ATO Interpretative Decision
ATO ID 2004/708
Income tax
Assessability of dividend received from Sweden by an Australian resident individualFOI status: may be released
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This ATO ID has been amended to remove references in the Reasons for Decision to repealed legislation dealing with foreign tax credit rules. With effect from 1 July 2008 the foreign tax credit system will be replaced by the foreign tax offset system.
This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions.
Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series. The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Are Swedish sourced dividends received by a resident individual assessable under subsection 6-10(4) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. Dividends sourced in Sweden received by a resident individual are assessable under subsection 6-10(4) of the ITAA 1997.
Facts
The taxpayer is a resident of Australia for taxation purposes.
The taxpayer receives dividends from Swedish sources.
Reasons for Decision
Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable in by another provision. The assessable income of an Australian resident taxpayer, includes statutory income from all sources, whether in or out of Australia (subsection 6-10(4) of the ITAA 1997).
Section 10-5 of the ITAA 1997 lists the provisions about assessable income. Included in this list is subsection 44(1) of the Income Tax Assessment Act 1936 (ITAA 1936) which deals with dividends.
Paragraph 44(1)(a) of the ITAA 1936 provides that, subject to certain provisions, the assessable income of an Australian resident taxpayer, who is a shareholder of a company (whether the company is a resident or non-resident), includes dividends paid to the taxpayer by the company out of profits derived by it from any source.
In determining liability to Australian tax of foreign sourced income received by a resident it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act).
Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one.
Schedule 17 to the Agreements Act contains the tax treaty between Australia and Sweden (Swedish Agreement). The Swedish Agreement operates to avoid double taxation of income received by Australian and Swedish residents.
Article 10(1) of the Swedish Agreement provides that dividends paid by a company that is a resident of Sweden, being dividends to which a resident of Australia is beneficially entitled, may be taxed in Australia.
Article 10(2) of the Swedish Agreement provides that such dividends may be taxed in Sweden, and according to the law of Sweden, but the tax shall not exceed 15 per cent of the gross amount of the dividends.
Article 24(1) of the Swedish Agreement provides that a credit against Australian tax for tax paid in Sweden shall be allowed (in accordance with the law of Australia) where Swedish tax has been paid in accordance with the Swedish Agreement. However, in the case of a dividend, no credit is allowable for tax paid in respect of the profits out of which the dividend is paid.
As the taxpayer is a resident of Australia, the dividend income forms part of their assessable income under subsection 6-10(4) of the ITAA 1997. If Swedish tax is paid in relation to this dividend income, a foreign tax credit will be allowed.
Date of decision: 9 August 2004Year of income: Year ended 30 June 2001
Legislative References:
Income Tax Assessment Act 1936
paragraph 44(1)(a)
subsection 6-10(4)
section 10-5 International Tax Agreements Act 1953
Section 4
Schedule 17
Schedule 17, Article 10(1)
Schedule 17, Article 10(2)
Schedule 17, Article 24(1)
Keywords
Dividend income
Double tax agreements
Foreign income
Sweden
ISSN: 1445-2782