5.2 The main objective of the 1980 CTD update is to make significant progress in providing a competitive network of tax arrangements for Australian-based businesses by reducing the dividend deduction tax rate for Canadian subsidiaries and branches of Australian companies. The main secondary objectives are the prevention of double taxation of capital gains realized by Canadian residents on the disposal of shares in Australian companies, while maintaining Australian tax duties and reducing maximum withholding tax rates. In other respects, the revision of the DTC will better adapt it to the evolution of tax legislation and tax administration since 1980 and to the modern DTC policy of both countries. Tax treaties are formal bilateral agreements between two legal services. Australia has tax agreements with more than 40 lawyers. www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/determining-your-residency-status.html • The existing provision on the income of doubles from third countries is replaced by a more comprehensive article on other income, based on the Australian model and providing for withholding tax on income not otherwise dealt with by the DBA. 1.48 The article contains a “sweep up” provision with respect to capital gains, which allows each State, in accordance with its national law, to tax all capital gains arising from its own residents or a resident of the other State from the disposal of assets not covered by the preceding paragraphs of the article. It thus maintains the application of Australian national law relating to the taxation of capital gains linked to the disposal of such assets. • The limitation of the tax rate on the profits of Canadian branches is reduced to 5%, which corresponds to the reduced rates of VAT on dividends. www.internationalcitizens.com/moving-abroad/to/immigrating-canada-guide.php 1.29 In accordance with Canada`s reservation on the OECD model, the Agreement contains a provision allowing for the levying of a tax on the profits of branches (Article 10(6)).
The paragraph has been amended to reflect Canada`s more modern tax practices. The tax limit on Canadian branch profits will be lowered from 15% to 5%. [New subsection (6)] 1. This Convention shall not affect the tax privileges of diplomatic or consular officials in accordance with the general rules of international law or the provisions of special agreements. 5.33 A revised CTD should not be expected to increase compliance costs for taxpayers. Closer alignment with more recent contractual practices would likely reduce them. For example, reduced dividend and withholding rates will give more freedom to those investing in Canada to structure their investments and reduce dividends and interest.