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Australia's Financial Services Council has called for a simple, flat rate of withholding tax to be made available for Australian funds entering the Asia Region Funds Passport (ARFP).
The Asia Region Funds Passport will, once implemented, provide a multilaterally agreed framework to facilitate the cross border marketing of managed funds across participating economies in the Asia region.
In its 2017 State of the Industry report, the FSC noted Australia's high WHT rates and described the regime as "extremely complicated." It added that other jurisdictions under the ARFP "offer lower rates and simpler regimes for investors in their collective investment vehicles."
The report explained: "Withholding applies to foreign investors and is levied on different income characters including interest, dividends, royalties, and managed investment trust fund payments. The rates applying to different types of income are based on a combination of different tax treaty rules, domestic taxation rules, and the character (or type) of income being generated."
The FSC is concerned that Australian fund managers will be at a disadvantage because they will first have to "identify potential high headline rates and then explain how different types of income are classified."
The report stated that a 2012 WHT rate hike increased uncertainty among investors. It added that industry concerns have continued to grow and that pressure has been mounting on the Government to simplify the rules.
As a way forward, the FSC recommended that "a simple, flat rate of withholding tax be available for Australian funds entering the ARFP regime."
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