Commonwealth Numbered Regulations - Explanatory Statements

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INCOME TAX REGULATIONS (AMENDMENT) 1993 NO. 47

STATUTORY RULES 1993 No. 47

Issued by Authority of the Treasurer

INCOME TAX ASSESSMENT ACT 1936

Income Tax Regulations (Amendment)

GENERAL OUTLINE

Purpose of regulations

The purpose of these regulations, which amend the Income Tax Regulations, is to give effect to the proposal to introduce a final withholding tax on royalties received by non-residents. 'Re proposal was announced in the 1992-93 Budget.

The legislation giving effect to the royalty withholding tax, Taxation Laws Amendment Act (No 5) 1992 and Income Tax (Dividends and Interest Withholding Tax) Amendment Act 1992, received Royal Assent on 24 December 1992 and 21 December 1992, respectively.

Matters covered by regulations

The regulations giving effect to the royalty withholding tax cover the deduction of withholding tax from royalties paid to, credited to or otherwise dealt with on behalf of non-residents.

The rate of royalty withholding tax to be deducted is 30% of the gross amount of the royalty, subject to any reduction agreed on a reciprocal basis in a double tax agreement.

DETAILED NOTES ON THE REGULATIONS

Regulations 1 and 2

Regulations 1 and 2 are procedural and simply modify the existing Income Tax Regulations as necessary and incorporate new regulation 137A in those Regulations.

Regulation 137A

Regulation 137A provides for the deduction of royalty withholding tax at the rate of:

(i)       30% of the royalty where the royalty is paid to a resident of a country with which Australia does not have a double tax agreement, or

(ii)       the amount specified in the double tax agreement where the recipient is resident of a country with which Australia has a double tax agreement.

'Double tax agreement', in effect, means a convention or agreement with another country, for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. They are set out as schedules to the Income Tax (International Agreements) Act 1953.