Australia and the Republic of France have signed a new tax treaty to replace the existing treaty, which was signed in 1976.
The new treaty was signed by Minister for Foreign Affairs, the Hon. Alexander Downer, and the French Minister of Foreign Affairs, Philippe Douste-Blazy in Paris on Tuesday.
According to Australian Treasurer Peter Costello, the new treaty will enhance the already robust investment relationship between Australia and France and will further increase trade and investment flows between the two countries.
The treaty will substantially reduce the withholding tax on certain dividend, interest and royalty payments to provide similar outcomes to Australia’s treaty arrangements with the United States and the United Kingdom.
"This will provide long term benefits for business, making it cheaper for Australian business enterprises to obtain intellectual property, equity and finance for expansion," explained Mr Costello.
"It will also remove obstacles currently inhibiting Australian corporate expansion into France," he added.
The new treaty will update the taxation arrangements between Australia and France in a number of other areas. In particular it will clarify and align capital gains tax treatment more closely with Organisation for Economic Cooperation and Development (OECD) practice, and provide for improved integrity measures.
The new treaty is also consistent with the Australian government’s response to the Review of International Taxation Arrangements, and updates an important part of Australia’s treaty network.
The new treaty will enter into force when both countries advise that they have completed their domestic requirements. In the case of Australia, Mr Costello stated that legislation will be introduced in the Australian Parliament as soon as practicable.
The full text of the Revised Tax Treaty between Australia and France can be found in the Tax News Resources section.
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