Explanatory Memorandum(Circulated by authority of the Treasurer,the Hon Ralph Willis, MP)Note: References to paragraph numbers contained in the explanation of the DTA relate to the relevant paragraph of the Article under discussion.
General outline and financial impact
The Bill will amend the International Tax Agreements Act 1953 (the Agreements Act) to give the force of law in Australia to a comprehensive double taxation agreement (DTA) with the Czech Republic for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. The DTA covers the various forms of income flows between Australia and the Czech Republic.
Any taxpayers who, for the purposes of the DTA, are residents of either Australia or the Czech Republic and who derive income, profits or gains from the other country.
The Bill will make the following changes to the Agreements Act:
- it will insert in subsection 3(1) the definition of 'the Czech agreement'.
- it will insert new section 11ZE which will give the force of law in Australia to the Czech DTA.
- it will add the text of the DTA as Schedule 40.
The DTA will enter into force on the latest date on which diplomatic notes are exchanged between Australia and the Czech Republic formally advising that all the requirements necessary to give it the force of law in the respective countries have been finalised.
Amendments effected by the Bill will commence on the day on which the Act receives the Royal Assent.
The DTA with the Czech Republic will have effect:
- in Australia , for withholding tax purposes, in respect of dividends, interest and royalties derived on or after 1 January in the calendar year next following that in which the DTA enters into force; and for other Australian taxes covered by the DTA, in respect of 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.
- in the Czech Republic , for all Czech taxes covered by the DTA, in respect of income assessable for any taxable year commencing on or after 1 January in the calendar year next following that in which it enters into force.
The operation of the DTA contained in this Bill is not expected to have a significant effect on revenue.
No significant additional compliance costs will result from the entry into force of the DTA as the treaty is mainly concerned with the allocation of taxing rights between Australia and the Czech Republic.