| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your private ruling
Authorisation Number: 1012453691564
Ruling
Subject: Non-resident withholding tax
Question and answer
Should the unfranked dividends from Australian equities held by company A (Y branch) have withholding tax withheld at a rate of 15%?
Yes.
This ruling applies for the following period
Year ended 30 June 2013
The scheme commenced on
1 July 2012
Relevant facts
Company A is a country A company and is a country A resident company for tax purposes.
Company A has a branch in Y which trades Australian equities with a prime broker. The Company A is the dividend recipient.
The prime broker for Company A currently withholds tax at 30% on unfranked dividends.
Relevant legislative provisions
International Tax Agreements Act 1953 Section 4
International Tax Agreements Act 1953 Section 5
International Tax Agreements Act 1953 Sch2-Art10(1) and
International Tax Agreements Act 1953 Sch2-Art10(2).
Reasons for decision
Unfranked dividends
Withholding tax on unfranked dividends is generally imposed at a flat rate of 30 per cent. However, in determining liability to Australian tax for foreign residents, it is necessary to consider not only the income tax laws, but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act).
Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and the ITAA 1997 where there are inconsistent provisions (except for some limited provisions).
Section 5 of the Agreements Act states that, subject to the provisions of the Agreements Act, any provision in an Agreement listed in section 5 has the force of law. The country A Agreement (Convention) is listed in section 5 of the Agreements Act. The country A Convention operates to avoid the double taxation of income received by Australian and Canadian residents.
An Article of the country A Convention states that the rate of withholding tax payable on dividends is 15% of the gross amount.
In your case the prime broker for Company A (Y branch) has been withholding tax at a rate of 30% on unfranked dividends from Australian equities. In accordance with the double tax agreement between Australia and Country A, the correct rate of withholding tax is %.