Private ruling: Sovereign immunity
Published: November 2012
Ruling period: 1 July 2009 to 30 June 2016
Date scheme commenced: 1 July 2009

Ruling: Q1: Is the foreign country central bank eligible for exemption from Australian income tax including withholding taxes from its Australian investments under the common law principle of sovereign immunity? | A1: Yes. The foreign country central bank is eligible for exemption from Australian income tax including withholding taxes from its Australian investments under the common law principle of sovereign immunity | Q2: Does the foreign country central bank qualify as a 'sovereign entity? | A2: It is not necessary to answer this question. The foreign country central bank's eligibility for an exemption from income taxes is not determined by establishing whether or not the central bank comes within the definition of 'sovereign entity'. Rather, eligibility for an exemption will be determined by the application of the three conditions precedent examined in answer to Question 1

Relevant facts and circumstances: The foreign country central bank has provided legislation and annual reports to establish that it is a central bank

Relevant legislative provisions: Taxation Administration Act 1953 subsection 15-15(2).

Reasons for decision: Summary: In order to establish whether sovereign immunity applies to exempt Australian income tax including withholding tax, it is necessary to establish the following conditions required in ATOID 2002/45: 1. that the person making the investment (and therefore deriving the income) is a foreign government or an agency of a foreign government; 2. that the moneys being invested are and will remain government moneys; and 3. that the income is being derived from a non commercial activity. Condition 1 - that the person making the investment (and therefore deriving the income) is a foreign government or agency of a foreign government The foreign country central bank has provided evidence which demonstrates that it is exercising governmental functions and is owned and controlled by the foreign government. As such, the entity will constitute an agency of a foreign government subject to satisfaction of the conditions below. Condition 2 - that the moneys being invested are and will remain government moneys The foreign country central bank has provided evidence that the moneys being invested are and will remain government money. Condition 3 - that the income is being derived from a non-commercial activity Based on the evidence provided by the foreign country central bank, it is considered that that income is being derived from a non commercial activity. | Detailed Reasoning - Conclusion: Accordingly, having satisfied conditions one to three above, the foreign country central bank will qualify for an exemption from Australian income tax including withholding tax derived from its Australian income under the principle of sovereign immunity.

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