Private ruling: Exemption from withholding tax
Date of advice: 18 November 2016
Published: March 2017
Ruling period: 1 January 20YY to 31 December 20ZZ
Date scheme commenced: 1 July 20XX

Ruling: Question and answer | Where Entity A invests the official reserve assets of the Country B Government on behalf of and for the benefit of the Retirement Fund, is any interest income generated from investments in Australian financial arrangements exempt from withholding tax? | Yes

Relevant facts and circumstances: Entity A is a Country B statutory body which was established to manage the Country B Government Pension Fund (Retirement Fund). The Retirement Fund in turn is a fund established for the purposes of funding the pension liabilities of the Country B Government. The source of funds of the Retirement Fund is from official reserve assets of the Country B Government. A certificate has been forwarded from the Government of Country B stating: ● The Retirement Fund that is managed and invested by Entity A represents the official reserve assets of the Government of Country B . Entity A is a resident of Country B. Entity A is not a superannuation fund for foreign residents for the purposes of paragraph 128(3)(b) of the Income Tax Assessment Act 1936 (ITAA1936). Entity A does not have a permanent establishment in Australia.

Relevant legislative provisions: International Agreements Act 1953

Reasons for decision: Summary: The International Agreements Act 1953 gives domestic legal effect to the various double tax agreements Australia has with other counties. The Country B Agreement is located on the Austlii website (www.austlii.edu.au) in the Australian Treaties Series database. The Country B Agreement operates to avoid the double taxation of income received by residents of Australia and Country B. An Article of the Country B Agreement states: Notwithstanding the provisions of paragraph 2, interest derived from the investment of official reserve assets by the Government of a Contracting State or by a bank performing central banking functions in a Contracting State shall be exempt from tax in the other Contracting State. Entity A is a statutorily established agency of the Country B Government whose function is to administer and manage the Retirement Fund. The Retirement Fund in turn is a fund established for the purposes of funding the pension liabilities of the Country B Federal Government. The source of funds of the Retirement Fund is from official reserve assets of the Country B Government. A certificate has been forwarded from the Government of Country B stating: The Retirement Fund that is managed and invested by Entity A represents the official reserve assets of the Government of Country B . Consequently the exemption in the relevant Article of the Country B Agreement will apply and Entity A is exempt from tax on interest derived from Australian investments.