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British Virgin Islands and Australia Conclude Tax Information Exchange Agreement

by Philip Morton, Investors

29 October 2008

The Australian Assistant Treasurer Chris Bowen and the Premier of the BVI Ralph O’Neal on Monday announced the signing of a Tax Information Exchange Agreement (TIEA) between Australia and the BVI.

The TIEA provides for full exchange of information (EOI) on request in both criminal and civil tax matters and builds upon legislation in both jurisdictions, which already provides for mutual legal assistance in criminal matters. The TIEA reflects both governments’ shared commitment to implementing Organisation for Economic Cooperation and Development (OECD) principles of transparency and effective exchange of information, to eliminate harmful tax practices.

Under the terms of the TIEA, Australia and the BVI have agreed not to apply prejudicial or restrictive measures based on harmful tax practices to residents or nationals while the TIEA is in force and effective. Further, Australia will remove any governmental references to the BVI as a ‘tax haven’ and will list the BVI as an ‘information exchange country’ in the Taxation Administration Regulations 1976. This will provide residents of the BVI with access to reduced withholding tax rates on distributions of certain income they may receive from Australian managed investment trusts.

In addition to the TIEA, Australia and the BVI have signed an agreement for the allocation of taxing rights with respect to certain income of individuals, which will provide benefits to Australian and BVI residents. Australia and the BVI have also agreed to enter into discussions, when appropriate, to foster further co-operation in areas of mutual interest.

In response to the signing of the TIEA, Mr Bowen said:

“The TIEA between Australia and the BVI demonstrates both jurisdictions’ commitment to international co-operation and effective exchange of information. The BVI’s co-operation in fostering these international standards of transparency and exchange of information enhances its reputation as a globally integrated and responsible financial centre.” He added: “Australia is at the forefront of efforts to implement widespread international co-operation on tax matters and is pleased to welcome the BVI to its TIEA network. This is the fourth TIEA signed by Australia and the second signed by the BVI.

“The TIEA also complements the strong commitment of the governments of Australia and the BVI to international standards on anti-money laundering and counter-terrorism financing, as set by the Financial Action Task Force. The Australian government particularly welcomes the BVI’s admission as a full member to the International Organisation of Securities Commissions, where it joins more than 100 jurisdictions with recognised high standards of regulation and compliance.”

Mr O’Neal said:

"In addition to the TIEA, we have also negotiated a further package of measures that will bring benefits to the BVI, including technical assistance, non-discriminatory tax treatment and an agreement covering the allocation of taxing rights for students and government employees. The BVI looks forward to an ongoing cooperative relationship with Australia."

  • Residents of ‘information exchange countries’ are subject to withholding tax at the following rates: 22.5% for fund payments made between 1 July 2008 and 30 June 2009;
  • 15% (final) for fund payments made between 1 July 2009 and 30 June 2010; and
  • 7.5% (final) for fund payments made from 1 July 2010.

For the 2008-09 income year, as an interim measure, investors resident in information exchange countries are eligible to claim a deduction for expenses relating to fund payments. The net amount will be subject to tax at 22.5%. Residents of other countries are subject to a final withholding tax of 30%.

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