On 13.10.16, the International Tax Agreements Amendment Bill 2016 passed all stages of Parliament and received Royal Assent on 20.10.16 as Act No. 64 of 2016.

The Bill amends the International Tax Agreements Act 1953 to give legislative effect to the Agreement between Australia and the Federal Republic of Germany for the Elimination of Double Taxation with respect to Taxes on Income and on Capital and the Prevention of Fiscal Evasion and Avoidance and its Protocol, signed at Berlin on 12 November 2015; and the International Tax Agreements Act 1953 and Taxation (Interest on Overpayments and Early Payments) Act 1983 to make consequential amendments. It replaces the existing 1972 treaty.

[APH – Bills Digest, Bill & EM] [Related TT Articles April ‘16 & Sept ‘16] [LTN 198, 13/10/16]

Extract from EM

1.3 The German agreement modernises the bilateral tax arrangements between Australia and the Federal Republic of Germany (Germany) for the purpose of eliminating double taxation. It also aims to prevent fiscal evasion and avoidance, through the inclusion of a range of integrity provisions and by enabling the respective tax authorities to exchange taxpayer information and provide mutual assistance to each other in the collection of both countries’ outstanding tax debts. It broadly follows the Organisation for Economic Cooperation and Development (OECD) Model Tax Convention on Income and on Capital (OECD Model) and, in doing so, broadly reflects current Australian and international tax policy settings.

1.6 As a member of both the G20 and the OECD, Australia has committed to the implementation of the OECD/G20 Base Erosion and Profit Shifting Project (the BEPS Project).

1.7 The BEPS Project 2015 Final Reports on:

  • Action 2 (Neutralising the Effects of Hybrid Mismatch Arrangements),
  • Action 6 (Preventing the Granting of Treaty Benefits in Inappropriate Circumstances),
  • Action 7 (Preventing the Artificial Avoidance of Permanent Establishment Status) and
  • Action 14 (Making Dispute Resolution Mechanisms More Effective)

recommended a range of integrity provisions be adopted in bilateral tax treaties to address base erosion and profit shifting practices, as well as other treaty provisions intended to make tax treaty dispute resolution mechanisms more effective. Several of these recommended treaty provisions form part of the new minimum standards on treaty shopping (intended to put an end to the use of conduit companies to channel investments) and effective mutual agreement procedures (intended to ensure that the fight against double non-taxation does not result in double taxation) to which OECD and G20 countries have committed.

1.8 The German agreement includes the treaty provisions which form part of the minimum standards for protecting against treaty shopping (included in the Action 6 2015 Final Report) and ensuring effective mutual agreement procedures (included in the Action 14 2015 Final Report), as well as many of the other treaty provisions recommended in the 2015 Final Reports on Actions 2, 6, 7 and 14.