AUSTRALIAN TAX TREATIES
The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the MLI) has modified the application of this tax treaty. A synthesised text of the MLI and this tax treaty is available to facilitate the understanding of how the MLI modifies this tax treaty.
Dividends paid by a company which is a resident of a Contracting State for the purposes of its tax, being dividends to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State. 2
However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident for the purposes of its tax, and according to the law of that State, but the tax so charged shall not exceed:
(a) 5 per cent of the gross amount of the dividends:
(i) to the extent to which those dividends are paid out of profits that have borne the normal rate of tax, where those dividends are paid to a company (other than a partnership) which holds directly at least 10 per cent of the capital of the company paying the dividends; and
(ii) provided that the resident of the other Contracting State has invested a minimum of 700,000 Australian Dollars or an equivalent amount in Russian Roubles in the capital of that company; and
(iii) where, if the dividends are paid by a company that is resident in Russia, the dividends are exempt from Australian tax; and
(b) 15 per cent of the gross amount of the dividends in all other cases. 3
For the purposes of subparagraph (a) of paragraph 2 of this Article, profits have borne the normal rate of tax:
(a) in Australia, to the extent to which the dividends have credits attached for tax paid on their profits by Australian companies in accordance with its law relating to tax; and
(b) in Russia, to the extent that they are assessable to tax. 4
The term " dividends " as used in this Article means income from shares, as well as other amounts which are subjected to the same taxation treatment as income from shares by the law of the State of which the company making the distribution is a resident for the purposes of its tax. 5
The provisions of paragraphs 1 and 2 shall not apply if the person beneficially entitled to the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated in that other State, or performs in that other State independent personal services from a fixed base situated in that other State, and the holding in respect of which the dividends are paid is effectively connected with that permanent establishment or fixed base. In that case the provisions of Article 7 or Article 14, as the case may be, shall apply. 6
Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company - being dividends to which a person who is not a resident of the other Contracting State is beneficially entitled - except insofar as the holding in respect of which such dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, even if the dividends paid consist wholly or partly of profits or income arising in such other State. This paragraph shall not apply in relation to dividends paid by any company which is a resident of a Contracting State for the purposes of its tax and which is also a resident of the other Contracting State for the purposes of the other Contracting State ' s tax.
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