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Ruling
Subject: Sovereign immunity
Question
Is the foreign country central bank eligible for exemption from Australian income tax including withholding taxes from its Australian investments under the common law principle of sovereign immunity?
Answer
Yes. The foreign country central bank is eligible for exemption from Australian income tax including withholding taxes from its Australian investments under the common law principle of sovereign immunity
This ruling applies for the following periods:
1 January 2010 to 21 December 2015
The scheme commences on:
1 January 2010
Relevant facts and circumstances
The foreign country central bank has provided legislation and annual reports to establish that it is a central bank
Relevant legislative provisions
Taxation Administration Act 1953 subsection 15-15(2).
Reasons for decision
In order to establish whether sovereign immunity applies to exempt Australian income tax including withholding tax, it is necessary to establish the following conditions required in ATOID 2002/45:
1. that the person making the investment (and therefore deriving the income) is a foreign government or an agency of a foreign government;
2. that the moneys being invested are and will remain government moneys; and
3. that the income is being derived from a non commercial activity.
Condition 1 - that the person making the investment (and therefore deriving the income) is a foreign government or agency of a foreign government
The foreign country central bank has provided evidence which demonstrates that it is exercising governmental functions and is owned and controlled by the foreign government. As such, the entity will constitute an agency of a foreign government subject to satisfaction of the conditions below.
Condition 2 - that the moneys being invested are and will remain government moneys
The foreign country central bank has provided evidence that the moneys being invested are and will remain government money.
Condition 3 - that the income is being derived from a non-commercial activity
Based on the evidence provided by the foreign country central bank, it is considered that that income is being derived from a non commercial activity.
Conclusion
Accordingly, having satisfied conditions one to three above, the foreign country central bank will qualify for an exemption from Australian income tax including withholding tax derived from its Australian income under the principle of sovereign immunity.