The Assistant Treasurer, Senator Rod Kemp, today announced that the protocol amending the Australia-Finland Double Taxation Agreement will enter into force from today. This followed an exchange of notes through the diplomatic channel indicating that the necessary procedures to give the protocol the force of law had been completed in each country.
Signature of the protocol took place in Canberra on 5 November 1997. Details of the protocol were made public at that time and legislation providing for the protocol to be given the force of law in Australia - the International Tax Agreements Amendment Act (No.1) 2000 – received the Royal Assent on 6 July 2000.
A significant benefit of the protocol is the updating of the dividends article to reflect the dividend imputation systems of both countries. The new arrangements will effectively provide for exemption from withholding tax of fully franked dividends paid by Australian resident companies to Finnish resident shareholders. In addition, dividends paid by Finnish resident companies out of profits that have been subject to Finland's corporate income tax to Australian resident shareholders, will also effectively be exempted from withholding tax. Unfranked dividends paid to Finnish residents will continue to be subject to Australian withholding tax of 15%. Finland will also remain entitled to apply a 15% withholding tax on dividends paid by Finland companies out of profits that have not been subject to its corporate income tax.
The reduction in dividend withholding tax rates for non-portfolio investment was a key recommendation of the Ralph Review of Business Taxation in the area of double taxation agreements. The Government will continue to pursue this aim with other countries as opportunities arise.
Other changes made by the protocol include a revised list of Finnish taxes covered by the agreement and changes to the methods by which Finland undertakes to eliminate international double taxation.
The protocol will generally have effect in Australia in respect of withholding tax on income derived by a nonresident, in relation to income derived on or after 1 July 2001 and in respect of other taxes, in relation to income, profits or gains derived on or after 1 July 2001.
The protocol will generally have effect in Finland in respect of taxes withheld at source on income derived on or after 1 January 2001 and in respect of other taxes on income, for taxes chargeable for any tax year beginning on or after 1 January 2001.
Formal notification of the entry into force of the protocol will be published in the Gazette as soon as practicable.
CANBERRA
17 August 2000
Contacts: Richard Allsop Assistant Treasurer’s Office (02) 6277 7360
Michael Lennard Australian Taxation Office (02) 6216 2611