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Edited version of your written advice
Authorisation Number: 1013126378153
Date of advice: 18 November 2016
Ruling
Subject: Exemption from withholding tax
Question and answer
Where Entity A invests the official reserve assets of the Country B Government on behalf of and for the benefit of the Retirement Fund, is any interest income generated from investments in Australian financial arrangements exempt from withholding tax?
Yes
This ruling applies for the following period:
1 January 20YY to 31 December 20ZZ
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
Entity A is a Country B statutory body which was established to manage the Country B Government Pension Fund (Retirement Fund).
The Retirement Fund in turn is a fund established for the purposes of funding the pension liabilities of the Country B Government. The source of funds of the Retirement Fund is from official reserve assets of the Country B Government.
A certificate has been forwarded from the Government of Country B stating:
● The Retirement Fund that is managed and invested by Entity A represents the official reserve assets of the Government of Country B.
Entity A is a resident of Country B.
Entity A is not a superannuation fund for foreign residents for the purposes of paragraph 128(3)(b) of the Income Tax Assessment Act 1936 (ITAA1936).
Entity A does not have a permanent establishment in Australia.
Relevant legislative provisions
International Agreements Act 1953
Reasons for decision
The International Agreements Act 1953 gives domestic legal effect to the various double tax agreements Australia has with other counties.
The Country B Agreement is located on the Austlii website (www.austlii.edu.au) in the Australian Treaties Series database. The Country B Agreement operates to avoid the double taxation of income received by residents of Australia and Country B.
An Article of the Country B Agreement states:
Notwithstanding the provisions of paragraph 2, interest derived from the investment of official reserve assets by the Government of a Contracting State or by a bank performing central banking functions in a Contracting State shall be exempt from tax in the other Contracting State.
Entity A is a statutorily established agency of the Country B Government whose function is to administer and manage the Retirement Fund.
The Retirement Fund in turn is a fund established for the purposes of funding the pension liabilities of the Country B Federal Government. The source of funds of the Retirement Fund is from official reserve assets of the Country B Government.
A certificate has been forwarded from the Government of Country B stating:
The Retirement Fund that is managed and invested by Entity A represents the official reserve assets of the Government of Country B.
Consequently the exemption in the relevant Article of the Country B Agreement will apply and Entity A is exempt from tax on interest derived from Australian investments.