Private ruling: Withholding tax - interest and dividends - double tax convention
Date of advice: 9 October 2020
Published: November 2020
Ruling period: The relevant income years
Date scheme commenced: The relevant start date

Ruling: Q1: Is the Fund exempt from withholding tax on dividends paid by Australian resident companies from equity investments under 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)? | A1: Yes. | Q2: Is the Fund exempt from withholding tax on interest paid on Australian debt investments under subparagraph 3d) of Article 11 of theSwiss Convention? | A2: Yes .

Relevant facts and circumstances: The Fund The Fund is a public pension. It was established in Switzerland. It is an independent public-law institution. The Fund is a tax resident of Switzerland. The Fund is managed as a collective institution. It insures the staff of the insured employers within the framework of the 2nd pillar. The main purpose of the Fund is to provide occupational benefits for employees. Administration of the Fund The Fund has been governed by the Federal Act on Occupational Old-Age, Survivors and Disability Pension Plans (BVG), the Federal Act on Freedom of Movement in Occupational Old-Age, Survivors' and Disability Pension Plans (Vested Benefits Act, FZG) and the associated ordinances. The legal basis also includes the regulations of the Fund as well as each employer's pension regulations. The Fund is made up of a large number of pension funds. Each employer has its own pension regulations for its employees and pensioners. The administrative organs of the Fund are appointed in accordance with the above law and the powers set out in the Fund's internal by-laws: § The highest management body of the Fund is the Board of Directors. § The day-to-day operations are managed by the management. § The Assembly of Delegates (DV) is made up of people from the various groups of insured persons and usually has its regular meeting once a year. The DV advises the affairs of the Fund and accepts requests and applications from the insured. § Controlling bodies include the auditor and expert in occupational pensions. The Fund has confirmed that: § it has no employees or representatives in Australia, and § all members of the Board, management, DV and bodies are residents of Switzerland. The Fund's central management and control is carried on outside Australia by entities none of whom is an Australian resident. The legislation and the Fund's internal by-laws do not mandate that the Fund has a specified end date and there is no contemplation of the Fund being terminated. The Fund has confirmed that it is an indefinitely continuing fund. Benefits provided The Swiss pension system rests on three pillars: § the state-run pension scheme for the aged, orphans, and surviving spouses § the pension funds run by investment foundations, which are tied to employers § voluntary, private investments. The occupational pension scheme, more often referred to as "the 2 nd pillar", is a funded pension plan. It is compulsory for employees and is financed by both employees and employers. The sum of the contributions of the employer should be at least equal to the sum of the contributions of his employees. According to article 113 of the Swiss federal Constitution, "the occupational pension scheme, together with the Old-age, Survivors' and Invalidity Insurance, enables the insured person to maintain his or her previous lifestyle in an appropriate manner". The second pillar offers old age pensions. Some of the pension funds also provide benefits in case of disability and to the next of kin in case of premature death. The funds in the second pillar can be used before retirement to buy a principal home, to start an independent activity, or when leaving Switzerland permanently. When changing employment, funds are transferred to the pension fund of the new employer. When unemployed, the funds are transferred into a savings account. When the person resumes working, the savings can be transferred into the pension fund of the new employer. The federal law on occupational old-age, survivors' and disability benefits defines minimum benefits for old age, death and disability. The pension institutions are free to go beyond the minimum required by law. The Fund generally grants such extra-mandatory benefits. The insured has an entitlement to benefits under: § Retirement and old age pension § Lump-sum withdrawal upon retirement § Disability § Survivor's benefits. Ordinary retirement age is usually 65 years for men and 64 for women. Early retirement is possible from 58 at the earliest. Retirement can be postponed up to the age of 70 at the latest. The Fund does not provide benefits as a result of events other than old age retirement, disability or death. Funding The benefits provided by the Fund are funded by employee and employer contributions and investment earnings including income from the Fund's Australian investments. The amount of the contributions depends on the pension plan. The employer pays at least the same contributions as his employees. The Fund's current Australian investments The Fund has made investments in Australia. The Fund intends to make further investment in Australia that may take the form of debt and equity interests. The Fund does not intend to participate in the management, control or decision making for these further investments nor intends to have a 'special relationship' with those payers that may amount to having control or being actively involved in the management of those investments.


Reasons for decision: 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 the taxpayer 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 (the 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). 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 public law institution whose purpose is to operate different types of pension benefit schemes on behalf of insured employers. Its purpose is to provide occupational benefits for employees and for their relatives and survivors against the economic consequences of old age, disability and death. The Fund 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 was established in Switzerland and exists as a pension scheme. In respect of paragraphs 1.35 and 1.36 of the EM to the ITAAB 2014, given the Fund is a pension fund established in Switzerland pursuant to the BVG, the Fund satisfies the definition of a 'pension scheme' under the Swiss Convention. For completeness, the Fund is exempt from tax in Switzerland. As a result, due to it being not liable to pay tax in Switzerland, prima facie , the Fund does not satisfy paragraph 1 of Article 4 of the Swiss Convention to be defined as a 'resident of a Contracting State'. However, as determined above, the Fund is deemed to be 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 Switzerland for the purposes of the Swiss Convention. | Detailed Reasoning - Conclusion: 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 of 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 provision in relation to dividend income. The provision states relevantly: 1. 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. 2. 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: 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. 3. .... 4. 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: 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. 5. 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. 6. .... 7. 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. 8. .... 9. 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. For subparagraph 4d) of Article 10 of the Swiss Convention to apply to the Fund, to provide an exemption from withholding tax on dividends, it must satisfy the following: § there are dividends that are paid by companies that are residents of Australia, § the Fund derives and 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, and § 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 shares. Therefore, there are dividends that are paid by companies that are residents of Australia from the investments held by the Fund. | Detailed Reasoning - The beneficial owner of the dividends: The term 'beneficial owner' is not defined under 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 interest 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. The OECD Model Tax Convention on Income and on Capital (the OECD Commentary will often need to be considered as a matter of practice, in interpreting tax treaties. Paragraph 12 of the 2010 OECD Commentary on Article 11 of the Model Tax Convention states: ... The term 'beneficial owner' is not used in a narrow technical sense, rather, it should be understood in its context and in light of the object and purposes of the Convention, including avoiding double taxation and the prevention of fiscal evasion and avoidance. Therefore, the term 'beneficial owner' should be used in a purposive sense in light of the operation of the Swiss Convention. Due to the purposive meaning to be given to 'beneficial owner' made apparent by the OECD Model Tax Convention, it is considered that BLPK derives the income and is the beneficial owner of the dividends 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 Fund holds directly no more than 10 per cent of the voting power in the Australian resident companies paying dividends from the investments held. Based upon the above, this condition is satisfied. | Detailed Reasoning - Pension scheme and investment income is exempt from Swiss tax: As established 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 10 of the Swiss Convention: Paragraphs 7 and 9 of Article 10 of the Swiss Convention affect the exemption to withholding tax on dividends under subparagraph 4d) of Article 10 of the Swiss Convention. These provisions do not apply to the Fund pursuant to the following: § 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 Australian resident companies that pay dividends from the investments 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 fund is 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. 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 operate to exempt the Fund from withholding tax on dividends paid by Australian resident companies from the investments held. | Detailed Reasoning - Question 2: Is the Fund exempt from withholding tax on interest paid on Australian debt investments under subparagraph 3d) of Article 11 of theSwiss Convention? | 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 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). Consideration of the Swiss Convention is outlined below. | Detailed Reasoning - Swiss Convention - application to the Fund: As determined above, the Fund is deemed to be 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 for the purposes of the Swiss Convention. 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 considered to be an Australian income tax and is covered by the Swiss Convention. | Detailed Reasoning - Interest income: Article 11 of the Swiss Convention is the relevant provision in relation to interest income. The provision states the following: 1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2. 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. 3. 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: ... (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, in respect of an exemption from withholding tax on interest income, it must satisfy the following: § there is interest that arises in Australia § the Fund is the beneficial owner of the interest § the Fund is a resident of Switzerland, and § 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. 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 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 Fund will be the beneficial owner of the interest and will be considered to derive the interest. | 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. 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: The Fund does not meet any of the restrictions on the availability of the exemptions regarding its investments under Article 11, which 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 issuers of the debt instruments upon 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 investments that the Fund has invested in are such that the payer has no special relationship with the Fund. Consequently, the restrictions, prescribed in the Swiss Convention, to the availability of the exemptions from income and withholding tax on interest income 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. As 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.

Other relevant facts: The Fund was established, and is maintained, to provide benefits for individuals who are not Australian residents. | The Fund is not a resident of Australia for tax purposes. | The Fund will receive interest income along with dividend and non-share dividend income from companies who are residents of Australia for tax purposes. | The Fund is exempt from Switzerland income tax on its interest and dividend income. | The Fund has not and cannot deduct amounts under either the Income Tax Assessment Act 1997 (ITAA1997) or the Income Tax Assessment Act 1997 ( ITAA 1936) for amounts paid to it. | The Fund has not been allowed a tax offset or a tax offset is not allowable for an amount that has been paid to it. | The income of the Fund is not non-assessable non-exempt income because of either Subdivision 880-C of the ITAA 1997 or Division 880 of the Income Tax (Transitional Provisions) Act 1997 . | Question 1: Is the Fund exempt from withholding tax on dividends paid by Australian resident companies from equity investments under subparagraph 4d) of Article 10 of the Swiss Convention?