Private ruling: Dividend withholding tax
Date of advice: 25 September 2025
Published: 24 November 2025
Ruling period: Year ending 31 December 20XX

Ruling: Q1: Is Company A eligible to apply a zero rate of dividend withholding tax pursuant to Article XX of the tax treaty between Australia and Country A (the Convention), in respect of the Dividend Payment to Company B. which is both its immediate and ultimate parent company? | A1: Yes



Reasons for decision: Summary: Article YY of the Convention provides that dividends will not be taxed where certain criteria are met. Based on the information provided, Company B is a company resident in Country A for tax purposes and will be the beneficial owner of the proposed dividend. Company B has directly held 100% of the shares representing the entire voting power of Company A since XX and will continue to do so when the dividend is paid. Therefore, the first part of the criteria within Article YY is satisfied, and we need to consider the further specific criteria. The principal class of shares of Company B are listed on the Stock Exchange A. Therefore, Company B is a company whose principal class of shares are listed on a recognised stock exchange. However, we also need to consider if Company A's shares are "regularly traded" on the Stock Exchange A. "Regularly traded" is undefined in the Convention therefore we look to the Income Tax Assessments Act 1997 (ITAA 1997) and Income Tax Assessments Act 1936 . However, the meaning of "trading" is defined in section 960-220 of the ITAA 1997 as: Shares in a listed public company There is a trading in *shares in a company if there is an issue, redemption or transfer of those shares, or any other dealing in those shares, but only if it changes the respective proportions in which all the registered holders of shares in the company: (a) can exercise the voting power in the company; or (b) have the right to receive, as registered holders (whether or not for their own benefit) any dividends that the company may pay; or (c) have the right to receive, as registered holders (whether or not for their own benefit) any distribution of capital of the company. The Corporations Act 2001 also has the following definition: "trade", in relation to financial products, in relation to a financial market, includes: (a) make or accept on that financial market an offer to dispose of, acquire or exchange the financial products; and (b) make on that financial market an offer or invitation that is intended, or may reasonably be expected, to result in the making or acceptance of an offer to dispose of, acquire or exchange the financial products. Further the Macquarie dictionary defines 'regular' as 'frequent' and 'recurring at fixed times.' Therefore, the meaning of the phrase "regularly traded" implies a consistent recurrence of offers and acceptances, sale or exchanges of the company's shares on the specified stock exchanges; it is more than a one-off transaction. Given the facts, the Commissioner is satisfied that the shares are regularly traded and this criterion is satisfied. For completeness, based on the facts, we note that paragraph XX of Article YY does not apply to preclude the application of Article YY. Therefore, they satisfy the criteria in Article YY for no withholding on the Dividend Payment.

Company A, an Australian tax resident company, proposes to declare and pay a dividend of YY million to Company B (Dividend Payment), which is both its immediate and ultimate parent company located in Country A. The dividend payment is scheduled for ZZ 2025. | This is part of a broader capital management strategy following Company A's expected receipt of YY million in dividends from its subsidiaries in YY 20XX. | Company A's retained earnings prior to paying the dividend to Company B will be XX million. | Company B is a tax resident of Country A. | Company B has maintained 100% voting power in Company A throughout the 12-month period ending ZZ 20XX. | Company B's principal class of shares are listed on the Stock Exchange A. | There are currently approximately YY million Company B shares and, apart from treasury shares, these are all listed on the Stock Exchange A. | For the year ending XX, the lowest volume traded was YY and highest was ZZ. Every day the Stock Exchange A was open for the year ended XX, shares in YY were traded. The average for the year being approximately ZZ traded per day. | Does IVA apply to this private ruling?: Part IVA of the Income Tax Assessment Act 1936 contains anti-avoidance rules that can apply in certain circumstances where you or another taxpayer obtains a tax benefit, imputation benefit or diverted profits tax benefit in connection with an arrangement. | If Part IVA applies, the tax benefit or imputation benefit can be cancelled (for example, by disallowing a deduction that was otherwise allowable) or you or another taxpayer could be liable to the diverted profits tax. | We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part. | If you want us to rule on whether Part IVA applies, we will need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply. | For more information on Part IVA, go to our website ato.gov.au/gaar .