Written answers

Tuesday, 6 July 2010

10:00 am

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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Question 156: To ask the Minister for Finance the position regarding the taxation treatment of a matter (details supplied). [29858/10]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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I am informed by the Revenue Commissioners that Ireland has a double taxation agreement (DTA) with Australia since 1983. It generally reflects the provisions found in the OECD model tax agreement. The full text of the Australian DTA can be found on the Revenue website at: http://www.revenue.ie/en/practitioner/law/double/australia.html The effect of the DTA may be summarised as follows: The purpose of a DTA is the avoidance of double taxation and the prevention of fiscal evasion. Double taxation arises where the same income or gain is taxed by two jurisdictions. This normally occurs where income or gains arise in one country and are paid to a resident of another country. DTAs seek to allocate exclusive taxing rights to one or other country for particular items of income or, where the DTA allows items of income or gains to remain taxable in both countries, to require the country of residence of the taxpayer to grant credit against its tax on the income or gain for the tax paid in the other country.

In relation to the Australian DTA, business profits earned by a resident of one country from sources in the other country are taxable only in the country of residence of the taxpayer unless that taxpayer has a permanent establishment in the other country. If there is a permanent establishment then the other country can tax the profits earned through it and in such circumstances the country of residence will give a credit for such tax.

Dividends paid by a company resident in one country to a resident of the other country may be taxed at a rate of 15% in the first-mentioned country. The country of residence will give a credit for such tax. Note however that Ireland does not impose any tax on dividends paid to residents of Australia (or any other treaty country). Similarly, payments of interest or royalties from one country to a resident of the other may be taxed in the paying country at a rate of 10% and the country of residence of the taxpayer will give a credit for such tax. Income and gains derived by a resident of one country from immovable property situated in the other country may be taxed in both the country where the immovable property is situated and also in the country of residence of the alienator. The country of residence will grant a credit for such tax.

Income from employment of a resident of one country may be taxed in the other country if the employment is exercised there. However, the income will be taxable only in the country of residence of the taxpayer if the presence in the other country is less than 183 days in the tax year and the employer is not resident in the other country and does not have a permanent establishment there. Pensions are taxable only in the country of residence of the taxpayer. Where a taxpayer is resident for tax purposes in both countries at the same time according to their laws, there are tie-breaker provisions in the DTA that decide which country the taxpayer will be treated as a resident of for the purposes of the DTA. For individuals the main test is where the individual has a permanent home.

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