Australia and Taiwan have signed a double tax agreement (DTA) which aims to eliminate double taxation between the two countries. This agreement was signed on 10 December 2015 and came into effect on 1 January 2017.
Double taxation occurs when a person or company is taxed twice on the same income in two different countries. This can occur when a person or company is a resident of one country but has income from another country. Without a DTA, the person or company would be required to pay tax on the same income in both countries.
The Australia-Taiwan DTA aims to prevent double taxation by allocating taxing rights between the two countries. The DTA provides rules for determining residency, and establishes the maximum withholding tax rates on certain types of income, such as dividends, interest, and royalties.
Under the DTA, dividends paid by a company resident in one country to a resident of the other country are generally subject to a maximum withholding tax rate of 15%. This rate can be reduced to 5% if the recipient is a company that owns at least 10% of the capital of the company paying the dividends.
Interest paid by a resident of one country to a resident of the other country is generally subject to a maximum withholding tax rate of 10%. Royalties paid by a resident of one country to a resident of the other country are generally subject to a maximum withholding tax rate of 10%.
The DTA also provides rules for the avoidance of double taxation in relation to capital gains and income from employment. The agreement also includes provisions for the exchange of information between the tax authorities of the two countries.
The Australia-Taiwan DTA is expected to benefit individuals and companies that do business in both countries. The agreement will provide greater certainty and predictability in relation to taxation, and will reduce compliance costs associated with double taxation.
In conclusion, the Australia-Taiwan double tax agreement is a positive development for individuals and companies that do business in both countries. By eliminating double taxation and establishing clear rules for taxation, this agreement will promote trade and investment between Australia and Taiwan.
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