Document ID: chunk:federal_register_of_legislation:C2004A01208:clause:1_4:p15
Version: federal_register_of_legislation:C2004A01208
Segment Type: clause
Provision Reference: sch 1 cl 4 (pt 15/22)
Character Range: 69725–72616

its compliments to the British High Commission to Australia and has the honour to refer to the Convention between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of Australia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital Gains which has been signed today (the "Convention").
The Department has the honour to make the following proposals on behalf of the Government of Australia:

1. With reference generally to the application of the Convention (including these Notes),

the Contracting States agree that:

   (a) the term "income or gains" includes "profits";

   (b) the term "laws" includes the full body of law, and is not limited to statutory law;

   (c) the terms "paid or credited" and "payments or credits" shall not include the recording of internal transactions between a permanent establishment and another part of the same enterprise;

   (d) the expression "any provision of the laws of a Contracting State which is designed to prevent the avoidance or evasion of taxes" includes:

       (i) measures designed to address thin capitalisation, dividend stripping and transfer pricing;

       (ii) controlled foreign company, transferor trust and foreign investment fund rules;

       (iii) measures designed to ensure that taxes can be effectively recovered (conservancy measures); and

   (e) nothing in the Convention shall be construed as restricting, in any manner, the application of any provision of the laws of a Contracting State which is designed to prevent the avoidance or evasion of taxes.

2. With reference to Article 5 (Permanent establishment),

the Contracting States agree that the term "permanent establishment" fully encompasses the concept of a "fixed base" used in other double tax treaties in the context of independent personal services.

3. With reference to Article 7 (Business profits),

the Contracting States agree that:

   (a) nothing in paragraph 3 of the Article shall permit the deduction of an expense which would not be deductible if the permanent establishment were an independent enterprise which incurred the expense; and

   (b) where:

       (i) a resident of a Contracting State is beneficially entitled, whether directly or through one or more interposed trust estates, to a share of the business profits of an enterprise carried on in the other Contracting State by the trustee of a trust estate other than a trust estate which is treated as a company for tax purposes; and

       (ii) in relation to that enterprise, that trustee would, in accordance with the principles of Article 5, have a permanent establishment in that other State,

    the enterprise carried on by the trustee shall be deemed to be a business carried on in the other State by that resident through a permanent establishment situated in