ATO Interpretative Decision

ATO ID 2008/63

Income Tax

Assessable Income: Irish Common Contractual Fund - residency for the purposes of the Irish Agreement
FOI status: may be released

This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade.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.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Is an Irish Common Contractual Fund (CCF) a resident of Ireland for the purposes of Schedule 20 of the International Tax Agreements Act 1953 (the Irish Agreement)?

Decision

No. The CCF is not a resident of Ireland for the purposes of the Irish Agreement.

Facts

The CCF is not a legal entity in Ireland and is not subject to tax in Ireland. It acts as a pooled investment vehicle for the assets of pension funds and invests these assets on behalf of those funds.

Irish CCF's are regulated by the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2003 (the Regulations). According to the Regulations a CCF is a contractual arrangement under which participants participate in the co-ownership of assets.

The CCF receives Australian sourced income from investing the funds of the CCF.

The CCF is not a resident of Australia for the purposes of Australian tax.

Reasons for Decision

Article 4(1)(b) of the Irish Agreement provides that a person will be a resident of Ireland if they are:

liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature but not if he is liable to tax in Ireland in respect only of income from sources therein.

Even though the trustees of the CCF in their non-trustee capacity may be residents of Ireland for the purposes of the Irish treaty, it is the residency status of the trustees in their capacity's as trustees of the CCF that is relevant for the purposes of the treaty.

The trustees of the CCF do not satisfy the residency definition in the Irish Agreement as they are not liable to tax in Ireland on income they receive in their capacity as trustees of the CCF. Furthermore, there is no tax imposed at the level of the CCF in Ireland as it is treated as a flow-through vehicle for Irish tax purposes.

This approach follows the one taken in Taxation Ruling TR 2005/14 Income Tax: Application of the Australia/New Zealand Double Tax Agreement to New Zealand Resident Trustees of New Zealand Foreign Trusts. Paragraph 7 and 8 of TR 2005/14 states:

7.
For the purposes of determining residency under the NZ Agreement of a trustee of a New Zealand Foreign Trust, the relevant person is the trustee (and not the trust).

8.
Article 4(2) of the NZ Agreement provides that a person is not a resident of a Contracting State where they are liable to tax in that State in respect of income from sources in that State only. It is considered that in applying Article 4(2) to these trustees we look to how they are taxed on trust income in their capacity as trustees in New Zealand. How the trustee may be taxed in respect of income derived in their non-trustee capacity is not considered relevant to this issue.

As a result, the CCF is not a resident of Ireland for the purposes of the Irish Agreement.

Date of decision: 21 April 2008

Year of income: Years ended 30 June 2007 Years ended 30 June 2008 Years ended 30 June 2009 Years ended 30 June 2010 Years ended 30 June 2011

Legislative References:
International Tax Agreements Act 1953
Schedule 20 - Article 4

Related Public Rulings (including Determinations)
Taxation Ruling TR 2005/14

Related ATO Interpretative Decisions
ATO ID 2008/61
ATO ID 2008/62

Other References:
European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2003

Keywords
Entities & taxpayer groups
International tax
Non resident entities
Trustees
Trusts
Resident/residency

Siebel/TDMS Reference Number: 5733825

Business Line: Public Groups and International

Date of publication: 2 May 2008

ISSN: 1445-2782

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