1 Is the Fund excluded from liability to withholding tax on its interest income derived from Australia (through Umbrella Fund (UF) and its sub-funds) under Article X.x, paragraph (x) of the Agreement (X Convention)?
1 Yes. Question 1 Is the Fund excluded from liability to withholding tax on its dividend income derived from Australia (through UF and its sub-funds) under Article 10.4, paragraph (d) of the X Convention? Answer 2 Yes. This ruling applies for the following periods: XX July 20YY to XX June 20YY The scheme commenced on: XX July 20YY
The Fund The Fund is a self-managed pension fund established in Country B. The Fund was established and maintained only to provide superannuation/pension benefits for individuals who are not Australian residents. Management of the Fund's investments The Fund is managed by its own Board of Trustees, which is located in Country B. All management and investment decisions of the Fund are carried out and made in Country B by the Board of Trustees, the Investment Committee and the executives of the Fund. The members of the Board of Trustees, the Investment Committee and the executives are individuals none of whom are Australian residents. The Fund holds investments (including shares in Australia) through UF and its sub-funds, which are contractual funds established in Country B and have no legal personality. UF invests in a variety of Australian securities (e.g. bonds, shares, futures) through its sub-funds. The Australian equity investments held by the Fund are shares in Australian resident companies which pay dividends in relation to those shares. The Fund is the only investor/unitholder in UF and is the beneficial owner of the income derived by UF and its sub-funds.
With respect to the Australian investments: • The Fund does not carry on a business through a permanent establishment situated in Australia and does not perform independent personal services from a fixed base in Australia. Accordingly, the holdings generating dividends are not effectively connected with any such permanent establishment or fixed base. • All interest income is paid by Australian residents for the purposes of Australian tax, and all such income is not connected to a permanent establishment or a fixed base situated outside of Australia. • The Fund does not participate directly or indirectly in the management, control or capital, and does not have an existing or contingent right to participate in the financial, operating or policy decisions, of the issuer of the debt or equity in which UF and its sub-funds invest. • The Australian debt instruments in which the Fund has invested in are such that the payer has no special relationship with the Fund.
• The Australian resident companies that pay dividends from the investments held through UF and its sub-funds are not dual residents of both Australia and Country B, pursuant to paragraph 1 of Article 4 of the X Convention. • As the beneficial owner of dividends paid by Australian resident companies, the Fund holds directly or indirectly no more than 10 per cent of the voting power in the companies paying the dividends. The Fund Contract The legal relationships between the Fund, UF and its sub-funds are governed by way of contract (the Fund Contract). Pursuant to the Fund Contract, the Fund Manager (FM) of UF and its sub-funds has the following responsibilities: • The FM manages the sub-funds for the account and benefits of the Fund. • The FM makes decisions about the issue of units, the investments and their valuation. It calculates the net asset value and fixes the issue and redemption prices and profit distributions. The FM exercises all the rights belonging to UF and to the sub-funds.
• The FM and its agents are subject to the duties of loyalty, care and information. They act independently and safeguard only interests of the investor. Pursuant to the Fund Contract, the custodian bank of the Fund and its sub-funds (the Custodian) has the following responsibilities: • The Custodian legally holds the assets of UF for the account and benefit of the unitholder of UF in accordance with the Fund Contract. • The Custodian safeguards the assets of the sub-funds, deals with the issue and redemption of fund units and the payment transactions for the sub-funds. The Custodian and its agents are subject to the duties of loyalty, care and information. The Fund is the sole qualified investor of UF and its sub-funds within the meaning of Art. 10 Para. 3 of the Federal Law on Collective Investments, dated 23 June 2006. The Fund holds the units of the sub-funds for its members (beneficiaries) and represents their interests. The Fund can terminate the Fund Contract at any time by requiring payment of its share in the sub-funds in cash. The Fund Manager can consent to a transfer of part of the portfolio at market value.
The Fund is entitled to the assets and income only of the sub-funds in which it holds an interest. Only the relevant sub-funds are liable for the obligations relating to individual sub-funds. Tax treatment The Fund is treated as a company for Country B tax purposes. The Fund is exempt from tax in Country B. The Country B Tax Authority has confirmed that the Fund is a pension fund for the purposes of the X Convention. The Fund is beneficially entitled to the underlying assets of UF and sub-funds and is entitled to the income from the investment of UF and its sub-funds as it arises. UF and its sub-funds do not directly own real estate. They are fiscally transparent and are not subject to tax in Country B. As a result, UF and its sub-funds are ignored for the purposes of income tax by the taxation authority of Country B and the income of UF, and its sub-funds are considered to be the income of the Fund as the investor in UF.
The Fund is not a fund for which an amount has been set aside or to which an amount has been paid by a taxpayer that is an amount that has been allowed or is allowable as a deduction or in respect of which a rebate of tax has been allowed or is allowable under any provision of the Australian income tax legislation. Residency The Fund is a resident company in Country B in the sense of the X Convention. The Fund is taxed neither as a domicile nor a holding company nor as an aid society. The Fund is tax exempt in Country B, as a regulated qualified pension fund. No members are admitted as members of the Fund when they are (or were) residents of Australia.
Income Tax Assessment Act 1936 section 128B Income Tax (Dividends, Interest and Royalties Withholding Tax) Act 1974 section 7 International Tax Agreements Act 1953 section 4 Reference for Avoidance of Double Taxation protocol between Australia and Country B supplied.