Australia And Finland Update Tax Treaty

by Mary Swire, Tax-News.com, Hong Kong

21 November 2006

The Australian Treasurer Peter Costello and the Finnish Minister of Finance, Eero Heinaluoma yesterday signed a new tax treaty between Australia and Finland to replace the existing, outdated treaty.

According to Costello, the new treaty, signed on the occasion of the G-20 meeting in Melbourne, will enhance the important investment relationship between Australia and Finland, further assisting trade and investment flows, while reflecting current tax treaty policies and practices of the two countries.

The new treaty substantially reduces withholding tax on certain dividend, interest and royalty payments, in line with Australia’s tax treaties with the United States and the United Kingdom, and more recently with France and Norway. It also broadly updates taxation arrangements between Australia and Finland. In particular, it will align capital gains tax treatment more closely with Organisation for Economic Cooperation and Development (OECD) practice, and provide for improved integrity measures.

Costello explained that these changes reduce the cost to Australian businesses of accessing intellectual property, equity and finance for expansion. They also reduce obstacles inhibiting further corporate expansion into Finland, he added.

The changes have come about in response to the Australian government's Review of International Taxation Arrangements.

The new treaty will enter into force when both countries advise that they have completed their domestic requirements.

The Australian Treasury said that legislation for this purpose will be introduced in parliament "as soon as practicable".

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