Private ruling: Withholding tax - double tax agreement
Date of advice: 30 July 2021
Published: October 2021
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Does subparagraph 4d) of Article 10 of the Convention between Australia and the Swiss Confederation for the Avoidance of Double Taxation with respect to Taxes and Income, with Protocol [2014] ATS 33 (Swiss Convention) apply to the dividend income derived by The Fund from its Australian investments held through FCP and its Sub-Fund A, such that the dividends shall not be taxed in Australia? | A1: Yes | Q2: Does subparagraph 3d) of Article 11 of the Swiss Convention apply to the interest income derived by The Fund from its Australian investments held through FCP and its sub-funds, Sub-Fund A, Sub-Fund B and Sub-Fund C, such that the interest shall not be taxed in Australia? | A2: Yes

Relevant facts and circumstances: The Fund The Fund is a foundation in the sense of Article 80 ff. of the Swiss Civil Code (ZGB), Article 331 of the Swiss Code of Obligations (OR) and Article 48, paragraph 2 of the Swiss Federal Act of 25 June 1982 on Occupational Old Age, Survivors' and Invalidity Pension Provision (OPA/BVG/LPP). The Fund is domiciled in Switzerland. The Fund's objective is to provide occupational welfare under the terms of the BVG for the employees of the Employer Group. The Fund provides for an appropriate welfare protection of its policy holders and for their families and survivors against the economic consequences of retirement through age and the risks of death and disability. The Fund may also provide welfare going beyond the minimum legal benefits, including support benefits in the event of hardship, such as illness, accident, disability or unemployment. The Foundation Board governs The Fund in accordance with the law and ordinances, the provisions of the Deed of Foundation and regulations, and the directives of the supervisory authority. Benefits cannot be paid out of The Fund's assets except for welfare purposes. The Fund's assets are managed in accordance with Swiss Federal Law investment guidelines following accepted principles. A return of funds to The Founder, to affiliated employers or their legal successors and use of the funds for an object other than for occupational welfare purposes is excluded. The Fund is registered in the Commercial Register of Canton A. FCP and its sub-funds FCP is an umbrella fund of the "Other funds for traditional investments" category established in accordance with Articles 25, 68, and 93 of the Swiss Collective Investment Schemes Act of 23 June 2006 (CISA). FCP is made up of sub-funds (Sub-Funds), including Sub-Fund A, Sub-Fund B and Sub-Fund C. Investment in FCP is restricted to The Fund. The Fund is the sole investor and holds units in FCP for its members as beneficiaries. FCP is a contractual arrangement between The Fund (as the sole investor), the Fund Management Company (FMC), and the Custodian. The Fund as the sole investor has either a direct or indirect legal entitlement, at the expense of collective assets, to redeem its units at the net asset value. FCP and its Sub-Funds are governed by Swiss law and in particular CISA, the Swiss Collective Investment Schemes Ordinance of 22 November 2006 (CISO) and the Collective Investment Schemes Ordinance of 21 December 2006 issued by the Swiss Financial Market Supervisory Authority (FINMA) (CISO FINMA). The legal relationships between The Fund, FMC and Custodian are governed by contractual arrangement (FCP Fund Contract) and the applicable provisions of Swiss legislation concerning collective investment schemes. Under the FCP Fund Contract, FCP and its Sub-Funds do not have separate legal personalities, are fiscally transparent and are not subject to tax in Switzerland. The incomes of FCP and the Sub-Funds are considered to be the income of The Fund as the sole investor in FCP. FMC manages the Sub-Funds at its own discretion and in its own name for the account of The Fund. FMC makes all decisions relating to the issuing of units, the investments and their valuation. FMC exercises all rights associated with FCP and the Sub-Funds. FMC and its agents act independently and exclusively in the interests of The Fund, as the sole investor, acting in good faith and have a duty to exercise due diligence and provide information. FMC may delegate investment decisions and specific tasks for all or some of the sub-funds, provided that it is in the interests of efficient management. FMC may, with the consent of Custodian, submit amendments to the FCP Fund Contract to the supervisory authority for approval and may open further sub-funds subject to consent from the supervisory authority. Custodian is responsible for the safekeeping of the Sub-Funds' assets, the issue and redemption of fund units and payments on behalf of the Sub-Funds. Custodian and its agents act independently and exclusively in the interests of The Fund, as the sole investor, acting in good faith and have a duty to exercise due diligence and provide information. Custodian may delegate the safekeeping of the Sub-Funds' assets to third-party or collective depositories in Switzerland or abroad. Custodian ensures that FMC complies with the law and the FCP Fund Contract. The FCP Fund Contract can be terminated by The Fund at any time and request payment in respect of units held in the corresponding sub-fund in cash or in permissible investments belonging to the sub-fund. The net income of the Sub-Funds will be distributed to the investor annually within four months of the close of the financial year in the relevant accounting currency. FMC may make additional interim distributions from the income of the FCP. External auditors examine whether FMC and the Custodian act in compliance with the FCP Fund Contract, the CISA and the code of professional ethics of the Swiss Funds Association (SFA). The Fund's Australian investments via the FCP and its Sub-Funds FCP holds corporate and government bonds, units and common stock investments in various Australian entities. FCP's investments are held under sub-funds with their own respective asset managers to whom the investment decisions have been delegated. Sub-Fund A holds shares in Australian resident companies which pay dividends in relation to those investments. Sub-Fund A also holds units in Australian resident managed investment trusts (MITs) from which they may derive various types of income, including interest income. Sub-Fund A holds no more than 10% of the voting power in the Australian resident companies paying dividends or the Australian resident MITs. Sub-Fund B and Sub-Fund C, hold Australian government bonds and Australian corporate bonds from which they derive interest income. Additional information The Fund does not carry on a business through a permanent establishment situated in Australia and does not perform independent personal services from a fixed base in Australia. The Fund, being the beneficial owner of the interest, does not and will not participate in the management, control or decision-making of any of the entities from which it derives interest income. The Australian payers with respect to The Fund's Australian investments have no special relationship with The Fund. The Fund is treated as a company for Swiss tax purposes. The Fund is exempt from tax in Switzerland. The Certificate of Residence from the Tax Authorities of Canton A states The Fund is a resident of Switzerland for tax purposes. Assumptions The Australian resident companies that pay dividends from the investments held through FCP and its Sub-Funds are not dual residents of both Australia and Switzerland, pursuant to paragraph 1 of Article 4 of the Swiss Convention.

Relevant legislative provisions: Convention between Australia and the Swiss Confederation for the Avoidance of Double Taxation with respect to Taxes and Income, with Protocol [2014] ATS 33 Article 10 | Convention between Australia and the Swiss Confederation for the Avoidance of Double Taxation with respect to Taxes and Income, with Protocol [2014] ATS 33 Article 11

Reasons for decision: Summary: The Fund is considered to be a person who is a resident of a Contracting State and is therefore subject to the Swiss Convention. Dividends paid to The Fund from investments in Australian resident companies held through FCP and Sub-Fund A meet the requirements of subparagraph 4d) of Article 10 of the Swiss Convention and as such, shall not be taxed in Australia. | Detailed Reasoning - Detailed reasoning: Subsection 128B(1) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that, subject to certain exclusions, section 128B of the ITAA 1936 will apply to income derived by a non-resident that consists of a dividend paid by an Australian resident company (franked dividends are specifically excluded from the operation of section 128B by paragraph 128B(3)(ga) of the ITAA 1936). Subsection 128B(4) of the ITAA 1936 provides that a person who derives dividend income to which section 128B of the ITAA 1936 applies, is liable to pay withholding tax on that dividend income. The withholding tax rate applicable is generally 30% of the dividend amount (section 7 of the Income Tax (Dividends, Interest and Royalties Withholding Tax) Act 1974 ). Unfranked dividends derived by a non-resident from Australian resident companies are therefore subject to withholding tax unless otherwise excluded. However, in determining liability to Australian tax on Australian source income derived by a non-resident, it is necessary to consider not only the income tax laws but also any applicable Convention or Double Taxation Agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and the Income Tax Assessment Act 1997 (ITAA 1997) so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Withholding tax payable in respect of dividends paid to non-residents is an Australian income tax that is covered by the Swiss Convention. As such, consideration of the Swiss Convention is outlined below. | Detailed Reasoning - Swiss Convention - application to The Fund: In order for the Swiss Convention to apply, Article 1 of the Swiss Convention states: This Convention shall apply to persons who are residents of one or both of the Contracting States. The Fund must therefore be considered both a 'person' and a 'resident of a Contracting State' for the Swiss Convention to apply. Person Subparagraph 1c) of Article 3 of the Swiss Convention defines 'person' to include: ...an individual, a company, a trust and any other body of persons. Subparagraph 1d) of Article 3 of the Swiss Convention defines a 'company' to mean: ...any body corporate or any entity which is treated as a company or body corporate for tax purposes. The Fund is a foundation undertaken in Switzerland and is treated as a company for tax purposes in Switzerland. Therefore, The Fund satisfies the definition of a 'company' pursuant to subparagraph 1d) of Article 3 of the Swiss Convention. It is, therefore, considered to be a 'person' in accordance with Subparagraph 1c) of Article 3 of the Swiss Convention for the purposes of applying the Swiss Convention. | Detailed Reasoning - Resident of a Contracting State: Paragraph 1 of Article 4 of the Swiss Convention provides the following: For the purposes of this Convention, the term "resident of a Contracting State" means any person who, under the laws of that State, is liable to tax as a resident of that State, and also includes the Government of that State and any political subdivision or local authority thereof. This term, however, does not include any person who is liable to tax in that State in respect only of income from sources in that State. In addition, sub-subparagraph 3a)(i) of the Protocol to the Swiss Convention states that, in relation to paragraph 1 of Article 4 of the Swiss Convention, it is understood that the term 'resident of a Contracting State' includes, in particular, a person that is a pension scheme established in that State. Accordingly, The Fund must be a pension scheme established in Switzerland to satisfy the definition of a 'resident of a Contracting State' for the purposes of the Swiss Convention. Subparagraph 1i) of Article 3 of the Swiss Convention provides the following in respect of the term 'pension scheme': ...the term "pension scheme" means any plan, scheme, fund, foundation, trust or other arrangement established in a Contracting State or, in the case of Australia, that is an Australian superannuation fund for the purposes of Australian tax, which is: (i) regulated by that State; and (ii) operated principally to administer or provide pension or retirement benefits or to earn income for the benefit of one or more such schemes. Subparagraph 2b) of the Protocol to the Swiss Convention provides the following in respect of Article 3 of the Swiss Convention: It is understood that the term "pension scheme" in subparagraph i) of paragraph 1 includes the following and any identical or substantially similar schemes which are established pursuant to legislation introduced after the date of signature of this Convention: b) in Switzerland, any pension schemes covered by: (i) the Federal Act on old age and survivors' insurance, of 20 December 1946; (ii) the Federal Act on disabled persons' insurance of 19 June 1959; (iii) the Federal Act on supplementary pensions in respect of old age, survivors' and disabled persons' insurance of 6 October 2006; (iv) the Federal Act on old age, survivors' and disabled persons' insurance payable in respect of employment or self-employment of 25 June 1982, including the non-registered pension schemes which offer occupational pension plans and the forms of individual recognised pension schemes comparable with the occupational pension plans. Paragraph 1.35 of the Explanatory Memorandum to the International Tax Agreements Amendment Bill of 2014 (Cth) (EM to the ITAAB 2014) states the following in respect of sub-subparagraphs 1i)(i) and 1i)(ii) of Article 3 of the Swiss Convention: In Switzerland, a pension scheme includes any plan, scheme, fund, foundation or trust that is established and regulated in Switzerland and is operated principally to administer or provide pension or retirement benefits or to earn income for the benefit of one or more such schemes. Furthermore, paragraph 1.36 of the EM to the ITAAB 2014 provides the following, in relation to subparagraph 2b) of the Protocol to the Swiss Convention: More specifically, the Swiss Convention is also intended to cover any Swiss pension scheme covered by: • the Federal Act on old age and survivors' insurance, of 20 December 1946; • the Federal Act on disabled persons' insurance, of 19 June 1959; • the Federal Act on supplementary pensions in respect of old age, survivors' and disabled persons' insurance, of 6 October 2006; • the Federal Act on old age, survivors' and disabled persons' insurance payable in respect of employment or self-employment of 25 June 1982, including the non-registered pension schemes which offer occupational pension plans and the forms of individual recognised pension schemes comparable with the occupational pension plans; and • and any identical or substantially similar schemes that are established under legislation introduced after signature of the Swiss Convention. The Fund is a foundation in accordance with Article 80 ff. of the ZGB/CC, Article 331 of the OR/CO and Article 48, paragraph 2 of the OPA/BVG/LPP. The Fund was established in and is domiciled in Switzerland. The Fund's objective is to provide occupational welfare under the terms of the BVG for the employees of the Employer Group. The Fund provides retirement benefits for the protection of its policy holders, and for their families and survivors, against the economic consequences of retirement through age and the risks of death and disability. In respect of paragraphs 1.35 and 1.36 of the EM to the ITAAB 2014, given The Fund is a foundation established in Switzerland pursuant to the deed of foundation and OPA/BVG/LPP, and operates principally to provide pension related benefits, The Fund satisfies the definition of a 'pension scheme' under the Swiss Convention. This view is supported by the Certificate of Residence provided by The Fund from the Swiss tax authorities. As such, pursuant to sub-subparagraph 3a)(i) of the Protocol to the Swiss Convention, The Fund is a resident of a Contracting State. | Detailed Reasoning - Conclusion on the application of the Swiss Convention: The Fund meets the requirements of Article 1 of the Swiss Convention and is therefore subject to its application. | Detailed Reasoning - Swiss Convention - application to taxes: Paragraphs 1 and 2 of Article 2 of the Swiss Convention, in respect to taxes covered, provides the following: 1. This Convention shall apply to taxes on income imposed on behalf of a Contracting State and, in the case of Switzerland, on behalf of its political subdivisions or local authorities, irrespective of the manner in which they are levied. 2. There shall be regarded as taxes on income all taxes imposed on total income or on elements of income, including taxes on gains from the alienation of movable or immovable property, taxes on the total amounts of wages or salaries paid by enterprises, as well as taxes on capital appreciation. In addition, subparagraph 3a) of Article 2 of the Swiss Convention provides the following: The existing taxes to which this Convention shall apply are in particular: a) in Australia: the income tax, the fringe benefits tax and resource rent taxes imposed under the federal law of Australia; (hereinafter referred to as "Australian tax"); Based upon the above, the Swiss Convention applies to all taxes imposed on income and in particular applies to Australian income tax. Section 128B of the ITAA 1936imposes liability to withholding tax on dividend, interest and royalty income derived by non-residents. As such, withholding tax payable in respect to dividends to non-residents is considered to be an Australian income tax and is covered by the Swiss Convention. | Detailed Reasoning - Dividend income: Article 10 of the Swiss Convention is the relevant article in relation to dividend income. The article states relevantly: a) 5 per cent of the gross amount of the dividends if the beneficial owner is a company which, in the case of Australia, holds directly at least 10 per cent of the voting power in the company paying the dividends, or in the case of Switzerland, holds directly at least 10 per cent of the capital in the company paying the dividends; b) 15 per cent of the gross amount of the dividends in all other cases. a) A Contracting State, or political subdivision or a local authority thereof (including a government investment fund); b) a central bank of a Contracting State; c) in the case of Australia, a resident of Australia deriving such dividends from the carrying on of complying superannuation activities; or d) in the case of Switzerland, a pension scheme whose investment income is exempt from Swiss tax. For subparagraph 4d) of Article 10 of the Swiss Convention to apply to The Fund, to the effect that the dividend income shall not be taxed in Australia, it must satisfy each of the following: • There are dividends that are paid by companies that are residents of Australia. • The Fund is the beneficial owner of the dividends. • The Fund holds directly no more than 10 per cent of the voting power in the companies paying the dividends. • The Fund is a pension scheme and its investment income is exempt from Swiss tax. | Detailed Reasoning - There are dividends that are paid by companies that are residents of Australia: Sub-Fund A holds shares in Australian resident companies which pay dividends in relation to those investments. Therefore, there are dividends that are paid by companies that are residents of Australia from the investments held by The Fund through FCP and Sub-Fund A. | Detailed Reasoning - The beneficial owner of the dividends: The term 'beneficial owner' is not defined in the Swiss Convention. Paragraph 2 of Article 3 of the Swiss Convention provides the following: As regards the application of the Convention at any time by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning that it has at that time under the law of that State for the purposes of the taxes to which the Convention applies, any meaning under the applicable tax laws of that State prevailing over a meaning given to the term under other laws of that State. As such, the definition of the term 'beneficial owner' in relation to dividends derived from an Australian source shall be guided by the context of its use in the Swiss Convention or, without such context, by the laws of Australia for the purposes of taxation. Additionally, paragraphs 1.41, 1.42 and 1.43 of the EM to the ITAAB 2014 provide the following, in respect of paragraph 2 of Article 3 of the Swiss Convention: 1.41. Unless the context requires otherwise, a term not specifically defined in the Swiss Convention will have the same meaning that it has under the law of the country applying the Convention at the time of its application. In that case, the meaning of the term under the taxation law of that country will have precedence over the meaning it may have under other domestic laws. 1.42. The same term may have a differing meaning and a varied scope within different Acts relating to specific taxation measures. For example, GST definitions are sometimes broader than income tax definitions. The definition more specific to the type of tax should be applied in such cases. For example, where the matter subject to interpretation is an income tax matter, but definitions exist in either the ITAA 1936 or the ITAA 1997 and the A New Tax System (Goods and Services Tax) Act 1999 , the income tax definition would be the relevant definition to be applied. 1.43. If a term is not defined in the Convention, but has an internationally understood meaning in tax treaties and a meaning under the domestic law, the context would normally require that the international meaning be applied. ATO Interpretive Decision ATO ID 2011/13 Income Tax Interest withholding tax: interest arising in Australia paid to a New Zealand Limited Partnership - 'beneficially owned' (ATO ID 2011/13)provides guidance in relation to the use of relevant context for interpreting Australian tax treaties and is therefore instructive in considering the application of paragraph 2 of Article 3 of the Swiss Convention. ATO ID 2011/13 states the following: Relevant context for the purposes of interpreting an Australian tax treaty includes the Commentaries on the OECD Model Tax Convention on Income and on Capital (the OECD Commentary). Paragraph 104 of Taxation Ruling TR 2001 / 13 states that the OECD Commentary provides important guidance on interpretation and application of the OECD Model Tax Convention and will often need to be considered as a matter of practice, in interpreting tax treaties, at least where the wording is ambiguous. Paragraph 12.1 of the 2017 OECD Commentary on Article 10 of the Model Tax Convention (OECD Commentaries) states: ... The term "beneficial owner" is therefore not used in a narrow technical sense (such as the meaning it has under the trust law of many common law countries), rather, it should be understood in its context, in particular in relation to the words "paid ... to a resident", and in light of the object and purposes of the Convention, including avoiding double taxation and the prevention of fiscal evasion and avoidance. The OECD Commentaries provide an example of using the term 'beneficial owner' in a narrow technical sense in a footnote to paragraph 12.1 regarding a 'meaning it has under the trust law of many common law countries': ... where the trustees of a discretionary trust do not distribute dividends earned during a given period, these trustees, acting in their capacity as such (or the trust, if recognised as a separate taxpayer), could constitute the beneficial owners of such income for the purposes of Article 10 even if they are not the beneficial owners under the relevant trust law. Therefore, the term 'beneficial owner' should be used in a purposive sense in light of the operation of the Swiss Convention. Paragraph 12.4 of the OECD Commentaries informs that the 'beneficial owner' can be found through identifying the entity which has the unconstrained right to use and enjoy the dividend income: ... Where the recipient of a dividend does have the right to use and enjoy the dividend unconstrained by a contractual or legal obligation to pass on the payment received to another person, the recipient is the "beneficial owner" of that dividend. It should also be noted that Article 10 refers to the beneficial owner of a dividend as opposed to the owner of the shares, which may be different in some cases. Further, the OECD Commentaries at paragraphs 12.2 to 12.3 provides examples of situations where agents, nominees, and conduit companies acting as a fiduciary or administrator on account of the interested parties would not be the 'beneficial owner' of the income despite being the direct recipient of the income. In particular, paragraph 12.4 states: In these various examples (agent, nominee, conduit company acting as a fiduciary or administrator), the direct recipient of the dividend is not the "beneficial owner" because that recipient's right to use and enjoy the dividend is constrained by a contractual obligation to pass on the payment received to another person. In terms of Australian tax, ATO Interpretive Decision ATO ID 2008/61 Income Tax: Withholding Tax Exemption: interest and dividends paid by an Australian resident and received by a Dutch Stichting as unitholder in an Irish Common Contractual Fund (ATO ID 2008/61) is relevant. ATO ID 2008/61 provides that, in respect of the particular arrangement in that decision, the relationship between the manager, custodian and the unitholder constitute a trust relationship. ATO ID 2008/61 refers to French J in Harmer & Ors v. FC of T 89 ATC 5180; (1989) 20 ATR 1461 who stated that a trust 'is notably a definition of a relationship by reference to obligations'. Further, ATO ID 2008/61 provides the following: His Honour went on to state that the four essential elements of a trust are: 1. the trustee who holds a legal or equitable interest in the trust property 2. the trust property which must be property capable of being held on trust and which includes a chose in action 3. one or more beneficiaries other than the trustee, and 4. a personal obligation on the trustee to deal with the trust property for the benefit of the beneficiaries, which obligation is also annexed to the property. ATO ID 2008/61 states the following: All four elements of a trust are present in the relationship between the manager, custodian and the unitholder of the CCF. The manager of the CCF, and in some cases the custodian, holds legal title to the assets of the CCF. The assets are not held by the manager and the custodian for their own benefit, but rather the deed obliges the manager and custodian to deal with the assets of the CCF on behalf of and in the best interests of the unitholder in the CCF. Accordingly, both the manager and the custodian are acting in a trustee capacity with respect to the assets of the CCF, being the trust property which initially arose from the unitholder's contributions to the CCF. A unitholder is beneficially entitled to a proportion of the underlying assets of the CCF in accordance with their unit holding ... In applying these principles to The Fund, FCP and its Sub-Funds, • The FMC as manager holds legal title to the assets. • The Custodian acts to safeguard the assets. • The assets are not held by the FMC or Custodian for their own benefit, but they act for the interests of The Fund, which is the only unitholder of FCP and its Sub-Funds. • The Fund is beneficially entitled to the income of FCP and its Sub-Funds. Based upon the above rights and obligations, a trust relationship exists between The Fund, FCP, FMC and Custodian. The trust relationship outlined above has the same characteristics as the examples provided in the OECD Commentaries at paragraph 12.4, being that FMC, or in some cases Custodian, is the direct recipient of the dividend income paid by Australian residents, and the right to use and enjoy the dividend income is constrained by the contractual obligations of the FCP to hold the payment for the sole benefit of, and distribute it to, The Fund as the only unit holder in the Sub-Funds of FCP. Therefore, The Fund is considered to be the 'beneficial owner' of the dividend income received by FMC or Custodian. This is further supported by the Swiss tax treatment of The Fund and the income arising through FCP and its Sub-Funds. FCP and its Sub-Funds are not subject to Swiss income tax and are fiscally transparent. The income of the relevant Sub-Funds is considered to be the income of The Fund as the sole investor in FCP. As such, it can be concluded that The Fund is the beneficial owner of the dividends paid from Australia to FCP for the purposes of the Swiss Convention. | Detailed Reasoning - The Fund holds directly no more than 10 per cent of the voting power in the companies paying the dividends: The Fundholds directly no more than 10 per cent of the voting power in the Australian resident companies paying dividends from the investments held through FCP and Sub-Fund A. Based upon the above, this condition is satisfied. | Detailed Reasoning - Pension scheme and investment income is exempt from Swiss tax: As established above, The Fundis a pension scheme, pursuant to the Swiss Convention, and is exempt from tax in Switzerland. Therefore, this condition is satisfied. | Detailed Reasoning - Other paragraphs of Article 10 of the Swiss Convention: Paragraphs 7 and 9 of Article 10 of the Swiss Convention operate to limit the application of subparagraph 4d) of Article 10 of the Swiss Convention in certain circumstances. These paragraphs do not apply for the following reasons: • The Funddoes not carry on a business through a permanent establishment situated in Australia and does not perform independent personal services from a fixed base in Australia. • The Australian resident companies that pay dividends from the investments held through FCP and Sub-Fund A are not dual residents of both Australia and Switzerland, pursuant to paragraph 1 of Article 4 of the Swiss Convention. The Fund also, as determined above, is a resident of Switzerland. | Detailed Reasoning - Conclusion: The Fundis a Swiss pension scheme whose investment income is exempt from Swiss tax. In addition, The Fund is the beneficial owner of dividends paid by Australian resident companies from its investments held through FCP and Sub-Fund A. Furthermore, The Fund holds directly no more than 10 per cent of the voting power in the Australian resident companies paying dividends. Therefore, subparagraph 4d) of Article 10 of the Swiss Convention will apply to the dividends paid to The Fund from its Australian investments held through FCP and Sub-Fund A, such that the dividends shall not be taxed in Australia. | Detailed Reasoning - Question 2: Does subparagraph 3d) of Article 11 of the Swiss Convention apply to the interest income derived by The Fund from its Australian investments held through FCP and its sub-funds, Sub-Fund A, Sub-Fund B and Sub-Fund C, such that the interest shall not be taxed in Australia? | Summary: The Fund is a resident of a Contracting State and is therefore subject to the Swiss Convention. Interest paid in relation to the Australian investments held by The Fund through FCP and its sub-funds, Sub-Fund A, Sub-Fund B and Sub-Fund C, meets the requirements of subparagraph 3d) of Article 11 of the Swiss Convention and as such, shall not be taxed in Australia. | Detailed Reasoning - Detailed reasoning: A non-resident is liable to pay withholding tax under subsection 128B(5) of the ITAA 1936 if the 'non-resident' derives income that consists of interest and the requirements of subsection 128B(2) of the ITAA 1936 are satisfied in relation to that income. Subsection 128B(2) of the ITAA 1936 provides that: Subject to subsection (3), this section... applies to income that: (a) is derived... by a non-resident; and (b) consists of interest that: (i) is paid to the non-resident.... However, in determining liability to Australian tax on Australian source income derived by a non-resident, it is necessary to consider not only the income tax laws but also any applicable Convention or Double Taxation Agreement contained in the Agreements Act. Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Withholding tax payable in respect of interest paid to non-residents, is considered to be an Australian income tax that is covered by the Swiss Convention. As such, consideration of the Swiss Convention is outlined below. | Detailed Reasoning - Swiss Convention - application to the Fund: As determined above, The Fund is a person and a pension scheme established in Switzerland. As such, pursuant to sub-subparagraph 3a)(i) of the Protocol to the Swiss Convention, The Fund is a resident of a Contracting State. Furthermore, The Fund meets the requirements of Article 1 of the Swiss Convention and is therefore subject to its application. | Detailed Reasoning - Swiss Convention - application to taxes: Paragraphs 1 and 2 of Article 2 of the Swiss Convention, in respect to taxes covered, provides the following: 1. This Convention shall apply to taxes on income imposed on behalf of a Contracting State and, in the case of Switzerland, on behalf of its political subdivisions or local authorities, irrespective of the manner in which they are levied. 2. There shall be regarded as taxes on income all taxes imposed on total income or on elements of income, including taxes on gains from the alienation of movable or immovable property, taxes on the total amounts of wages or salaries paid by enterprises, as well as taxes on capital appreciation. In addition, subparagraph 3a) of Article 2 of the Swiss Convention provides the following: The existing taxes to which this Convention shall apply are in particular: a) in Australia: the income tax, the fringe benefits tax and resource rent taxes imposed under the federal law of Australia; (hereinafter referred to as "Australian tax"); Based upon the above, the Swiss Convention applies to all taxes imposed on income and in particular, applies to Australian income tax. Section 128B of the ITAA 1936imposes liability to withholding tax on dividend, interest and royalty income derived by non-residents. As such, withholding tax payable in respect to interest to non-residents is an Australian income tax and is covered by the Swiss Convention. | Detailed Reasoning - Interest income: Article 11 of the Swiss Convention is the relevant article in relation to interest income. The article states the following: ... (d) in the case of Switzerland, a pension scheme whose investment income is exempt from Swiss tax. For subparagraph 3d) of Article 11 of the Swiss Convention to apply to The Fund, such that the interest income shall not be taxed in Australia, it must satisfy each of the following: • There is interest that arises in Australia. • The Fund derives and is the beneficial owner of the interest. • The Fund is a resident of Switzerland. • The Fund is a pension scheme and its investment income is exempt from Swiss tax. | Detailed Reasoning - Interest that arises in Australia: Interest income arises from the Australian investments held by The Fund through FCP and its sub-funds, Sub-Fund A, Sub-Fund B and Sub-Fund C. Additionally, all interest income arising from the Australian investments is paid by Australian residents for the purposes of Australian tax, and all such income is not connected to a permanent establishment or a fixed base situated outside Australia. Accordingly, pursuant to paragraph 7 of Article 11 of the Swiss Convention, interest income arises in Australia. Therefore, interest arises in Australia from the Australian investments held by The Fund through FCP and its sub-funds, Sub-Fund A, Sub-Fund B and Sub-Fund C, in accordance with subparagraph 3d) of Article 11 of the Swiss Convention. | Detailed Reasoning - The beneficial owner of the interest and derives the interest: For the purposes of the Swiss Convention, the OECD Commentaries on the term 'beneficial owner' used in Article 11 at paragraphs 9.1-10.1 largely mimic the commentaries on Article 10. Therefore, for the same reasons as previously outlined, The Fund is the beneficial owner of the interest income received by FMC or Custodian under the FCP and its Sub-Funds. The term 'derive' is not defined in the Swiss Convention or the OECD Commentaries; as outlined above, paragraph 2 of Article 3 of the Swiss Convention states that where a term is not defined, interpretation shall be guided by the context of its use in the Swiss Convention or, without such context, by the laws of Australia for the purposes of taxation. Under Australian taxation law, where interest income is initially received by a manager and/or custodian prior to it being paid to the beneficial owner, the beneficial owner will be deemed to have derived the income at the time it became presently entitled to the income where a trust relationship exists. As established above, a trust relationship exists between The Fund, FCP, FMC and Custodian under the FCP Fund Contract. Under the terms of the FCP Fund Contract, the net income of the Sub-Funds will be distributed to The Fund annually. This is the point at which The Fund becomes presently entitled to and has derived the interest income. This is therefore also sufficient to establish, for the purposes of the Swiss Convention, that The Fund has derived the interest income. Therefore, The Fund is the beneficial owner of the interest income and will be considered to derive the interest income for the purposes of Article 11 of the Swiss Convention. | Detailed Reasoning - Resident of Switzerland: As determined above, The Fund is a resident of Switzerland as it satisfies the definition of a 'resident of a Contracting State' and was established in Switzerland. | Detailed Reasoning - Pension scheme and investment income is exempt from Swiss tax: As determined above, The Fund is a pension scheme pursuant to the Swiss Convention and is exempt from tax in Switzerland. | Detailed Reasoning - Other paragraphs of Article 11 of the Swiss Convention: Paragraphs 4, 6, 7 and 8 of Article 11 of the Swiss Convention operate to limit the application of subparagraph 3d) of Article 11 of the Swiss Convention in certain circumstances. These include where: a) the member of a Contracting State is operating through a permanent establishment whether or not that permanent establishment is situated in that other contracting state (paragraphs 6 and 7 of Article 11 of the Swiss Convention). The Fund does not operate through or have any permanent establishments, within the meaning of Article 5 of the Swiss Convention, in Australia through which its investments are made or managed. b) the beneficial owner of the interest participates in the management, control or decision-making of the issuer of the debt-claim (paragraph 4 of Article 11 of the Swiss Convention). The Fund, being the beneficial owner of the interest, does not and will not participate in the management, control or decision-making of any of the entities from which it derives interest income. c) there exists a special relationship between the payer and the person beneficially entitled to the interest which results in the amount being paid exceeding the amount that would otherwise have been expected to have been paid had such a special relationship not been in existence (paragraph 8 of Article 11 of the Swiss Convention). In the present circumstances, the Australian payers with respect to The Fund's Australian investments have no special relationship with The Fund. Consequently, the restrictions discussed above will not be applicable in respect of the interest income derived by The Fund on its Australian investments. | Detailed Reasoning - Conclusion: The Fund is a Swiss pension scheme whose investment income is exempt from Swiss tax. In addition, it derives interest income from Australian investments held via FCP and its sub-funds, Sub-Fund A, Sub-Fund B and Sub-Fund C. As none of the restrictions prescribed in paragraphs 4, 6, 7 or 8 of Article 11 of the Swiss Convention apply to The Fund, subparagraph 3d) of Article 11 of the Swiss Convention will apply to the interest paid to The Fund from the Australian investments via FCP and its sub-funds, Sub-Fund A, Sub-Fund B and Sub-Fund C, such that the interest shall not be taxed in Australia.

This ruling applies for the following periods: | Question 1: Does subparagraph 4d) of Article 10 of the Swiss Convention apply to the dividend income derived by The Fund from its Australian investments held through FCP and Sub-Fund A, such that the dividends shall not be taxed in Australia? | Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State. | However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed: | Notwithstanding the provisions of subparagraph 2b), dividends shall not be taxed in the Contracting State of which the company paying the dividends is a resident if the beneficial owner of the dividends holds, in the case of Australia, directly no more than 10 per cent of the voting power in the company paying the dividends, or in the case of Switzerland, directly no more than 10 per cent of the capital of the company paying the dividends, and the beneficial owner is: | Paragraphs 2, 3 and 4 shall not affect the taxation of the company in respect of the profits out of which the dividends are paid. | The provisions of paragraphs 1, 2, 3 and 4 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply. | Notwithstanding paragraph 8, dividends paid by a company that is deemed to be a resident only of one Contracting State pursuant to paragraph 3 of Article 4 may be taxed in the other Contracting State, but only to the extent that the dividends are paid out of profits arising in that State. Where such dividends are beneficially owned by a resident of the first-mentioned State, paragraph 2 of this Article shall apply as if the company paying the dividends were a resident only of the other State. | Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. | However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed 10 per cent of the gross amount of the interest. | Notwithstanding paragraph 2, interest arising in a Contracting State and beneficially owned by a resident of the other Contracting State shall not be taxed in the first-mentioned State if the interest is derived by: