Australia And Chile Sign DTA
Thursday, March 11, 2010
Australia’s Assistant Treasurer, Nick Sherry, has announced that Australia
and Chile have signed a comprehensive bilateral double taxation agreement (DTA)
– the second such agreement between Australia and a South American country.
The signing of the DTA had been delayed due to the earthquake in Chile on February
27, and the Australian government thanked the Chilean government and its officials
for being able to bring the agreement to a conclusion in difficult circumstances.
"The new income tax treaty between Australia and Chile will provide certainty
and stability of tax treatment for Australian and Chilean cross-border investors
and reduce tax-related barriers so the economic relationship between our countries
can continue to grow," Sherry said.
"Chile is a major destination for Australian investment, especially in
the mining sector. The signing of this historic tax treaty is a great step forward
for Australian businesses,” he continued. “It will help maintain
the integrity of Australia's tax base by allowing the exchange of taxpayer information,
including bank information, between Australian and Chilean tax administrators."
The provisions of the new DTA with Chile will also include reductions in source-country
withholding taxes on certain cross-border payments of dividends, interest and
royalties; and rules to determine when an enterprise or an individual of one
country may be taxed on its activities abroad. There will be an agreed basis
for determining the allocation of profits within a multinational company to
reflect the transfer pricing that would be adopted by independent parties.
There will be a general obligation for both countries to relieve double taxation
on cross-border income by permitting tax paid under the other country's laws,
and in accordance with the DTA, to be allowed as a credit against tax payable
under their own laws. Special rules will preserve the application of existing
tax arrangements between Chile and Australian companies under the provisions
of Chilean legislation. This is of particular importance to Australian mining
companies with investments in Chile.
Legislation to give the new treaty the force of law will be introduced into
the Australian and Chilean parliaments as soon as is practicable, Sherry informed.