Private ruling: Double tax agreement - foreign super fund
Date of advice: 2 August 2022
Published: November 2022
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
Date scheme commenced: I July 20XX

Ruling: Q1: Does subparagraph 4d) of Article 10 of the Swiss Convention apply to the dividend income derived by the Fund from its Australian investments that it holds either directly or via a custodian bank such that the dividends shall not be taxed in Australia? | A1: Yes. | Q2: Will subparagraph 3d) of Article 11 of the Swiss Convention apply to the interest income derived by the Fund from Australian investments it holds either directly or via a custodian bank such that the interest shall not be taxed in Australia? | A2: Yes.

Relevant facts and circumstances: The Fund 1. The Fund is a foundation within the meaning 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). 2. The Fund was established in and is domiciled in Switzerland. 3. The Fund's objective is to insure the members and their relatives and survivors against the economic consequences of retirement, disability and death by providing its members with an occupational pension within the framework of the BVG. The Fund also provides additional benefits beyond the statutory minimum, including support benefits in the event of hardship, such as illness, accident, disability or unemployment. 4. The Fund's governing body is the Foundation Board. The Foundation Board administers the Fund in accordance with the relevant legislation and applicable ordinances, the provisions of the Foundation Deed and Pension Regulations and with the instructions of the supervisory authority. 5. The Foundation Board enacts the plan rules which outline the administration of the Fund. 6. All of the Fund's management and investment decisions are undertaken by the Foundation Board and the Fund's executive managers outside of Australia. 7. The Fund is treated as a company for Swiss tax purposes. 8. The Fund is exempt from tax in Switzerland. 9. 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. Investments 10. The Fund holds investment interests in various countries. 11. The Fund holds investment interests in Australia and other countries through portfolios with various banks, including Bank A. 12. At present, the Fund's investment portfolio with Bank A holds investments in Australia, including equity interests in Australian resident companies listed on the Australian Securities Exchange (ASX). This portfolio contains only investments held by Bank A for the Fund. 13. Bank A and other banks act only in a custodial capacity with respect to the Fund's investments. The Fund undertakes investment decisions and decides which investments shall take place. Bank A and other banks are responsible only for portfolio administration and payments. 14. The Fund may hold investments, including Australian investments, for a short period of time or several years. 15. The Fund is entitled to the assets and income of the portfolios held with Bank A and other banks. 16. The Fund beneficially owns its investments in Australia. 17. The Fund holds directly no more than 10 per cent of the voting power in the Australian resident companies paying dividends. Additional information 18. The Fund may purchase additional equity interests in Australian resident companies listed on the ASX which it will either hold directly or via a from which it may derive dividend income. The Fund will never hold more than 10% of the voting power in the Australian resident companies from which it receives dividends. 19. The Fund may make investments in Australia which it will either hold directly or via a custodian from which it may derive interest income. With respect to these investments: a. The Fund will not participate in the management, control or decision-making of any issuers of the instruments from which it derives interest income. b. The Fund will not have a special relationship with those payers who pay the interest on the instruments that the Fund has invested in. c. Interest income arising from the Australian investments will be paid by Australian residents for the purposes of Australian tax, and all such income will not be connected to a permanent establishment or a fixed base situated outside Australia. Assumptions 20. The Australian resident companies that pay dividends from the investments held by the Fund are not dual residents of both Australian 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 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. | Detailed Reasoning - 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. The Fund provides retirement benefits for the protection of members and for their families and survivors against the economic consequences of retirement through age, as well as the risks of death and disability. The Fund also provides additional benefits beyond the statutory minimum, including support benefits in the event of hardship, such as illness, accident, disability, or unemployment. 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 Foundation Deed 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 is further 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 paid to non-residents is 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 paid by an Australian resident to it 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: The Fund holds shares in Australian resident companies which pay dividends in relation to those investments. This requirement is satisfied. | 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. The Fund holds its Australian shares through portfolios with various banks, such as Bank A, which act in a custodial capacity. Whilst the transactions are facilitated by Bank A and other intermediary banks, the Fund is ultimately entitled to the assets and income of the portfolios held with such financial institutions. The Fund is the beneficial owner of the Australian investments. Therefore, whilst the custodian bank is the direct recipient of the dividend income paid by Australian resident companies, it is the Fund which possesses the unconstrained right to use and enjoy such income. The custodian bank is under a contractual obligation to 'pass on' the payment to the Fund. Therefore, the Fund is the 'beneficial owner' of the dividend income received from Australian resident companies. | 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 it dividends. Its existing holdings in Australian resident companies are substantially less than 10%. 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 provisions 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 by the Fund 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: As the Fund is a Swiss pension scheme that holds less than 10 per cent of the voting power in Australian resident companies from whom it receives dividends, subparagraph 4d) of Article 10 of the Swiss Convention will apply to the dividends paid to the Fund from its Australian investments, such that the dividends shall not be taxed in Australia. | Detailed Reasoning - Question 2: Will subparagraph 3d) of Article 11 of the Swiss Convention apply to the interest income derived by the Fund from Australian investments it holds either directly or via a custodian bank 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 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 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. Pursuant to sub-subparagraph 3a)(i) of the Protocol to the Swiss Convention, the Fund is a resident of a Contracting State. 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 on 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 paid from Australia 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: The Fund holds numerous portfolios through various intermediary banks. The composition of such portfolios is fluid and therefore interest income may arise from Australian investments acquired by the Fund in the future. The Fund will satisfy this element of subparagraph 3d) of Article 11 of the Swiss Convention in relation to prospective interest income provided that it is paid by Australian resident companies for the purposes of Australian tax and all such income is not connected to a permanent establishment or fixed base outside Australia. | 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. As outlined above, the Fund holds investment interests through portfolios with various banks which act in a custodial capacity. Whilst the transactions are facilitated by Credit Suisse and other intermediary banks, the Fund is ultimately entitled to the assets and income of the portfolios held with such financial institutions. Therefore, the Fund will be the 'beneficial owner' of any interest income from the Australian investments paid to the portfolios, where they are acquired directly or via a custodian bank. 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. Where the Fund receives interest income from Australian investments it holds directly, it will have derived the interest income for the purposes of Article 11. Where the Fund receives the interest income from a custodian that holds the Fund's Australian investment assets on its behalf, as the beneficiary of the custodial relationship, it will be treated as having derived the relevant income for treaty purposes. As such, the Fund will satisfy these requirements. | Detailed Reasoning - Resident of Switzerland: As determined above, the Fund is a resident of Switzerland and therefore 'a resident of a Contracting State.' | 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 provisions 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. For the Fund to be afforded the benefit of subparagraph 3d), it must not, and will not: a) Operate 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); b) As the beneficial owner of the interest, participate in the management, control or decision-making of the issuer of the debt-claim (paragraph 4 of Article 11 of the Swiss Convention). c) Enjoy a special relationship with the payer 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). | Detailed Reasoning - Conclusion: Provided none of the restrictions prescribed in the Swiss Convention regarding the availability of the exemptions from tax on interest income apply, subparagraph 3d) of Article 11 of the Swiss Convention will operate to exempt the Fund from withholding tax on interest paid to the Fund from the Australian investments it holds either directly or via a custodian bank.

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: