The central objective of the changes to the DBA 2015 is to remove tax barriers and create a more favourable investment environment between Australia and Germany. A reduction in withholding taxes in certain circumstances will reduce investment and trade costs between the two countries and promote the further growth of trade relations. Strengthening economic ties with Germany will not only allow Australia to strategically access the European market, but also reduce its dependence on the Chinese economy. 1 Australia`s income tax agreements are brought into force by the International Tax Agreements Act 1953. The Agreement between the Australian Bureau of Trade and Industry and the Taipei Economic and Cultural Office on the Prevention of Double Taxation and the Prevention of Tax Evasion with Respect to Taxes on Income is one less document of the contractual status adopted as Schedule 1 of the International Tax Agreements Act 1953. The new double taxation agreement between Australia and Germany has entered into force. According to the 1972 DBA, the country of origin can withhold up to 10% of the value of interest payments made between Australia and Germany. According to the 1972 DBA, the country of origin can levy a withholding tax rate of 10% on licence payments between Australia and Germany. The 2015 DBA lowers this rate to 5%. When a resident Australian company pays dividends, interest or royalties to a foreign company, it is generally required to pay on overseas payments (and vice versa) withheld at source, i.e. the income tax payable.1 Withholding tax rates are 30% on dividends and royalties and 10% on interest.2 These rates are reduced by DTAs between Australia and a number of country.
including Germany. Irrespective of the above, the exemption from interest offsetting tax provided for in the 2015 DBA recognises that the 10% tax rate may be excessive given the financing costs of certain types of businesses. This will reduce investment costs between Australia and Germany and support the further growth of trade relations between the two countries. The 2015 DBA provides for derogations from this withholding tax for interest payments if the interest is derived from: the new DBA will apply to investors and companies carrying out cross-border transactions. It will also affect multinationals with branches or assets in Australia and Germany. First, the new DBA reduces withholding tax on royalties, certain types of interest and dividends from the home country. The new maximum rates are as follows: the withholding tax rate for dividends under the 1972 DBA is 15%. It must normally be paid after receipt of an unvalued dividend paid by a company established in Australia to a shareholder established in Germany (free dividends paid by a company established in Australia are not subject to withholding tax).
This shows the continued commitment of both countries to oppose international tax evasion practices. Many of the amendments discussed above implement the recommendations of the OECD/G20 Final Report on Profit Reduction and Profit Shifting (BEPS Report). 4 The tax administrations of some Australian contractors have agreed to draft consolidated texts to help the public better understand the impact of the MLI. . . .