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Edited version of your written advice
Authorisation Number: 1012925295167
Date of advice: 9 December 2015
Ruling
Subject: Superannuation fund for foreign residents
Question 1
Will interest income and dividend income derived by the entity from its Australian investments be exempt be exempt from withholding tax under paragraph 128B(3)(jb) of the Income Tax Assessment Act 1936 (ITAA 1936)?
Answer
Yes.
Question 2
If the answer to question 1 is 'Yes', will that interest income and dividend income be income that is not assessable not exempt (NANE income) under section 128D of the ITAA 1936?
Answer
Yes.
This ruling applies for the following periods:
Year ending 30 June 20XX to year ending 30 June 20YY
The scheme commenced on
During the year ended 30 June 20XX
Relevant facts and circumstances
1. The entity is a foreign superannuation fund was established by an Act of a foreign country and is a resident of that foreign country for income tax purposes.
2. The sole role of the entity is to promote financial and retirement planning for residents of that foreign country.
3. The Board of the entity has its central management and control outside of Australia by entities none of whom are residents of Australia.
4. The entity provides various benefits, for workers. It was established, and is maintained, only to provide benefits for individuals who are not Australian residents.
5. There are no provisions in the Act for the termination or winding-up of the entity after a specified period.
6. The calculation of benefits is governed by the Act but benefits are not payable unless an application has been made and payment has been authorised.
7. The entity is exempt from income tax in the foreign country.
8. The entity has, or will make, investments in Australia.
9. The entity derives, or will derive, interest and dividend income from its Australian investments.
Relevant legislative provisions
Income Tax Assessment Act 1936 paragraph 128B(3)(jb)
Income Tax Assessment Act 1936 section 128D
Reasons for decision
Question 1
Will interest income and dividend income derived by the entity from its Australian investments, be exempt from withholding tax under paragraph 128B(3)(jb) of the ITAA 1936?
Detailed reasoning
Section 128B of the ITAA 1936 imposes liability to withholding tax on certain income that is derived by non-residents.
However, paragraph 128B(3)(jb) of the ITAA 1936 provides that section 128B of the ITAA 1936 does not apply to income that:
(i) is derived by a non-resident that is a superannuation fund for foreign residents
(ii) consists of interest, or consists of dividends or non-share dividends paid by a company that is a resident, and
(iii) is exempt from income tax in the country in which the non-resident resides.
The entity satisfies the three conditions in paragraph 128(3)(jb) of the ITAA 1936.
As all the conditions in paragraph 128B(3)(jb) of the ITAA 1936 are satisfied, interest and dividends derived by the entity from its Australian investments are exempt from withholding tax.
Question 2
If the answer to question 1 is 'Yes', will that interest income and dividend income be income that is NANE income under section 128D of the ITAA 1936?
Detailed reasoning
Section 128D of the ITAA 1936 relevantly provides that income to which withholding tax would be payable but for the operation of paragraph 128B(3)(jb) of the ITAA 1936, is NANE income of a person.
The interest income and dividend income derived by the entity from its Australian investments will be NANE income under section 128D of the ITAA 1936 because, but for the operation of paragraph 128B(3)(jb) of the ITAA 1936, it would be subject to withholding tax.