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Australia-Germany DTA Enters Into Force

by Mary Swire,, Hong Kong

27 December 2016

The Australian Government has announced that a new double tax agreement (DTA) with Germany is now in force, replacing the previous 1972 treaty.

The new DTA was signed on November 12, 2015. Instruments of ratification were exchanged on December 7, 2016.

The DTA sets the maximum withholding tax rate for dividends at 15 percent. A rate of five percent will apply if the beneficial owner of the dividends is a company (other than a partnership) that holds directly at least 10 percent of the voting power of the company paying the dividends throughout a six-month period that includes the day of payment. Exemptions will apply in certain cases.

A maximum 10 percent withholding tax will be applicable to interest payments, with exemptions applicable in specific circumstances. The withholding tax rate for royalties will be five percent.

These withholding tax rates will apply from January 1, 2017.

According to a joint statement by Revenue Minister Kelly O'Dwyer and Finance Minister Mathias Cormann, the new DTA "aligns with recent OECD tax treaty developments, including new provisions recommended by the OECD/G20 that are intended to minimize tax avoidance opportunities and create a more certain business environment for taxpayers."

"It will also enhance the exchange of information and assistance in the collection of outstanding tax debts between our tax officials, with these provisions of the new treaty now in effect. This is consistent with both Governments' support for ongoing OECD and G20 initiatives aimed at improving tax transparency and tax system integrity," the ministers added.

TAGS: tax | business | tax information exchange agreement (TIEA) | double tax agreement (DTA) | tax avoidance | interest | royalties | Organisation for Economic Co-operation and Development (OECD) | Australia | ministry of finance | tax authority | agreements | tax rates | withholding tax | Germany | dividends | G20

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