May 11, 1979 January 1, 1980
AGREEMENT BETWEEN THE
GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES AND THE GOVERNMENT OF AUSTRALIA
FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH
RESPECT TO TAXES ON INCOME
The Government of the Republic of the Philippines and the
Government of Australia,
Desiring to conclude an Agreement for the avoidance of double
taxation and the prevention of Fiscal evasion with respect to taxes on income.
Have agreed as follows:
CHAPTER I
Scope of the Agreement
ARTICLE 1
Personal Scope
(1) This
Agreement shall apply to persons who are residents of one or both of the
Contracting States.
(2) However,
nothing in this Agreement shall prevent the Philippines from taxing its own citizens,
who are not residents of the Philippines, in accordance with Philippine
law.
ARTICLE 2
Taxes Covered
(1) The
existing taxes to which this Agreement shall apply are —
(a) in
the Philippines:
the income taxes imposed by the Government of the Republic of the
Philippines.
(b) in
Australia:
the Australian income tax, including the additional tax upon the
undistributed amount of the distributable income of a private company;
(2) This
Agreement shall also apply to any identical or substantially similar taxes
which are imposed by either Contracting State after the date of signature of
this Agreement in addition to, or in place of, the existing taxes. At the end
of each calendar year, the competent authority of each Contracting State shall
notify the competent authority of the other Contracting State of any
substantial changes which have been made in the laws of his State relating to
the taxes to which this Agreement applies.
CHAPTER II
Definitions
ARTICLE 3
General Definitions
(1) In
this Agreement, unless the context otherwise requires —
(a) the
term "Philippines" means the Republic of the Philippines and when
used in a geographical sense means the national territory comprising the
Republic of the Philippines;
(b) the
term "Australia" means the Commonwealth of Australia and, when used
in a geographical sense, includes —
(i) the
Territory of Norfolk Island;
(ii) the
Territory of Christmas Island;
(iii) the
Territory of Cocos (Keeling) Islands;
(iv) the
Territory of Ashmoro and Cartier Islands;
(v) the
Coral Sea Islands Territory; and
(vi) any
area adjacent to the territorial limits of Australia or of the said Territories
in respect of which there is for the time being in force a law of Australia or
of a State or part of Australia or of a Territory aforesaid dealing with the
exploitation of any of the natural resources of the sea-bed and subsoil of the
continental shelf;
(c) the
terms "Contracting State", "one of the Contracting States"
and "other Contracting State" mean Australia or the Philippines, as
the context requires;
(d) the
term "person" means an individual, an estate, a trust, a company and
any other body of persons;
(e) the
term "company" means any body corporate or any entity which is
treated as a company or a body corporate for tax purposes;
(f) the
terms "enterprise of one of the Contracting States" and
"enterprise of the other Contracting State" mean an enterprise
carried on by a resident of the Philippines or an enterprise carried on by a
resident of Australia, as the context requires;
(g) the
term "tax" means Philippine tax or Australian tax, as the context
requires;
(h) the
term "Philippine tax" means tax imposed by the Philippines, being tax
to which this Agreement applies by virtue of Article 2;
(i) the
term "Australian tax" means tax imposed by Australia, being tax to
which this Agreement applies by virtue of Article 2;
(j) the
term "competent authority" means, in the case of Australia, the
Commissioner of Taxation or his authorized representative, and, in the case of
the Philippines, the Minister of Finance or his authorized
representative;
(k) the
term "international traffic", in relation to the operation of ships
or aircraft by a resident of one of the Contracting States, means operations of
ships or aircraft other than operations of ships or aircraft confined solely to
places in the other Contracting State.
(2) In
this Agreement, the terms "Philippine tax" and "Australian
tax" do not include any penalty or interest imposed under the law of
either Contracting State relating to the taxes to which this Agreement applies
by virtue of Article 2.
(3) For
the purposes of this Agreement, the carriage of passengers, livestock, mail,
goods or merchandise shipped in one of the Contracting States for discharge at
another place in that State shall be treated as operations of ships or aircraft
confined solely to places in that State.
(4) In
the application of this Agreement by a Contracting State, any term not defined
in this Agreement shall, unless the context otherwise requires, have the
meaning which it has under the laws of that Contracting State relating to the
taxes to which this Agreement applies.
ARTICLE 4
Residence
(1) For
the purposes of this Agreement, a person is a resident of one of the
Contracting States —
(a) in
the case of the Philippines —
(i) if
the person is a company or an entity which is incorporated, created or
organized in the Philippines or under its laws and is treated as a body
corporate for purposes of Philippine tax;
(ii) if
the person, not being a company or an entity treated as a company or body
corporate for the purposes of Philippine tax, is a resident of the Philippines
for the purposes of Philippine tax;
(b) in
the case of Australia, subject to paragraph (2), if the person is a resident of
Australia for the purposes of Australian tax.
(2) In
relation to income from sources in the Philippines, a person who is subject to
Australian tax on income which is from sources in Australia shall not be
treated as a resident of Australia unless the income from sources in the
Philippines is subject to Australian tax or, if that income is exempt from
Australian tax, it is so exempt solely because it is subject to Philippine
tax.
(3) Where
by reason of the preceding provisions of this Article an individual is a
resident of both Contracting States, then his status shall be determined in
accordance with the following rules —
(a) he
shall be deemed to be a resident solely of the Contracting State in which he
has a permanent home available to him;
(b) if
he has a permanent home available to him in both Contracting States, or if he
does not have a permanent home available to him in either of them, he shall be
deemed to be a resident solely of the Contracting State with which his personal
and economic relations are the closer.
(4) For
the purposes of the last preceding paragraph, an individual's citizenship of a
Contracting State shall be a factor in determining the degree of his personal
and economic relations with that Contracting State.
(5) Where
by reason of the provisions of paragraph (1), a person other than an individual
is a resident of both Contracting States, then it shall be deemed to be a
resident solely of the Contracting State in which it is incorporated, created
or organized.
ARTICLE 5
Permanent Establishment
1. For
the purposes of this Agreement, the term "permanent establishment"
means a fixed place of business through which the business of an enterprise is
wholly or partly carried on.
2. The
term "permanent establishment" shall include especially —
(a) a
place of management;
(b) a
branch;
(c) an
office;
(d) a
factory;
(e) a
workshop;
(f) a
mine, oil gas well, quarry or other place of extraction of natural resources;
(g) an
agricultural, pastoral or forestry property;
(h) a
building site or construction, installation or assembly project, or supervisory
activities in connection therewith where such site, project or activity
continues for more than six months;
(i) premises
used as a sales outlet;
(j) a
warehouse, in relation to a person providing storage facilities for others;
(k) a
place in one of the Contracting States through which an enterprise of the other
Contracting State furnishes services, including consultancy services, for a
period or periods aggregating more than six months in any taxable year or year
of income, as the case may be, in relation to a particular project, or to any
project connected therewith.
(3) Notwithstanding
the preceding provisions of this Article, an enterprise shall not be deemed to
have a permanent establishment merely by reason of —
(a) the
use of facilities solely for the purpose of storage, display or delivery of
goods or merchandise belonging to the enterprise;
(b) the
maintenance of a stock of goods or merchandise belonging to the enterprise
solely for the purpose of storage, display or delivery;
(c) the
maintenance of a stock of goods or merchandise belonging to the enterprise
solely for the purpose of processing by another enterprise;
(d) the
maintenance of a fixed place of business solely for the purpose of purchasing
goods or merchandise, or for collecting information, for the enterprise;
(e) the
maintenance of a fixed place of business solely for the purpose of activities
which have a preparatory or auxiliary character for the enterprise, such as
advertising or scientific research.
(4) An
enterprise shall be deemed to have a permanent establishment in one of the
Contracting States and to carry on business through that permanent
establishment if substantial equipment is being used in that State for more
than six months by, for or under contract with the enterprise.
(5) A
person acting in one of the Contracting States on behalf of an enterprise of
the other Contracting State — other than an agent of an independent status to
whom paragraph (6) applies — shall be deemed to be a permanent establishment of
that enterprise in the first-mentioned State if —
(a) he
has, and habitually exercises in that State, an authority to conclude contracts
on behalf of the enterprise, unless his activities are limited to the purchase
of goods or merchandise for the enterprise; or
(b) he
has such authority, but habitually maintains on behalf of the enterprise in the
first-mentioned State a stock of goods or merchandise from which on behalf of
the enterprise he regularly delivers goods or merchandise for use or
consumption in that State; or
(c) in
so acting, he manufactures or processes in that State for the enterprise goods
or merchandise belonging to the enterprise.
6. An
enterprise of one of the Contracting States shall not be deemed to have a
permanent establishment in the other Contracting State merely because it
carries on business in that other State through a broker, general commission
agent or any other agent of an independent status, where that person is acting
in the ordinary course of his business as such a broker or agent.
However, when the activities of such an agent are devoted wholly
or almost wholly on behalf of the enterprise, he shall not be considered to be
an agent of independent status within the meaning of this paragraph if it is
shown that the transactions between the agent and the enterprise were not made
under arms-length conditions. In such a case, the provisions of paragraph (5)
shall apply.
(7) The
fact that a company which is a resident of one of the Contracting States
controls or is controlled by a company which is a resident of the other
Contracting State, or which carries on business in that other State (whether
through a permanent establishment or otherwise) shall not of itself make either
company a permanent establishment of the other.
CHAPTER III
Taxation of Income
ARTICLE 6
Income from Real Property
(1) Income
from real property may be taxed in the Contracting State in which the real
property is situated.
(2) The
term "real property" shall have the meaning which it has under the
laws in force in the Contracting State in which the property in question is
situated. The term shall in any case include rights to royalties and other
payments in respect of the operation of mines, oil or gas wells, or quarries or
in respect of the exploitation of any natural resource and those rights shall
be regarded as situated where the mines, oil or gas wells, quarries or natural
resources are situated. Ships or aircraft shall not be regarded as real
property.
(3) Income
from a lease of land and income from any other direct interest in or over land,
whether or not improved, shall be regarded as income from real property
situated where the land to which the lease or other direct interest relates is
situated.
(4) The
provisions of paragraphs (1) and (3) shall also apply to income from real
property of an enterprise and to income from real property used for the
performance of professional services.
ARTICLE 7
Business Profits
(1) The
profits of an enterprise of one of the Contracting States shall be taxable only
in that State unless the enterprise carries on business in the other
Contracting State through a permanent establishment situated therein. If the
enterprise carries on business as aforesaid, the profits of the enterprise may
be taxed in the other State, but only so much of them as is attributable to
—
(a) that
permanent establishment; or
(b) sales
within that other Contracting State of goods or merchandise of the same or a
similar kind as those sold; or other business activities of the same or a
similar kind as those carried on through that permanent establishment if the
sale or the business activities had been made or carried on in that way with a
view to avoiding taxation in that other State.
(2) Subject
to the provisions of paragraph (3), where an enterprise of one of the Contracting
States carries on business in the other Contracting State through a permanent
establishment situated therein, there shall in each Contracting State be
attributed to that permanent establishment the profits which it might be
expected to make if it were a distinct and separate enterprise engaged in the
same or similar activities under the same or similar conditions and dealing
wholly independently with the enterprise of which it is a permanent
establishment or with other enterprises with which it deals.
(3) In
the determination of the profits of a permanent establishment, there shall be
allowed as deductions expenses of the enterprise, being expenses which are
incurred for the purposes of the permanent establishment (including executive
and general administrative expenses so incurred) and which would be deductible
if the permanent establishment were an independent entity which paid those
expenses whether incurred in the Contracting State in which the permanent
establishment is situated or elsewhere.
(4) No
profits shall be attributed to a permanent establishment by reason of the mere
purchase by that permanent establishment of goods or merchandise for the
enterprise.
(5) If
the information available to the competent authority of a Contracting State is
inadequate to determine the profits to be attributed to the permanent
establishment of an enterprise, nothing in this Article shall affect the
application of any law of that State relating to the determination of the tax
liability of a person provided that law shall be applied, so far as the
information available to the competent authority permits, in accordance with
the principles of this Article.
(6) For
the purposes of this Article, the profits of an enterprise do not include
income from the operation of aircraft in international traffic and, except as
provided in the Articles referred to in this paragraph, do not include items of
income dealt with in Articles 6, 8, 10, 11, 12, 13, 14, 16 and 17.
(7) The
profits of an enterprise of one of the Contracting States from the carrying on
in the other Contracting State of a business of any form of insurance other
than life insurance may be taxed in the other Contracting State in accordance
with the law of that other State relating specifically to the taxation of any
person who carries on such business, and Article 24 shall apply for the
elimination of double taxation as if the profits so taxed were attributable to
a permanent establishment of the enterprise in the State imposing the
tax.
ARTICLE 8
Shipping
(1) The
tax payable in a Contracting State by a resident of the other Contracting State
in respect of profits from the operation of ships in international traffic
shall not exceed the lesser of —
(a) one
and one-half per cent of the gross revenues derived from sources in that State;
and
(b) the
lowest rate of Philippine tax that may be imposed on profits of the same kind
derived under similar circumstances by a resident of a third State.
(2) Paragraph
(1) shall apply in relation to the share of the profits from the operation of
ships derived by a resident of one of the Contracting States through
participation in a pool service, in a joint transport operating organization or
in an international operating agency.
ARTICLE 9
Associated Enterprises
(1) Where
—
(a) an
enterprise of one of the Contracting States participates directly or indirectly
in the management, control or capital of an enterprise of the other Contracting
State; or
(b) the
same persons participate directly or indirectly in the management, control or
capital of an enterprise of one of the Contracting States and an enterprise of
the other Contracting State,
and in either case conditions operate between the two enterprises
in their commercial or financial relations which differ from those which might
be expected to operate between independent enterprises dealing wholly
independently with one another, then any profits which, but for those
conditions, might have been expected to accrue to one of the enterprises, but,
by reason of those conditions, have not so accrued, may be included in the
profits of that enterprise and taxed accordingly.
(2) If
the information available to the competent authority of a Contracting State is
inadequate to determine the profits to be attributed to an enterprise, nothing
in this Article shall affect the application of any law of that State relating
to the determination of the tax liability of a person, provided that that law
shall be applied, so far as the information available to the competent
authority permits, in accordance with the principles of this Article.
(3) Where
profits on which an enterprise of one of the Contracting States has been
charged to tax in that State are also included, by virtue of paragraph (1) or
(2), in the profits of an enterprise of the other Contracting State and taxed
accordingly, and the profits so included are profits which might have been
expected to have accrued to that enterprise of the other State if the
conditions operative between the enterprises had been those which might have
been expected to have operated between independent enterprises dealing wholly
independently with one another, then the first-mentioned State shall make an
appropriate adjustment to the amount of tax charged on those profits in the
first-mentioned State. In determining such an adjustment, due regard shall be
had to the other provisions of this Agreement in relation to the nature of the
income, and for this purpose the competent authorities of the Contracting
States shall, if necessary, consult each other.
ARTICLE 10
Dividends
(1) Dividends
paid by a company which is a resident of one of the Contracting States for the
purposes of its tax, being dividends to which a resident of the other
Contracting State is beneficially entitled, may be taxed in that other
State.
(2) Such
dividends may be taxed in the Contracting State of which the company paying the
dividends is a resident for the purposes of its tax, and according to the law
of that State, but the tax so charged shall —
(a) in
the case of dividends derived by a company, not exceed 15 per cent of the gross
amount of the dividends where relief, either by way of rebate or credit as
described in paragraph (2) of Article 24 or relief by way of credit as
described in the second sentence of paragraph (4) of Article 24, is given to
the beneficial owner of the dividends; and
(b) in
any other case, not exceed 25 per cent of the gross amount of the
dividends.
Nothing in this paragraph shall affect the taxation of a company
in respect of profits out of which dividends are paid.
(3) The
term "dividends" in this Article means income from shares and other
income assimilated to income from shares by the taxation law of the Contracting
State of which the company making the distribution is a resident.
(4) The
provisions of paragraphs (1) and (2) shall not apply if the person beneficially
entitled to the dividends, being a resident of one of the Contracting States,
carries on business of 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 that permanent establishment or fixed base. In such
a case, the provisions of Article 7 or Article 14, as the case may be, shall
apply.
(5) Dividends
paid by a company which is a resident of one of the Contracting States, being
dividends to which a person who is not a resident of the other Contracting
State is beneficially entitled, shall be exempt from tax in that other State
except insofar as the holding in respect of which the dividends are paid in
effectively connected with a permanent establishment or fixed base situated in
that other State. Provided that this paragraph shall not apply in relation to
dividends paid by a company which is a resident of Australia for the purposes
of Australian tax and which is also a resident of the Philippines for the
purposes of Philippine tax.
(6) The
Philippines may impose in accordance with its domestic law, apart from the
corporate income tax, a tax on remittances of profits by a branch to its Head
Office provided that the tax so imposed shall not exceed 15 per cent of the
amount remitted.
(7) Australia
may impose on income tax (in this paragraph called a "branch profits
tax") on the reduced taxable income of a company that is a resident of the
Philippines in addition to the income tax (in this paragraph called "the
general income tax") payable by the company in respect of its taxable
income; provided that any branch profits tax so imposed in respect of a year of
income shall not exceed 15 per cent of the amount by which the reduced taxable
income of that year of income exceeds the general income tax payable in respect
of the reduced taxable income of that year of income.
ARTICLE 11
Interest
(1) Interest
arising in one of the Contracting States, being interest to which a resident of
the other Contracting State in beneficially entitled, may be taxed in that
other State.
(2) Such
interest may be taxed in the Contracting State in which it arises, and
according to the law of that State, but the tax so charged shall not exceed 15
per cent of the gross amount of the interest.
(3) The
term "interest" in this Article includes interest from Government
Securities or from bonds or debentures and interest from any other form of
indebtedness (whether or not secured by mortgage and whether or not carrying a
right to participate in profits) as well all other income assimilated to
interest by the taxation law of the Contracting State in which the income
arises.
(4) The
provisions of paragraphs (1) and (2) shall not apply if the person beneficially
entitled to the interest, being a resident of one of the Contracting States,
carries on business in the other Contracting State in which the interest arises
through a permanent establishment situated therein, or performs in that other
State independent personal services from a fixed based situated therein, and
the indebtedness giving rise to the interest is effectively connected with that
permanent establishment or fixed base. In such a case, the provisions of
Article 7 or Article 14, as the case may be, shall apply.
(5) Interest
shall be deemed to arise in a Contracting State when the payer is that State
itself or a political subdivision of that State or a local authority of that
State or a person who is a resident of that State for the purposes of its tax.
Where, however, the person paying the interest, whether he is a resident of one
of the Contracting States or not, has in a Contracting State or outside both
Contracting States a permanent establishment or fixed base in connection with
which the indebtedness on which the interest is paid was incurred, and the
interest is borne by the permanent establishment or fixed base, then the
interest shall be deemed to arise where the permanent establishment or fixed
base is situated.
(6) Where,
owing to a special relationship between the payer and the person beneficially
entitled to the interest, or between both of them and some other person, the
amount of the interest paid, having regard to the indebtedness for which it is
paid, exceeds the amount which might have been expected to have been agreed
upon by the payer and the person so entitled in the absence of such
relationship, the provisions of this Article shall apply only to the
last-mentioned amount. In that case, the excess part of the amount of the
interest paid shall remain taxable according to the law of each Contracting
State, but subject to the other provisions of this Agreement.
(7) Interest
derived by the Government of a Contracting State, or by any other body
exercising governmental functions in, or in a part of, a Contracting State, or
by a bank performing central banking functions in a Contracting State, shall be
exempt from tax in the other Contracting State.
(8) The
Philippine tax on interest arising in the Philippines in respect of public
issues of bonds, debentures or similar obligations and paid by a company which
is a resident of the Philippines to a resident of Australia shall not exceed 10
per cent of the gross amount of the interest.
(9) The
principles set forth in paragraphs (1) to (7) inclusive of Article 5 shall be
applied in determining for the purposes of this Article whether there is a
permanent establishment outside both Contracting States, and whether an
enterprise, not being an enterprise of one of the Contracting States, has a
permanent establishment in one of the Contracting States.
ARTICLE 12
Royalties
(1) Royalties
arising in one of the Contracting States, being royalties to which a resident
of the other Contracting State is beneficially entitled, may be taxed in that
other State.
(2) Such
royalties may also be taxed in the Contracting State in which they arise, and
according to the law of that State. However, the tax so charged shall not
exceed —
(a) 15
per cent of the gross amount of the royalties where the royalties are paid by
an enterprise registered with the Philippine Board of Investments and engaged
in preferred areas of activities; and
(b) in
all other cases, 25 per cent of the gross amount of the royalties.
(3) The
term "royalties" in this Article means payments or credits, whether
periodical or not, and however described or computed, to the extent to which
they are made as consideration for —
(a) the
use of, or the right to use, any copyright, patent, design or model, plan,
secret formula or process, trademark, or other like property or right;
(b) the
use of, or the right to use, any individual, commercial or scientific
equipment;
(c) the
supply of scientific, technical, industrial or commercial knowledge or
information;
(d) the
supply of any assistance that is ancillary and subsidiary to, and is furnished
as a means of enabling the application or enjoyment of, any such property or
right as is mentioned in paragraph (a), any such equipment as is mentioned in
paragraph (b) or any such knowledge or information as is mentioned in paragraph
(c);
(e) the
use of, or the right to use —
(i) motion
picture films;
(ii) films
or video tapes for use in connection with television; or
(iii) tapes
for use in connection with radio broadcasting; or
(f) total
or partial forbearance in respect of the use of a property or right referred to
in this paragraph.
(4) The
provisions of paragraphs (1) and (2) shall not apply in the person beneficially
entitled to the royalties, being a resident of one of the Contracting States,
carries on business in the other Contracting State in which the royalties arise
through a permanent establishment situated therein, or performs in that other
State independent, professional services from a fixed base situated therein,
and the asset giving rise to the royalties is effectively connected with that
permanent establishment or fixed base. In such a case, the provisions of
Article 7 or Article 14, as the case may be, shall apply.
(5) Royalties
shall be deemed to arise in a Contracting State when the payer is that
Contracting State itself or a political sub-division of that State or a local
authority of that State or a person who is a resident of that State for
purposes of its tax. Where, however, the person paying the royalties, whether
he is a resident of one of the Contracting States or not, has in the other
Contracting State or outside both Contracting States a permanent establishment
or fixed base, in connection with which the liability to pay the royalties was
incurred, and the royalties are borne by the permanent establishment or fixed
base, then the royalties shall be deemed to arise where the permanent
establishment or fixed base in situated.
(6) Where,
owing to a special relationship between the payer and the person beneficially
entitled to the royalties or between both of them and some other person, the
amount of the royalties paid, having regard to what they are paid for, exceeds
the amount which might have been expected to have been agreed upon by the payer
and the person so entitled in the absence of such relationship, the provisions
of this Article shall apply only to the last-mentioned amount. In that case,
the excess part of the amount of the royalties paid shall remain taxable
according to the law of each Contracting State, but subject to the other
provisions of this Agreement.
(7) The
principles set forth in paragraphs (1) to (7) inclusive of Article 5 shall be
applied in determining for the purposes of this Article whether there is a
permanent establishment outside both Contracting States, and whether an
enterprise, not being an enterprise of one of the Contracting States, has a
permanent establishment in one of the Contracting States.
ARTICLE 13
Alienation of Property
(1) Income
from the alienation of real property may be taxed in the Contracting State in
which that property is situated.
(2) For
the purposes of this Article —
(a) the
term "real property" shall have the meaning which it has under the
laws in force in the Contracting State in which the property in question is
situated and shall include —
(i) a
lease of land or any other direct interest in or over land;
(ii) rights
to exploit, or to explore for, natural resources; and
(iii) shares
or comparable interests in a company, the assets of which consist wholly or
principally of direct interests in or over land in one of the Contracting
States or of rights to exploit, or to explore for, natural resources in one of
the Contracting States;
(b) real
property shall be deemed to be situated —
(i) where
it consists of direct interests in or over land — in the Contracting State in
which the land is situated;
(ii) where
it consists of rights to exploit, or to explore for, natural resources — in the
Contracting State in which the natural resources are situated or the
exploration may take place; and
(iii) where
it consists of shares or comparable interests in a company, the assets of which
consist wholly or principally of direct interests in or over land in one of the
Contracting States or of rights to exploit, or to explore for, natural
resources in one of the Contracting States — in the Contracting State in which
the assets or the principal assets of the company are situated.
(3) Subject
to the provisions of paragraph (1), income from the alienation of capital
assets of an enterprise of one of the Contracting States or available to a
resident of one of the Contracting States for the purpose of performing
professional services or other independent activities shall be taxable only in
that Contracting State, but, where those assets form part of the business
property of a permanent establishment or fixed base situated in the other
Contracting State, such income may be taxed in that other State.
ARTICLE 14
Independent Personal Services
(1) Income
derived by an individual who is a resident of one of the Contracting States in
respect of professional services or other independent activities of a similar
character shall be taxable only in that State. However, if such an individual —
(a) has
a fixed base regularly available to him in the other Contracting State for the
purpose of performing his activities; or
(b) in
a year of income or taxable year, as the case may be, stays in the other
Contracting State for a period or periods aggregating 183 days for the purpose
of performing his activities; or
(c) derives,
in a year of income or taxable year, as the case may be, from residents of the
other Contracting State gross remuneration in that State exceeding ten thousand
Australian dollars or its equivalent in Philippine pesos from performing his
activities;
so much of the income derived by him as is attributable to activities
so performed may be taxed in the other State.
(2) The
Treasurer of Australia and the Minister of Finance of the Philippines may agree
in letters exchanged for the purpose to variations in the amount specified in
sub-paragraph (c) of paragraph (1) and any variations so agreed shall have
effect according to the tenor of the letters.
(3) The
term "professional services" includes services performed in the
exercise of independent scientific, literary, artistic, educational or teaching
activities, as well as in the exercise of independent activities of physicians,
lawyers, engineers, architects, dentists and accountants.
ARTICLE 15
Dependent Personal Services
(1) Subject
to the provisions of Articles 16, 18, 19 and 20, salaries, wages and other
similar remuneration derived by an individual who is a resident of one of the
Contracting States in respect of an employment shall be taxable only in that
State unless the employment is exercised in the other Contracting State. If the
employment is so exercised, such remuneration as is derived from that exercise
may be taxed in that other State.
(2) Notwithstanding
the provisions of paragraph (1), remuneration derived by an individual who is a
resident of one of the Contracting States in respect of an employment exercised
in the other Contracting State shall be taxable only in the first-mentioned
State if —
(a) the
recipient is present in that other State for a period or periods not exceeding
in the aggregate 183 days in the year of income or taxable year, as the case
may be, of that other State; and
(b) the
remuneration is paid by, or on behalf of, an employer who is not a resident of
that other State; and
(c) the
remuneration is not deductible in determining taxable profits of a permanent
establishment or a fixed base which the employer has in that other State.
(3) Notwithstanding
the preceding provisions of this Article, remuneration in respect of an
employment exercised aboard a ship or aircraft operated in international
traffic by a resident of one of the Contracting States may be taxed in that
Contracting State.
ARTICLE 16
Directors' Fees
Directors' fees and similar payments derived by a resident of one
of the Contracting States in his capacity as a member of the board of directors
of a company which is a resident of the other Contracting State may be taxed in
that other State. In relation to remuneration of a director of a company
derived from the company in respect of the discharge of day-to-day functions of
a managerial or technical nature, the provisions of Article 15 shall apply as
if the remuneration were remuneration of an employee in respect of an
employment and as if references to "employer" were references to the
company.
ARTICLE 17
Entertainers
(1) Notwithstanding
the provisions of Articles 14 and 15, income derived by entertainers (such as
theatrical, motion picture, radio or television artists and musicians and
athletes) from their personal activities as such may be taxed in the
Contracting State in which these activities are exercised.
(2) Where
income in respect of the personal activities of an entertainer as such accrues
not to that entertainer but to another person, that income may, notwithstanding
the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in
which the activities of the entertainer are exercised.
(3) Notwithstanding
the provisions of paragraph (1) and Articles 14 and 15, income derived from
activities performed in a Contracting State by entertainers shall be exempt
from tax in that Contracting State if the visit to that State is substantially
supported or sponsored by the other Contracting State and the entertainer is
certified as qualifying under this provision by the competent authority of that
other State.
ARTICLE 18
Pensions and Annuities
(1) Pensions
(including government pensions) and annuities paid to a resident of one of the
Contracting States shall be taxable only in that State. However, pensions paid
by a Philippine enterprise under a pension plan not registered under Philippine
law may be taxed in the Philippines.
(2) The
term "annuity" means a stated sum payable periodically at stated
times during life or during a specified or ascertainable period of time under
an obligation to make the payments in return for adequate and full
consideration in money or money's worth.
ARTICLE 19
Government Service
(1) Remuneration
(other than a pension) paid by a Contracting State or a political sub-division
of that State or a local authority of that State to any individual in respect
of services rendered in the discharge of governmental functions shall be
taxable only that State. However, such remuneration shall be taxable only in
the other Contracting State if the services are rendered in that State and the
recipient is a resident of that State who —
(a) is
a citizen or national of that State; or
(b) did
not become a resident of that State solely for the purpose of performing the
services.
(2) The
provisions of paragraph (1) shall not apply to remuneration in respect of
services rendered in connection with any trade or business carried on by one of
the Contracting States or a political sub-division of one of the States or a
local authority of one of the States. In such a case the provisions of Articles
15 and 16 shall apply.
ARTICLE 20
Professors and Teachers
(1) Remuneration
which a professor or teacher who is a resident of one of the Contracting States
and who visits the other Contracting State for a period not exceeding two years
for the purpose of teaching or carrying out advanced study or research at a
university, college, school or other educational institution receives for those
activities shall be taxable only in the first-mentioned State.
(2) This
Article shall not apply to remuneration which a professor or teacher receives
for conducting research if the research is undertaken primarily for the private
benefit of a specific person or persons.
(3) For
the purposes of paragraph (1), the term "remuneration" shall include
remittances from sources outside the other State sent to enable the professor
or teacher to carry out the purposes referred to in paragraph (1).
ARTICLE 21
Students and Trainees
Where a student or trainee, who is a resident of one of the
Contracting States or who was a resident of that State immediately before
visiting the other Contracting State and who is temporarily present in the
other State solely for the purpose of his education or training, receives
remittances from sources outside the other State for the purpose of his
maintenance or education, those payments shall be exempt from tax in the other
State.
ARTICLE 22
Income of Dual Resident
Where a person who by reason of the provisions of paragraph (1) of
Article 4 is a resident of both Contracting States but by reason of the
provisions of paragraph (3) or (5) of that Article is deemed for the purposes
of this Agreement to be a resident solely of one of the Contracting States
derives income from sources in that Contracting State or from sources outside
both Contracting States, that income shall be taxable only in that Contracting
State.
ARTICLE 23
Source of Income
Income derived by a resident of one of the Contracting States
which, under any one or more of Articles 6 to 8 and 10 to 17 may be taxed in
the other Contracting State, shall, for the purposes of Article 24 and of the
income tax law of that other State, be deemed to be income from sources in that
other State.
CHAPTER IV
Methods of Elimination of Double Taxation
ARTICLE 24
(1) Subject
to the provisions of the law of Australia from time to time in force which
relate to the allowance of a credit against Australian tax of tax paid in a
country outside Australia (which shall not affect the general principle
hereof), Philippine tax paid, whether directly or by deduction, in respect of
income derived by a person who is a resident of Australia from sources in the
Philippines (excluding, in the case of dividends; tax paid in respect of the
profits out of which the dividends are paid except to the extent that the
provisions of paragraph (2) may permit that tax to be included) shall be
allowed as a credit against Australian tax payable in respect of that income.
(2) A
company which is a resident of Australia is, in accordance with the provisions
of the taxation law of Australia in force at the date of signature of this
Agreement, entitled to a rebate in its assessment at the average rate of tax
payable by the company in respect of dividends that are included in its taxable
income and are received from a company that is a resident of the Philippines.
However, should the law so in force be amended so that the rebate in relation
to the dividends ceases to be allowable under that law, credit shall be allowed
to the first-mentioned company under paragraph (1) for the Philippine tax paid
on the profits out of which the dividends are paid, but only if that company
beneficially owns at least 10 per cent of the paid-up share capital of the
second-mentioned company.
(3) For
the purposes of paragraph (1) and of the income tax law of Australia —
(a) a
resident of Australia deriving income from sources in the Philippines,
consisting of royalties to which sub-paragraph (a) of paragraph (2) of Article
12 applies, shall be deemed to have paid, in addition to any Philippine tax
actually paid, Philippine tax in an amount equal to 5 per cent of the gross
amount of the royalties; and
(b) the
amount of the said royalties shall be deemed to be the amount that would have
been the amount of the royalties if no Philippine tax had been paid, increased
by 5 per cent.
(4) In
accordance with the provisions and subject to the limitations of the law of the
Philippines (as it may be amended from time to time without changing the
general principle hereof), the Philippines shall allow to a resident of the
Philippines as a credit against the Philippine tax the appropriate amount of
taxes paid or accrued to Australia. In the case of a Philippine corporation
owning more than 50 per cent of the voting stock of an Australian corporation
from which it receives dividends in any taxable year, the Philippines shall
also allow credit for the appropriate amount of taxes paid or accrued to
Australia by an Australian corporation paying such dividends with respect to
the profits out of which such dividends are paid. Such appropriate amount shall
be based upon the amount of tax paid or accrued to Australia, but the credit
shall not exceed the limitations (for the purpose of limiting the credit to the
Philippine tax on income from sources within Australia, and on income from
sources outside the Philippines) provided by Philippine law for the taxable
year.
CHAPTER V
Special Provisions
ARTICLE 25
Mutual Agreement Procedure
(1) Where
a resident of one of the Contracting States considers that the actions of the
competent authority of one or both of the Contracting States result or will
result for him in taxation not in accordance with this Agreement, he may,
notwithstanding the remedies provided by the national laws of those States,
present his case to the competent authority of the Contracting State of which
he is a resident. The case must be presented in writing within two years from
the first notification of the action.
(2) The
competent authority shall endeavor, if the taxpayer's claim appears to it to be
justified and if it is not itself able to arrive at an appropriate solution, to
resolve the case with the competent authority of the other Contracting State,
with a view to the avoidance of taxation not in accordance with this
Agreement.
(3) The
competent authorities of the Contracting States shall jointly endeavor to
resolve any difficulties or doubts arising as to the application of this
Agreement.
(4) The
competent authorities of the Contracting States may communicate with each other
directly for the purpose of giving effect to the provisions of this
Agreement.
ARTICLE 26
Exchange of Information
(1) The
competent authorities of the Contracting States shall exchange such information
as is necessary for the carrying out of this Agreement or of the domestic laws
of the Contracting States concerning the taxes to which this Agreement applies
insofar as the taxation thereunder is not contrary to this Agreement. The
exchange of information is not restricted by Article 1. Any information
received by the competent authority of a Contracting State shall be treated as
secret in the same manner as information obtained under the domestic laws of
that State and shall be disclosed only to persons or authorities (including
courts and administrative bodies) concerned with the assessment or collection
of, enforcement or prosecution in respect of, or the determination of appeals
in relation to, the taxes to which this Agreement applies and shall be used
only for such purposes.
(2) In
no case shall the provisions of paragraph (1) be construed so as to impose on a
Contracting State the obligation —
(a) to
carry out administrative measures at variance with the laws or the
administrative practice of that or of the other Contracting State;
(b) to
supply particulars which are not obtainable under the laws or in the normal
course of the administration of that or of the other Contracting State;
(c) to
supply information which would disclose any trade, business, industrial,
commercial or professional secret or trade process, or to supply information
the disclosure of which would be contrary to public policy.
ARTICLE 27
Diplomatic and Consular Officials
Nothing in this Agreement shall affect the fiscal privileges of
diplomatic or consular officials under the general rules of international law
or under the provisions of special agreements.
ARTICLE 28
Miscellaneous
If, under any Agreement or Convention concluded by the
Philippines, a resident of any other country is exempt from —
(a) the
Philippine income tax on gross billings relating to the operation of aircraft
in international traffic; or
(b) the
Philippine business tax on gross receipts relating to the operation of ships or
aircraft in international traffic;
the Philippines will grant a corresponding exemption to residents
of Australia and Australia will grant a corresponding exemption to residents of
the Philippines.
CHAPTER VI
Final Provisions
ARTICLE 29
Entry Into Force
(1) This
Agreement shall be ratified and the instruments of ratification shall be
exchanged at Camberra, Australia, as soon as possible.
(2) The
Agreement shall enter into force upon the date of exchange of the instruments
of ratification and its provisions shall have effect:
(a) in
the Philippines —
(i) in
respect of tax withheld at the source on amounts paid to non-residents on or
after the 1st day of January of the calendar year on which the exchange of
instruments takes place;
(ii) in
respect of other taxes for taxable year beginning on or after the 1st day of
January in that calendar year.
(b) in
Australia —
(i) with
respect to withholding tax on income that is derived by a non-resident, in relation
to income derived on or after 1 January in the calendar year in which the
exchange of instruments of ratification takes place;
(ii) with
respect to other Australian tax, in relation to income of any year of income
beginning on or after 1 July in that calendar year;
ARTICLE 30
Termination
This Agreement shall continue in effect indefinitely but either
Contracting State may, on or before June 30 in any calendar year after the
fifth year following the exchange of the instruments of ratification, give to
the other Contracting State, through the diplomatic channel, written notice of
termination and in such event the Agreement shall cease to have effect:
(a) in
the Philippines —
(i) in
respect of tax withheld at the source on amounts paid to non-residents on or
after the first day of January in the calendar year next following that in
which the written notice of termination takes place; and
(ii) in
respect of other taxes for taxable years beginning on or after the first day of
January in the next following calendar year.
(b) in
Australia —
(i) with
respect to withholding tax on income that is derived by a non-resident, in
relation to income derived on or after 1 January in the calendar year next
following that in which the written notice of termination takes place;
(ii) with
respect to other Australian tax, in relation to income of any year of income
beginning on or after 1 July in the next following calendar year;
IN WITNESS WHEREOF the undersigned, duly authorized thereto, have
signed this Agreement.
DONE in duplicate at MANILA this 11th day of MAY One thousand nine
hundred and seventy-nine in the English language.
FOR THE GOVERNMENT FOR
THE GOVERNMENT
OF AUSTRALIA
OF THE REPUBLIC OF
THE PHILIPPINES
_________________________ __________________________
(SGD.
CESAR VIRATA (SGD.)
R. V. GARLAND
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