internet site at: http://www.ato.gov.au under the heading What's New.
CANBERRA
24 August 1999
Media Contacts: Ken Allen Australian Taxation Office (02) 6216 1155
Matthew Guy Assistant Treasurer's Office (02) 6277 7360
ATTACHMENT A
The agreement provides for certain types of income to be taxed in full by the country in which the income has its source. These include income from real property and alienation of real property, business profits attributable to a 'permanent establishment', most income from employment, most government remuneration, and income derived by entertainers and sportspersons. This agreement also contains specific rules concerning income, profits or gains arising from indirect alienation of real property following the Federal Court's decision in the Lamesa Holdings BV case. Other types of income may be taxed only in the country of residence of the recipient. These include shipping or aircraft profits derived from international operations, and subject to certain exceptions, income derived by an individual from professional or other independent services.
Dividends, interest and royalties may be taxed by both countries. As this agreement was negotiated before Australia changed its tax treaty policy of seeking reduced withholding tax rates for non-portfolio dividends, a general dividend withholding tax rate limit of 15 per cent applies. A source country tax rate limit of 10 per cent will generally apply for both countries in the case of interest and royalties.
Australia’s domestic withholding tax exemption will continue to apply for franked dividends paid to residents of the Slovak Republic, whilst the withholding tax applicable to outgoing unfranked dividends will generally be reduced from 30 to 15 per cent in respect of unfranked dividend payments.
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 respective domestic laws.
The new agreement will enter into force only after the Australian and Slovak Governments have exchanged diplomatic 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. Reflecting the Government’s commitment to open and accountable treaty making, the agreement and a National Interest Analysis will be tabled in the Parliament for review by the Joint Standing Committee on Treaties. In Australia, legislation will also be necessary to give the agreement the force of law and a Bill for that purpose will be introduced into the Parliament as soon as practicable.
Upon entry into force, the agreement will have effect in Australia for withholding tax purposes in relation to income derived by a resident of the Slovak Republic on or after 1 January in the calendar year next following that in which it enters into force. In respect of tax other than withholding tax, the agreement will have effect in Australia 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 it enters into force.
The agreement will have effect in the Slovak Republic for withholding tax purposes in relation to amounts derived on or after 1 January in the calendar year next following that in which it enters into force. In respect of other Slovak tax, the agreement will have effect in relation to tax chargeable for any taxable year starting from 1 January in the calendar year next following that in which it enters into force.