Generally, foreign pension funds that are eligible for Australian withholding tax exemptions apply for a private binding ruling from the Australian Taxation Office (ATO) to confirm their eligibility for such withholding tax exemptions. These private binding ruling are generally valid for five years provided that there are no material variations in the relevant circumstances or facts during the five year period.
Under Australian domestic law, eligible foreign pension funds deriving Australian source interest and dividend income are eligible for Australian withholding tax exemptions. The Australian government introduced new laws in early 2019 to amend the rules in respect of Australian withholding tax exemptions for foreign pension funds.
Effective from 1 July 2019, the Australian withholding tax exemptions that apply in respect of payments of interest, unfranked dividends (i.e. dividends that are paid out of untaxed profits), or non-share dividends (i.e. returns on non-share equity interests) from an Australian entity to foreign pension funds are limited to circumstances where the foreign pension funds hold an ownership interest of less than 10 per cent and have no influence or control rights in respect of the entity making the payments.
A seven-year transitional rule is available for investment assets held by the foreign pension fund (either directly or through an interposed Australian trust) on or before 27 March 2018. Under the transitional rule, the new rules only apply to payments of interest, unfranked dividends or non-share dividends from those investment assets from 1 July 2026.
It is important to note that the above Australian domestic law exemption applies in addition to the withholding tax exemption that is available to certain Swiss pension schemes under the Switzerland / Australia tax treaty.
Swiss pension funds which derives Australian source interest and/or dividend income should consider the impact of the new rules on their structures and determine whether they are eligible for the Australian withholding tax exemption. If you do not currently have a private binding ruling from the ATO to confirm your eligibility for the withholding tax exemption (either under Australian domestic law or the tax treaty), we strongly recommend that one is obtained.
Swiss pension funds which have benefitted from the withholding exemptions under an existing private binding ruling issued by the ATO should also consider the impact of the new rules on their current circumstances. Where the private binding rulings (which generally apply for a five year period) have expired, the foreign pension funds should apply for new private binding rulings under the new rules.
Deloitte can help Swiss pension funds to apply for private binding rulings in relation to Australian withholding tax exemption, under either Australian domestic law or the tax treaty, and can also help to liaise with the ATO to obtain withholding tax refunds (where applicable).
Should you need any assistance, please do not hesitate to contact one of our key contacts below.
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