Income Tax (International Agreements) Amendment Act 1992

No. 139 of 1992

An Act to amend the Income Tax (International Agreements) Act 1953, and for related purposes

[Assented to 23 November 1992]

The Parliament of Australia enacts:

Short title etc.

1.(1) This Act may be cited as the Income Tax (International Agreements) Amendment Act 1992.

(2) In this Act, “Principal Act” means the Income Tax (International Agreements) Act 1953¹.

Commencement

2. This Act commences on the day on which it receives the Royal Assent.

Interpretation

3.  Section 3 of the Principal Act is amended:

(a)    by omitting from subsection (1) the definition of “the Indian airline profits agreement”;

(b)    by inserting the following definitions in subsection (1):

“ ‘the Indonesian agreement’ means the Agreement between the Government of Australia and the Government of the Republic of Indonesia for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, being the agreement a copy of which is set out in Schedule 37;

‘the Spanish agreement’ means the Agreement between Australia and the Kingdom of Spain for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, being the agreement a copy of which in the English language is set out in Schedule 39;

‘the Vietnamese agreement’ means the Agreement between the Government of Australia and the Government of the Socialist Republic of Vietnam for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, being the agreement a copy of which in the English language is set out in Schedule 38;”.

Repeal of section 11J (Airline profits agreement with the Republic of India)

4.    Section 11J of the Principal Act is repealed.

5.    Before section 16 of the Principal Act the following sections are inserted:

Agreement with the Republic of Indonesia

“11ZB. Subject to this Act, on and after the date of entry into force of the Indonesian agreement, the provisions of the agreement, so far as those provisions affect Australian tax, have the force of law according to their tenor.

Agreement with the Socialist Republic of Vietnam

“11ZC. Subject to this Act, on and after the date of entry into force of the Vietnamese agreement, the provisions of the agreement, so far as those provisions affect Australian tax, have the force of law according to their tenor.

Agreement with the Kingdom of Spain

“11ZD. Subject to this Act, on and after the date of entry into force of the Spanish agreement, the provisions of the agreement, so far as those provisions affect Australian tax, have the force of law according to their tenor.”.

Repeal of Schedule 19 (Indian airline profits agreement)

6.  Schedule 19 to the Principal Act is repealed.

Insertion of Schedules 37, 38 and 39 (Indonesian, Vietnamese and Spanish agreements)

7.  The Principal Act is amended by adding at the end the Schedules set out in the Schedule to this Act.

Savings—Indian airline profits agreement

8.  Even though section 11J of the Principal Act has been repealed by this Act, if a particular assessment of Australian tax would be affected by the repeal, the repeal is to be disregarded in making that assessment.

SCHEDULE                                                   Section 7

“SCHEDULE 37                                              Section 3

AGREEMENT

BETWEEN

THE GOVERNMENT OF AUSTRALIA

AND

THE GOVERNMENT OF THE REPUBLIC OF INDONESIA

FOR

THE AVOIDANCE OF DOUBLE TAXATION

AND

THE PREVENTION OF FISCAL EVASION

WITH RESPECT TO TAXES ON INCOME

The Government of Australia and the Government of the Republic of Indonesia,

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:

ARTICLE 1

Personal Scope

This Agreement shall apply to persons who are residents of one or both of the Contracting States.

ARTICLE 2

Taxes Covered

1 The existing taxes to which this Agreement shall apply are:

(a)  in Indonesia:

the income tax imposed under the Undang-undang Pajak Penghasilan 1984 (Law No. 7 of 1983);

(b)  in Australia:

the income tax, and the resource rent tax in respect of offshore

SCHEDULE—continued

projects relating to exploration for or exploitation of petroleum resources, imposed under the federal law of Australia.

2 This Agreement shall also apply to any identical or substantially similar taxes which are imposed under the federal law of Australia or the law of Indonesia after the date of signature of this Agreement in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify each other of any substantial changes which have been made in the laws of their respective States relating to the taxes to which this Agreement applies within a reasonable period of time after those changes.

ARTICLE 3

General Definitions

1 In this Agreement, unless the context otherwise requires:

(a)  the term “Australia”, when used in a geographical sense, excludes all external territories other than:

(i) the Territory of Norfolk Island;

(ii) the Territory of Christmas Island;

(iii) the Territory of Cocos (Keeling) Islands;

(iv) the Territory of Ashmore and Cartier Islands;

(v) the Territory of Heard Island and McDonald Islands; and

(vi) the Coral Sea Islands Territory,

and includes any area adjacent to the territorial limits of Australia (including the Territories specified in this subparagraph) in respect of which there is for the time being in force, consistently with international law, a law of Australia dealing with the exploitation of any of the natural resources of the seabed and subsoil of the continental shelf;

(b)    the term “Indonesia” means the territory under the sovereignty of the Republic of Indonesia and such parts of the continental shelf and the adjacent seas over which the Republic of Indonesia has sovereignty, sovereign rights as well as other rights in accordance with the 1982 United Nations Convention on the Law of the Sea;

(c)     the terms “Contracting State”, one of the “Contracting States” and “other Contracting State” mean, as the context requires, Australia or Indonesia, the Governments of which have concluded this Agreement;

(d)    the term “person” includes an individual, a company and any other body of persons;

SCHEDULE—continued

(e) the term “company” means any entity which is treated as a company or 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 Australia or an enterprise carried on by a resident of Indonesia, as the context requires;

(g) the term “tax” means Australian tax or Indonesian tax, as the context requires, but does not include any penalty or interest imposed under the law of either Contracting State relating to its tax;

(h) the term “Australian tax” means tax imposed by Australia, being tax to which this Agreement applies by virtue of Article 2;

(i) the term “Indonesian tax” means tax imposed by Indonesia, 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 an authorised representative of the Commissioner and, in the case of Indonesia, the Minister of Finance or an authorised representative of the Minister.

2        The references in paragraph 4 of Article 10, paragraph 4 of Article 11, paragraph 4 of Article 12 and paragraph 3 of Article 22 to a permanent establishment or fixed base situated in one of the Contracting States include references to an enterprise’s sales and other business activities referred to in subparagraphs 1(b) and (c) of Article 7 and to an individual’s activities referred to in subparagraph 1(b) of Article 14.

3        In the application of this Agreement by one of the Contracting States, any term not defined in this Agreement shall, unless the context otherwise requires, have the meaning which it has under the laws of that State relating to the taxes to which this Agreement applies in force at the time of the application.

ARTICLE 4

Residence

1        For the purposes of this Agreement, a person is a resident of one of the Contracting States if the person is a resident of that Contracting State under the law of that State relating to its tax.

2        A person is not a resident of one of the Contracting States for the purposes of this Agreement if the person is liable to tax in that State in respect only of income from sources in that State.

3        Where by reason of the preceding provisions of this Article a person, being an individual, is a resident of both Contracting States, then the

SCHEDULE—continued

status of the person shall be determined in accordance with the following rules:

(a)     the person shall be deemed to be a resident solely of the Contracting State in which a permanent home is available to the person;

(b)    if a permanent home is available to the person in both Contracting States, or in neither of them, the person shall be deemed to be a resident solely of the Contracting State in which the person has an habitual abode;

(c)     if the person has an habitual abode in both Contracting States or in neither of them, the person shall be deemed to be a resident solely of the Contracting State with which the person’s economic and personal relations are closer.

4 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 its place of effective management is situated.

ARTICLE 5

Permanent Establishment

1       For the purposes of this Agreement, the term “permanent establishment”, in relation to an enterprise, means a fixed place of business through which the business of the enterprise is wholly or partly carried on.

2       The term “permanent establishment” includes especially:

(a)     a place of management;

(b)    a branch;

(c)     an office;

(d)    a factory;

(e)     a workshop;

(f)     a mine, an oil or gas well, a quarry or any other place of extraction of natural resources or a place of exploration for natural resources;

(g)     a farm, plantation or other place where agricultural, pastoral, forestry or plantation activities are carried on;

(h) an installation, drilling rig or ship used for exploration for or exploitation of natural resources, where that use continues for more than 120 days;

(i) a building site or construction, installation or assembly project or supervisory activities in connection with that site or project,

SCHEDULE—continued

where that site, project or activities exist for more than 120 days;

(j) the furnishing of services, including consultancy services, by an enterprise within one of the Contracting States through employees or other personnel engaged by the enterprise for that purpose, if those services are furnished, for the same or a connected project, within that State for a period or periods aggregating more than 120 days within any 12 month period.

3    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 or display of goods or merchandise belonging to the enterprise; or

(b)     the maintenance of a stock of goods or mechandise belonging to the enterprise solely for the purpose of storage or display; or

(c)     the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise; or

(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; or

(e)     the maintenance of a fixed place of business solely for the purpose of activities which have preparatory or auxiliary character for the enterprise, such as advertising or scientific research.

4    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 5 applies—shall be deemed to be a permanent establishment of that enterprise in the firstmentioned State if:

(a)     in so acting, the person manufactures or processes in that State for the enterprise goods or merchandise belonging to the enterprise; or

(b)    the person has, and habitually exercises in that State, an authority to conclude contracts on behalf of the enterprise, unless the person’s activities are limited to the purchase of goods or merchandise for the enterprise; or

(c)     the person has no such authority, but habitually maintains in the firstmentioned State a stock of goods or merchandise from which the person regularly delivers goods or merchandise on behalf of the enterprise.

5    An enterprise of one of the Contracting States shall not be deemed to have a permanent establishment in the other Contracting State

SCHEDULE—continued

merely because it carries on business in that other State through a person who is a broker, general commission agent or any other agent of an independent status and is acting in the ordinary course of the person’s business as such a broker or agent. However, when the activities of such a broker or agent are carried on wholly or principally on behalf of that enterprise itself or on behalf of that enterprise and other enterprises controlling, or controlled by or subject to the same common control as, that enterprise, the person will not be considered a broker or agent of an independent status within the meaning of this paragraph.

6       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.

7       The principles set forth in the preceding paragraphs of this Article shall be applied in determining for the purposes of paragraph 5 of Article 11 and paragraph 5 of Article 12 of this Agreement 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 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       In this Article, the term “real property”, in relation to one of the Contracting States, has the meaning which it has under the laws of that State and includes:

(a)     a lease of land and any other interest in or over land, whether improved or not, including a right to explore for mineral, oil or gas deposits or other natural resources, and a right to mine those deposits or resources; and

(b)    a right to receive variable or fixed payments either as consideration for or in respect of the exploitation of, or the right to explore for or exploit, mineral, oil or gas deposits, quarries or other places of extraction or exploitation of natural resources.

Ships, boats and aircraft shall not be regarded as real property.

3    Any interest or right referred to in paragraph 2 shall be regarded as situated where the land, mineral, oil or gas deposits, quarries or natural

SCHEDULE—continued

resources, as the case may be, are situated or where the exploration may take place.

4       The provisions of paragraph 1 shall also apply to income derived from the direct use, letting or use in any other form of real property.

5       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 independent personal 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 in that other State. If the enterprise carries on business in that manner, the profits of the enterprise may be taxed in the other State but only so much of them as it attributable to:

(a)     that permanent establishment; or

(b)    sales in that other State of goods or merchandise of the same or a similar kind as those sold through that permanent establishment; or

(c)     other business activities carried on in that other State of the same or a similar kind as those carried on through that permanent establishment.

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 in that other State, 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. However, no such deduction shall be allowed in respect of amounts, if any, paid (otherwise than

SCHEDULE—continued

towards reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission, for specific services performed or for management, or, except in the case of a banking enterprise, by way of interest on money lent to the permanent establishment. Likewise, no account shall be taken, in the determination of the profits of a permanent establishment, of amounts charged, (otherwise than towards reimbursement of actual expenses), by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission for specific services performed or for management, or, except in the case of a banking enterprise, by way of interest on money lent to the head office of the enterprise or any of its other offices.

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        Nothing in this Article shall affect the application of any law of one of the Contracting States relating to the determination of the tax liability of a person in cases where the information available to the competent authority of that State is inadequate to determine the profits to be attributed to a permanent establishment, provided that that law shall be applied, so far as the information available to the competent authority permits, consistently with the principles of this Article.

6        Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article.

7        Nothing in this Article affects the operation of any law of one of the Contracting States relating to tax imposed on profits derived by nonresidents on insurance premiums collected, or from insurance relating to risks arising or to property, in that State, whether or not that law deems the existence of a permanent establishment in relation to the relevant activity.

If the relevant law in force in either Contracting State at the date of signature of this Agreement is varied (otherwise than in minor respects so as not to affect its general character) the Contracting States shall consult with each other with a view to agreeing to any amendment of this paragraph that may be appropriate.

8    Where:

(a) a resident of one of the Contracting States is beneficially entitled, whether directly or through one or more interposed trust estates,

SCHEDULE—continued

to a share of the business profits of an enterprise carried on in the other Contracting State by the trustee of a trust estate other than a trust estate which is treated as a company for tax purposes; and

(b) in relation to that enterprise, that trustee would, in accordance with the principles of Article 5, have a permanent establishment in that other Contracting State,

the enterprise carried on by the trustee shall be deemed to be a business carried on in the other State by that resident through a permanent establishment situated in that other State and that share of business profits shall be attributed to that permanent establishment.

ARTICLE 8

Ships and Aircraft

1        Profits from the operation of ships or aircraft derived by a resident of one of the Contracting States shall be taxable only in that State.

2        Notwithstanding the provisions of paragraph 1, such profits may be taxed in the other Contracting State where they are profits from operations of ships or aircraft confined solely to places in that other State.

3        The provisions of paragraphs 1 and 2 shall apply in relation to the share of the profits from the operation of ships or aircraft derived by a resident of one of the Contracting States through participation in a pool service, in a joint transport operating organisation or in an international operating agency.

4        For the purposes of this Article, profits derived from the carriage by ships or aircraft 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 profits from operations of ships or aircraft confined solely to places in that State.

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,

SCHEDULE—continued

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 the enterprise and taxed accordingly.

2        Nothing in this Article shall affect the application of any law of one of the Contracting States relating to the determination of the tax liability of a person, including determinations in cases where the information available to the competent authority of that State is inadequate to determine the income to be attributed to an enterprise, provided that that law shall be applied, so far as it is practicable to do so, consistently 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 charged to tax in that other State, 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 firstmentioned State shall make an appropriate adjustment to the amount of tax charged on those profits in the firstmentioned State. In determining such an adjustment, due regard shall be had to the other provisions of this Agreement 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 under the law of that State relating to its tax, being dividends to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State.

2       Those dividends may be taxed in the firstmentioned Contracting State 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 dividends. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this limitation.

3       The term “dividends” in this Article means income from shares and other income assimilated to income from shares by the law, relating

SCHEDULE—continued

to tax, of the Contracting State of which the company making the distribution is a resident under that law.

4        The provisions of paragraph 2 shall not apply if the person beneficially entitled to the dividends, being a resident of one of the Contracting States, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated in that other State, or performs in that other State independent personal services from a fixed base situated in that other State, and the holding in respect of which the dividends are paid is effectively connected with that permanent establishment or fixed base. In that case the provisions of Article 7 or 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 in so far as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or fixed base situated in that other State. This paragraph shall not apply in relation to dividends paid by any company which is a resident of Australia under the law of Australia relating to its tax and which is also a resident of Indonesia under the law of Indonesia relating to its tax.

6        Notwithstanding any other provisions of this Agreement, where a company which is a resident of one of the Contracting States has a permanent establishment in the other Contracting State, the profits of the permanent establishment may be subjected to an additional tax in that other State in accordance with its law, but the additional tax so charged shall not exceed 15 per cent of the amount of such profits after deducting from those profits the tax imposed on them in that other State.

7        The provisions of paragraph 6 of this Article shall not affect the rate of any such additional tax payable under any production sharing contracts and contracts of work (or any other similar contracts) relating to oil and gas or other mineral products negotiated by the Government of Indonesia, its instrumentality, its relevant State oil company or any other entity thereof with a person who is a resident of Australia.

ARTICLE 11

Interest

1         Interest arising in one of the Contracting States, being interest to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State.

SCHEDULE—continued

2        That 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 10 per cent of the gross amount of the interest. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this limitation.

3        The term “interest” in this Article includes interest from Government securities or from bonds or debentures, whether or not secured by mortgage and whether or not carrying a right to participate in profits, interest from any other form of indebtedness and all other income assimilated to income from money lent by the law, relating to tax, of the Contracting State in which the income arises.

4        The provisions of paragraph 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 in that other State, or performs in that other State independent personal services from a fixed base situated in that other State, and the indebtedness in respect of which the interest is paid is effectively connected with that permanent establishment or fixed base. In that case, the provisions of Article 7 or 14, as the case may be, shall apply.

5        Interest shall be deemed to arise in one of the Contracting States when the payer is that State itself or a political subdivision or local authority of that State or a person who is a resident of that State under the law of that State relating to its tax. Where, however, the person paying the interest, whether the person is a resident of one of the Contracting State or not, has in one of the Contracting States 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 that interest is borne by that permanent establishment or fixed base, then the interest shall be deemed to arise in the State in which 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 that relationship, the provisions of this Article shall apply only to the lastmentioned amount. In that case, the excess part of the amount of the interest paid shall remain taxable according to the law, relating to tax, of each Contracting State, but subject to the other provisions of this Agreement.

7        Interest derived from the investment of official foreign exchange reserve assets by the Government of one of the Contracting States, its

SCHEDULE—continued

monetary institutions or a bank performing central banking functions in that State shall be exempt from tax in the other Contracting State.

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        Those royalties may be taxed in the Contracting State in which they arise, and according to the law of that State, but the tax so charged shall not exceed:

(a)     in the case of royalties described in subparagraphs 3(b) and (c) and, to the extent to which they relate to those royalties, in subparagraphs 3(d) and (f)—10 per cent; and

(b)     in all other cases—15 per cent.

The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of these limitations.

3    The term “royalties” in this Article means payments, 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; or

(b)     the use of, or the right to use, any industrial, commercial or scientific equipment; or

(c)     the supply of scientific, technical, industrial or commercial knowledge or information; or

(d)     the supply of any assistance that is ancillary and subsidiary to, and is furnished as a means of enabling the initial application of, any such property or right as is mentioned in subparagraph (a), any such equipment as is mentioned in subparagraph (b) or any such knowledge or information as is mentioned in subparagraph (c); or

(e)     the use of, or the right to use:

(i) motion picture films; or

(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 or supply of any property or right referred to in this paragraph.

SCHEDULE—continued

4       The provisions of paragraph 2 shall not apply if the person beneficially entitled to the royalties, being a resident of one of Contracting States, carries on business in the other Contracting State, in which the royalties arise, through a permanent establishment situated in that other State, or performs in that other State independent personal services from a fixed base situated in that other State, and the property or right in respect of which the royalties are paid is effectively connected with that permanent establishment or fixed base. In that case, the provisions of Article 7 or 14, as the case may be, shall apply.

5       Royalties shall be deemed to arise in one of the Contracting States when the payer is that State itself or a political subdivision or local authority of that State or a person who is a resident of that State under the law of that State relating to its tax. Where, however, the person paying the royalties, whether the person is a resident of one of the Contracting States or not, has in one of the Contracting States 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 in the State in which 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 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 Agreement shall apply only to the lastmentioned amount. In that case, the excess part of the amount of the royalties paid shall remain taxable according to the law, relating to tax, of each Contracting State, but subject to the other provisions of this Agreement.

7       In this Article, the term “payments” includes credits and the terms “paid”, “payer” and “person paying” have the corresponding meanings.

ARTICLE 13

Alienation of Property

1        Income, profits or gains derived by a resident of one of the Contracting States from the alienation of real property situated in the other Contracting State may be taxed in that other State.

2        Income, profits or gains from the alienation of property, other than real property, that forms part of the business property of a permanent establishment which an enterprise of one of the Contracting States has in the other Contracting State or pertains to a fixed base available in

SCHEDULE—continued

that other State to a resident of the firstmentioned State for the purpose of performing independent personal services, including income, profits or gains from the alienation of that permanent establishment (alone or with the whole enterprise) or of that fixed base, may be taxed in that other State.

3        Income, profits or gains from the alienation of ships or aircraft operated in international traffic, or of property (other than real property) pertaining to the operation of those ships or aircraft, shall be taxable only in the Contracting State of which the enterprise which operated those ships or aircraft is a resident.

4        Income, profits or gains derived by a resident of one of the Contracting States from the alienation of shares or comparable interests in a company, the assets of which consist wholly or principally of real property situated in the other Contracting State, may be taxed in that other State.

5        Nothing in this Agreement affects the application of a law of one of the Contracting States relating to the taxation of gains of a capital nature derived from the alienation of property other than that to which any of the preceding paragraphs of this Article apply.

6           (a) In this Article, the term “real property” has the same meaning as it has in Article 6.

(b) The situation of real property shall be determined for the purposes of this Article in accordance with paragraph 3 of Article 6.

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 unless:

(a)     a fixed base is regularly available to the individual in the other Contracting State for the purpose of performing the individual’s activities; in that case, so much of the income as is attributable to activities exercised from that fixed base may also be taxed in the other State; or

(b)    the individual is present in that other State for a period or periods exceeding 120 days in any period of 12 months; in that case, so much of the income as is derived from the individual’s activities in that other State may also be taxed in that other State.

SCHEDULE—continued

2          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 the 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 firstmentioned State if:

(a)     the recipient is present in that other State for a period or periods not exceeding in the aggregate 120 days in any period of 12 months; 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; and

(d)    the remuneration is, or upon the application of this Article will be, subject to tax in the firstmentioned 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 State.

ARTICLE 16

Directors’ Fees

Directors’ fees and similar payments derived by a resident of one of the Contracting States as a member of the board of directors or any other similar organ of a company which is a resident of the other Contracting State may be taxed in that other State.

SCHEDULE—continued

ARTICLE 17

Entertainers

1        Notwithstanding the provisions of Articles 14 and 15, income derived by entertainers (such as theatrical, motion picture, radio or television artistes 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 paragraphs 1 and 2, income derived from activities referred to in paragraph 1 performed under a cultural agreement or arrangement between the Contracting States shall be exempt from tax in the Contracting State in which the activities are exercised if the visit to that State is wholly or substantially supported by funds of the other Contracting State, a local authority or public institution 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.

2        Notwithstanding the provisions of paragraph 1, a pension (including a government pension) or an annuity paid to a resident of one of the Contracting States from sources in the other Contracting State may be taxed in that other State but the tax so charged may not exceed 15 per cent of the gross amount of the pension or annuity.

3        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.

4        Any alimony or other maintenance payment arising in one of the Contracting States and paid to a resident of the other Contracting State shall be taxable only in the firstmentioned State.

SCHEDULE—continued

ARTICLE 19

Government Service

1    Remuneration, other than a pension or annuity, paid by one of the Contracting States or a political subdivision or local authority of that State to any individual in respect of services rendered to it shall be taxable only in that State. However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that other State and the recipient is a resident of that other State who:

(a)     is a citizen or national of that State; or

(b)    did not become a resident of the 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 subdivision or local authority of that State. In that case, the provisions of Article 15 or 16, as the case may be, shall apply.

ARTICLE 20

Professors and Teachers

1       Where a professor or teacher who is a resident of one of the Contracting States visits the other Contracting State for a period not exceeding 2 years for the purpose of teaching or carrying out advanced study or research at a university, college, school or other educational institution in that other State, any remuneration the person receives for such teaching, advanced study or research shall be exempt from tax in that other State to the extent to which that remuneration is, or upon the application of this Article will be, subject to tax in the firstmentioned 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.

ARTICLE 21

Students

Where a student, who is a resident of one the Contracting States or who was a resident of that State immediately before visiting the other Contracting State and who is temporarily present in that other State solely for the purpose of the student’s education, receives payments from sources outside that other State for the purpose of the student’s maintenance or education, those payments shall be exempt from tax in that other State.

SCHEDULE—continued

ARTICLE 22

Income Not Expressly Mentioned

1        Items of income of a resident of one of the Contracting States which are not expressly mentioned in the foregoing Articles of this Agreement shall be taxable only in that State.

2        However, any such income derived by a resident of one of the Contracting States from sources in the other Contracting State may also be taxed in that other State.

3        The provisions of paragraph 1 shall not apply to income derived by a resident of one of the Contracting States where that income is effectively connected with a permanent establishment or fixed base situated in the other Contracting State. In that case, the provisions of Article 7 or 14, as the case may be, shall apply.

ARTICLE 23

Source of Income

Income, profits or gains derived by a resident of one of the Contracting States which, under any one or more of Articles 6 to 8, 10 to 19 and 22, may be taxed in the other Contracting State shall, for the purposes of Article 24 and the law of each Contracting State relating to its tax, be deemed to be income from sources in that other State.

ARTICLE 24

Methods of Elimination of Double Taxation

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 of this Article), Indonesian tax paid under the law of Indonesia and in accordance with this Agreement, whether directly or by deduction, in respect of income derived by a person who is a resident of Australia from sources in Indonesia shall be allowed as a credit against Australian tax payable in respect of that income.

2        Where a company which is a resident of Indonesia and is not a resident of Australia under the law of Australia relating to its tax pays a dividend to a company which is a resident of Australia and which controls directly or indirectly not less than 10 per cent of the voting power of the firstmentioned company, the credit referred to in paragraph 1 shall include the Indonesian tax paid by that firstmentioned company in respect of that portion of its profits out of which the dividend is paid.

SCHEDULE—continued

3        Where a resident of Indonesia derives income from Australia which may be taxed in Australia in accordance with the provisions of this Agreement, the amount of Australian tax payable in respect of that income shall be allowed as a credit against the Indonesian tax imposed on that resident in respect of the income. The amount of credit, however, shall not exceed that part of the Indonesian tax which is appropriate to that income.

4        The amount of Australian tax payable on income derived by a resident of Indonesia to whom paragraph 3 applies shall be increased, before the application of that paragraph in that case, by an amount equal to any amount paid by that resident under the Fringe Benefits Tax Act 1986 of Australia.

ARTICLE 25

Mutual Agreement Procedure

1        Where a person who is 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 the person in taxation not in accordance with this Agreement, the person may, notwithstanding the remedies provided by the national laws of those States, present a case to the competent authority of the Contracting State of which the person is a resident. The case must be presented within 3 years from the first notification of the action giving rise to taxation not in accordance with this Agreement.

2        The competent authority shall endeavour, if the claim appears 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. The solution so reached shall be implemented notwithstanding any time limits in the national laws of the Contracting States.

3        The competent authorities of the Contracting States shall jointly endeavour 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 national laws of the Contracting States concerning the taxes

SCHEDULE—continued

to which this Agreement applies in so far as the taxation under those laws is not contrary to this Agreement. The exchange of information is not restricted by Article 1. Any information received by the competent authority of one of the Contracting States shall be treated as secret in the same manner as information obtained under the national 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 the competent authority of one of the Contracting States 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; or

(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; or

(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 international agreements.

ARTICLE 28

Miscellaneous

Nothing in this Agreement shall affect the operation of the Treaty between Australia and the Republic of Indonesia on the Zone of Cooperation in an Area between The Indonesian Province of East Timor and Northern Australia, done over the Zone of Cooperation on 11 December 1989.

ARTICLE 29

Entry into Force

This Agreement shall enter into force on the date on which the Contracting States exchange notes through the diplomatic channel notifying each other that the last of such things has been done as is

SCHEDULE—continued

necessary to give this Agreement the force of law in Australia and in Indonesia, as the case may be, and in that event this Agreement shall have effect:

(a)  in Australia:

(i) in respect of withholding tax on income that is derived by a nonresident, in relation to income derived on or after 1 July in the calendar year next following that in which the Agreement enters into force;

(ii) in respect of other Australian tax, in relation to income, profits or gains of any year of income beginning on or after 1 July in the calendar year next following that in which the Agreement enters into force;

(b)  in Indonesia:

(i) in respect of tax withheld at source, on or after 1 July in the calendar year next following that in which the Agreement enters into force; and

(ii) in respect of other Indonesian tax, for taxable years beginning on or after 1 July in the calendar year next following that in which the Agreement enters into force.

ARTICLE 30

Termination

This Agreement shall continue in effect indefinitely, but either of the Contracting States may, on or before 30 June in any calendar year beginning after the expiration of 5 years from the date of its entry into force, give to the other Contracting State through the diplomatic channel written notice of termination and, in that event, this Agreement shall cease to be effective:

(a)  in Australia:

(i) in respect of withholding tax on income that is derived by a nonresident, in relation to income derived on or after 1 July in the calendar year next following that in which the notice of termination is given;

(ii) in respect of other Australian tax, in relation to income, profits or gains of any year of income beginning on or after 1 July in the calendar year next following that in which the notice of termination is given;

(b)  in Indonesia:

(i) in respect of tax withheld at source, on or after 1 July in the calendar year next following that in which the notice of termination is given;

(ii) in respect of other Indonesian tax, for taxable years

SCHEDULE—continued

beginning on or after 1 July in the calendar year next following that in which the notice of termination is given.

IN WITNESS WHEREOF the undersigned, duly authorised thereto, have signed this Agreement.

DONE in duplicate at Jakarta this Twentysecond day of April One thousand nine hundred and ninety two in the English language.

SCHEDULE—continued

“SCHEDULE 38                                                    Section 3

AGREEMENT

BETWEEN

THE GOVERNMENT OF AUSTRALIA

AND

THE GOVERNMENT OF THE SOCIALIST REPUBLIC OF VIETNAM

FOR

THE AVOIDANCE OF DOUBLE TAXATION

AND

THE PREVENTION OF FISCAL EVASION

WITH RESPECT TO TAXES ON INCOME

The Government of Australia and the Government of the Socialist Republic of Vietnam,

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:

ARTICLE 1

Personal Scope

This Agreement shall apply to persons who are residents of one or both of the Contracting States.

ARTICLE 2

Taxes Covered

1. The existing taxes to which this Agreement shall apply are:

(a)  in Australia:

the income tax, and the resource rent tax in respect of offshore projects relating to exploration for or exploitation of petroleum resources, imposed under the federal law of Australia:

(b)  in Vietnam:

(i) the income tax;

SCHEDULE—continued

(ii) the profit tax; and

(iii) the withholding tax.

2. This Agreement shall also apply to any identical or substantially similar taxes on income, profits or gains which are imposed under the federal law of Australia or the law of Vietnam after the date of signature of this Agreement in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify each other of any substantial changes which have been made in the laws of their respective States relating to the taxes to which this Agreement applies within a reasonable period of time after those changes.

ARTICLE 3

General Definitions

1.         In this Agreement, unless the context otherwise requires:

(a)  the term “Australia”, when used in a geographical sense, excludes all external territories other than:

(i) the Territory of Norfolk Island;

(ii) the Territory of Christmas Island;

(iii) the Territory of Cocos (Keeling) Islands;

(iv) the Territory of Ashmore and Cartier Islands;

(v) the Territory of Heard Island and McDonald Islands; and

(vi) the Coral Sea Islands Territory,

and includes any area adjacent to the territorial limits of Australia (including the Territories specified in this subparagraph) in respect of which there is for the time being in force, consistently with international law, a law of Australia dealing with the exploration for or exploitation of any of the natural resources of the seabed and subsoil of the continental shelf;

(b)    the term “Vietnam” means the Socialist Republic of Vietnam, and, when used in a geographical sense, includes national territory and any area adjacent to the territorial waters of Vietnam and beyond the territorial limit of Vietnam which in accordance with international law has been designated an area within which the rights of the Socialist Republic of Vietnam with respect to the exploration and the exploitation of any natural resources of the seabed and subsoil and water surface may be exercised;

(c)     the term “Contracting State” means Australia or Vietnam, as

SCHEDULE—continued

the context requires, the Governments of which have concluded this Agreement;

(d)    the term “person” includes an individual, a company and any other body of persons;

(e)     the term “company” means any entity which is treated as a company or body corporate for tax purposes;

(f)     the terms “enterprise of a Contracting State” and “enterprise of the other Contracting State” mean an enterprise carried on by a resident of Australia or an enterprise carried on by a resident of Vietnam, as the context requires;

(g)     the term “tax” means Australian tax or Vietnamese tax, as the context requires, but does not include any penalty or interest imposed under the law of either Contracting State relating to its tax;

(h) the term “Australian tax” means tax imposed by Australia, being tax to which this Agreement applies by virtue of Article 2;

(i) the term “Vietnamese tax” means tax imposed by Vietnam, 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 an authorised representative of the Commissioner and, in the case of Vietnam, the Minister of Finance or an authorised representative of the Minister.

2.         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 State from time to time in force 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 a Contracting State:

(a)     in the case of Australia, if the person is a resident of Australia for the purposes of Australian tax; and

(b)    in the case of Vietnam, if the person is liable, under the law of Vietnam, to tax therein by reason of the person’s domicile, residence, place of management of any other criterion of a similar nature.

SCHEDULE—continued

2.        A person is not a resident of a Contracting State for the purposes of this Agreement if the person is liable to tax in that State in respect only of income from sources in that State.

3.        Where by reason of the preceding provisions of this Article a person, being an individual, is a resident of both Contracting States, then the status of the person shall be determined in accordance with the following rules:

(a)     the person shall be deemed to be a resident solely of the Contracting State in which a permanent home is available to the person;

(b)    if a permanent home is available to the person in both Contracting States, or in neither of them, the person shall be deemed to be a resident solely of the Contracting State with which the person’s economic and personal relations are closer.

4.    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 its place of effective management is situated.

ARTICLE 5

Permanent Establishment

1.        For the purposes of this Agreement, the term “permanent establishment”, in relation to an enterprise, means a fixed place of business through which the business of the 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, an oil or gas well, a quarry or any other place of extraction of natural resources;

(g)     an agricultural, pastoral or forestry property; and

(h)  a building site or construction, installation or assembly project which exists for more than 183 days.

3.    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

SCHEDULE—continued

delivery of goods or merchandise belonging to the enterprise; or

(b)    the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery; or

(c)     the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise; or

(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; or

(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 a Contracting State and to carry on business through that permanent establishment if:

(a)     it carries on supervisory activities in that State for more than 183 days in connection with a building site, or a construction, installation or assembly project, which is being undertaken in that State; or

(b)    substantial equipment is being used in that State by, for or under contract with the enterprise.

5.    A person acting in a Contracting State 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 firstmentioned State if:

(a)     the person has, and habitually exercises in that State, an authority to concluded contracts on behalf of the enterprise, unless the person’s activities are limited to the purchasing of goods or merchandise for the enterprise; or

(b)    in so acting, the person manufactures or processes in that State for the enterprise goods or merchandise belonging to that enterprise.

6.    An enterprise of a Contracting State 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 person who is a broker, general commission agent or any other agent of an independent status and is acting in the ordinary course of the person’s business as such a broker or agent.

SCHEDULE—continued

7.        The fact that a company which is a resident of a Contracting State 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.

8.        The principles set forth in the preceding paragraphs of this Article shall be applied in determining for the purposes of paragraph 5 of Article 11 and paragraph 5 of Article 12 whether there is a permanent establishment outside both Contracting States, and whether an enterprise, not being an enterprise of a Contracting State, has a permanent establishment in a Contracting State.

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.        In this Article, the term “real property”:

(a)  in the case of Australia, has the meaning which it has under the laws of Australia and includes:

(i) a lease of land and any other interest in or over land, whether improved or not, including a right to explore for mineral, oil or gas deposits or other natural resources, and a right to mine those deposits or resources; and

(ii) a right to receive variable or fixed payments either as consideration for or in respect of the exploitation of, or the right to explore for or exploit, mineral, oil or gas deposits, quarries or other places of extraction or exploitation of natural resources;

(b)  in the case of Vietnam, means property which according to the laws of Vietnam is immovable property, and includes:

(i) property accessory to immovable property;

(ii) rights to which the provisions of general law in respect of landed property apply; and

(iii) usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the right to work mineral deposits, sources, and other natural resources;

(c)  does not include ships and aircraft.

3.    Any interest or right referred to in paragraph 2 shall be regarded as situated where the land, mineral, oil or gas deposits, quarries or natural resources, as the case may be, are situated or where the exploration may take place.

SCHEDULE—continued

4.        The provisions of paragraph 1 apply to income derived from the direct use, letting or use in any other form, of real property.

5.        The provisions of paragraphs 1, 3 and 4 also apply to income from real property of an enterprise and to income from real property used for the performance of independent personal services.

ARTICLE 7

Business Profits

1.        The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated in that other State. If the enterprise carries on business in that manner, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment.

2.        Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated in that other State, 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.        Nothing in this Article shall affect the application of any law of a Contracting State relating to the determination of the tax liability of a person in cases where the information available to the competent authority of that State is inadequate to determine the profits to be attributed to a permanent establishment, provided that that law shall be applied, so far as the information available to the competent authority permits, consistently with the principles of this Article.

SCHEDULE—continued

6.        Where profits include items of income or gains which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article.

7.        Nothing in this Article shall affect the operation of any law of a Contracting State relating to tax imposed on profits from insurance with nonresidents provided that if the relevant law in force in either Contracting State at the date of signature of this Agreement is varied (otherwise than in minor respects so as not to affect its general character) the Contracting States shall consult with each other with a view to agreeing to any amendment of this paragraph that may be appropriate.

8.        Where:

(a)     a resident of a Contracting State is beneficially entitled, whether directly or through one or more interposed trust estates, to a share of the business profits of an enterprise carried on in the other Contracting State by the trustee of a trust estate other than a trust estate which is treated as a company for tax purposes; and

(b)    in relation to that enterprise, that trustee would, in accordance with the principles of Article 5, have a permanent establishment in that other State,

the enterprise carried on by the trustee shall be deemed to be a business carried on in the other State by that resident through a permanent establishment situated in that other State and that share of business profits shall be attributed to that permanent establishment.

ARTICLE 8

Ships and Aircraft

1.        Profits from the operation of ships or aircraft derived by a resident of a Contracting State shall be taxable only in that State.

2.        Notwithstanding the provisions of paragraph 1, such profits may be taxed in the other Contracting State where they are profits from operations of ships or aircraft confined solely to places in that other State.

3.        The provisions of paragraphs 1 and 2 shall apply in relation to the share of the profits from the operation of ships or aircraft derived by a resident of a Contracting State through participation in a pool service, in a joint transport operating organization or in an international operating agency.

4.        For the purposes of this Article, profits derived from the carriage by ships or aircraft of passengers, livestock, mail, goods or merchandise shipped in a Contracting State for discharge at another place in that

SCHEDULE—continued

State shall be treated as profits from operations of ships or aircraft confined solely to places in that State.

ARTICLE 9

Associated Enterprises

1.    Where:

(a)     an enterprise of a Contracting State 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 a Contracting State 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.        Nothing in this Article shall affect the application of any law of a Contracting State relating to the determination of the tax liability of a person, including determinations in cases where the information available to the competent authority of that State is inadequate to determine the income to be attributed to an enterprise, provided that that law shall be applied, so far as it is practicable to do so, consistently with the principles of this Article.

3.        Where profits of which an enterprise of a Contracting State 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 charged to tax in that other State, 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 firstmentioned State shall make an appropriate adjustment to the amount of tax charged on those profits in the firstmentioned State. In determining such an adjustment, due regard shall be had to the other provisions of this Agreement and for this purpose the competent authorities of the Contracting States shall if necessary consult each other.

SCHEDULE—continued

ARTICLE 10

Dividends

1.        Dividends paid by a company which is a resident of a Contracting State 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.        Those 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 not exceed, in Australia, 15 per cent, and, in Vietnam, 10 per cent, of the gross amount of the dividends.

3.        The term “dividends” in this Article means income from shares and other income assimilated to income from shares by the law, relating to tax, of the Contracting State of which the company making the distribution is a resident for the purposes of its tax.

4.        The provisions of paragraph 2 shall not apply if the person beneficially entitled to the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated in that other State, or performs in that other State independent personal services from a fixed base situated in that other State, and the holding in respect of which the dividends are paid is effectively connected with that permanent establishment or fixed base. In that case the provisions of Article 7 or 14, as the case may be, shall apply.

5.        Dividends paid by a company which is a resident of a Contracting State, 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 in so far as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or fixed base situated in that other State. This paragraph shall not apply in relation to dividends paid by any company which is a resident of Australia for the purposes of Australian tax and which is also a resident of Vietnam for the purposes of Vietnamese tax.

ARTICLE 11

Interest

1.         Interest arising in a Contracting State, being interest to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State.

SCHEDULE—continued

2.        That 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 10 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, whether or not secured by mortgage and whether or not carrying a right to participate in profits, interest from any other form of indebtedness and all other income assimilated to income from money lent by the law, relating to tax, of the Contracting State in which the income arises.

4.        The provisions of paragraph 2 shall not apply if the person beneficially entitled to the interest, being a resident of a Contracting State, carries on business in the other Contracting State, in which the interest arises, through a permanent establishment situated in that other State, or performs in that other State independent personal services from a fixed base situated in that other State, and the indebtedness in respect of which the interest is paid is effectively connected with that permanent establishment or fixed base. In that case, the provisions of Article 7 or 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 or 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 the person is a resident of a Contracting State 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 that interest is borne by that permanent establishment or fixed base, then the interest shall be deemed to arise in the State in which 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 that relationship, the provisions of this Article shall apply only to the lastmentioned amount. In that case, the excess part of the amount of the interest paid shall remain taxable according to the law, relating to tax, of each Contracting State, but subject to the other provisions of this Agreement.

SCHEDULE—continued

ARTICLE 12

Royalties

1.        Royalties arising in a Contracting State, being royalties to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State.

2.        Those royalties may be taxed in the Contracting State in which they arise, and according to the law of that State, but the tax so charged shall not exceed 10 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; or

(b)     the use of, or the right to use, any industrial, commercial or scientific equipment; or

(c)     the supply of scientific, technical, industrial or commercial knowledge or information; or

(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 subparagraph (a), any such equipment as is mentioned in subparagraph (b) or any such knowledge or information as is mentioned in subparagraph (c); or

(e)     the use of, or the right to use:

(i) motion picture films; or

(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 or supply of any property or right referred to in this paragraph.

4.    The provisions of paragraph 2 shall not apply if the person beneficially entitled to the royalties, being a resident of a Contracting State, carries on business in the other Contracting State, in which the royalties arise, through a permanent establishment situated in that other State, or performs in that other State independent personal services from a fixed base situated in that other State, and the property or right in respect of which the royalties are paid or credited is effectively connected with that permanent establishment or fixed base. In that case, the provisions of Article 7 or 14, as the case may be, shall apply.

SCHEDULE—continued

5.        Royalties shall be deemed to arise in a Contracting State when the payer is that State itself or a political subdivision or 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 royalties, whether the person is a resident of a Contracting State or not, has in a 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 in the State in which 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 royalties, or between both of them and some other person, the amount of the royalties paid or credited, having regard to what they are paid or credited 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 lastmentioned amount. In that case, the excess part of the amount of the royalties paid or credited shall remain taxable according to the law, relating to tax, of each Contracting State, but subject to the other provisions of this Agreement.

ARTICLE 13

Alienation of Property

1.        Income, profits or gains derived by a resident of a Contracting State from the alienation of real property situated in the other Contracting State may be taxed in that other State.

2.        Income, profits or gains from the alienation of property, other than real property, that forms part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or pertains to a fixed base available in that other State to a resident of the firstmentioned State for the purpose of performing independent personal services, including income, profits or gains from the alienation of that permanent establishment (alone or with the whole enterprise) or of that fixed base, may be taxed in that other State.

3.        Income, profits or gains from the alienation of ships or aircraft operated in international traffic, or of property (other than real property) pertaining to the operation of those ships or aircraft, shall be taxable only in the Contracting State of which the enterprise which operated those ships or aircraft is a resident.

SCHEDULE—continued

4.        Income, profits or gains derived by a resident of a Contracting State from the aliénation of shares or comparable interests in a company, the assets of which consist wholly or principally of real property situated in the other Contracting State, may be taxed in that other State.

5.        Nothing in this Agreement affects the application of a law of a Contracting State relating to the taxation of gains of a capital nature derived from the alienation of property other than that to which any of the preceding paragraphs of this Article apply.

6.        In this Article, the term “real property” has the same meaning as it has in Article 6.

7.        The situation of real property shall be determined for the purposes of this Article in accordance with paragraph 3 of Article 6.

ARTICLE 14

Independent Personal Services

1.        Income derived by an individual who is a resident of a Contracting State in respect of professional services or other independent activities of a similar character shall be taxable only in that State unless a fixed base is regularly available to the individual in the other Contracting State for the purpose of performing the individual’s activities. If such a fixed base is available to the individual, the income may be taxed in the other State but only so much of it as is attributable to activities exercised from that fixed base.

2.        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 the independent activities of physicians, lawyers, engineers, architects, dentists and accountants.

ARTICLE 15

Dependent Personal Services

1.         Subject to the provisions of Articles 16, 18 and 19, salaries, wages and other similar remuneration derived by an individual who is a resident of a Contracting State 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 a Contracting State in

SCHEDULE—continued

respect of an employment exercised in the other Contracting State shall be taxable only in the firstmentioned 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 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; and

(d)    the remuneration is, or upon the application of this Article will be, subject to tax in the firstmentioned 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 a Contracting State may be taxed in that State.

ARTICLE 16

Directors’ Fees

Directors’ fees and similar payments derived by a resident of a Contracting State 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.

ARTICLE 17

Entertainers

1.        Notwithstanding the provisions of Articles 14 and 15, income derived by entertainers (such as theatrical, motion picture, radio or television artistes 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.

SCHEDULE—continued

ARTICLE 18

Pensions and Annuities

1.        Pensions (including government pensions) and annuities paid to a resident of a Contracting State shall be taxable only in that State.

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.

3.        Any alimony or other maintenance payment arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in the firstmentioned State.

ARTICLE 19

Government Service

1.    Remuneration, other than a pension or annuity, paid by a Contracting State or a political subdivision or local authority of that State to any individual in respect of services rendered in the discharge of governmental functions shall be taxable only in that State. However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that other State and the recipient is a resident of that other 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 a Contracting State or a political subdivision or local authority of that State. In that case, the provisions of Article 15 or 16, as the case may be, shall apply.

ARTICLE 20

Students

Where a student, who is a resident of a Contracting State or who was a resident of that State immediately before visiting the other Contracting State and who is temporarily present in that other State solely for the purpose of the student’s education, receives payments from sources outside that other State for the purpose of the student’s maintenance or education, those payments shall be exempt from tax in that other State.

SCHEDULE—continued

ARTICLE 21

Income Not Expressly Mentioned

1.        Items of income of a resident of a Contracting State which are not expressly mentioned in the foregoing Articles of this Agreement shall be taxable only in that State.

2.        However, any such income derived by a resident of a Contracting State from sources in the other Contracting State may also be taxed in that other State.

3.        The provisions of paragraph 1 shall not apply to income, other than income from real property as defined in paragraph 2 of Article 6, derived by a resident of a Contracting State where that income is effectively connected with a permanent establishment or fixed based situated in the other Contracting State. In that case, the provision of Article 7 or 14, as the case may be, shall apply.

ARTICLE 22

Source of Income

1.        Income, profits or gains derived by a resident of a Contracting State which, under any one or more of Articles 6 to 8, 10 to 19 and 21, may be taxed in the other Contracting State shall for the purposes of the law of that other Contracting State relating to its tax be deemed to be income from sources in that other Contracting State.

2.        Income, profits or gains derived by a resident of a Contracting State which, under any one or more of Articles 6 to 8, 10 to 19 and 21, may be taxed in the other Contracting State shall for the purposes of Article 23 and of the law of the firstmentioned Contracting State relating to its tax be deemed to be income from sources in the other Contracting State.

ARTICLE 23

Methods of Elimination of Double Taxation

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 of this Article), Vietnamese tax paid under the law of Vietnam and in accordance with this Agreement, whether directly or by deduction, in respect of income derived by a person who is a resident of Australia from sources in Vietnam shall be allowed as a credit against Australian tax payable in respect of that income.

2.        Where a company which is a resident of Vietnam and is not a resident of Australia for the purposes of Australian tax pays a dividend

SCHEDULE—continued

to a company which is a resident of Australia and which controls directly or indirectly not less than 10 per cent of the voting power of the firstmentioned company, the credit referred to in paragraph 1 shall include the Vietnamese tax paid by that firstmentioned company in respect of that portion of its profits out of which the dividend is paid.

3.        For the purposes of paragraphs 1 and 2, Vietnamese tax paid shall include an amount equivalent to the amount of any Vietnamese tax forgone.

4.        In paragraph 3, the term “Vietnamese tax forgone” means an amount which, under the law of Vietnam relating to Vietnamese tax and in accordance with this Agreement, would have been payable as Vietnamese tax on income but for an exemption from, or a reduction of, Vietnamese tax on that income resulting from the operation of those provisions of the laws of Vietnam which the Treasurer of Australia and the Minister of Finance of Vietnam determine from time to time in letters exchanged for this purpose to be provisions to which this paragraph applies. Subject to its terms, such a determination of applicable provisions shall be valid for as long as those provisions are not modified after the date of that determination or have been modified only in minor respects so as not to affect their general character.

5.        Paragraphs 3 and 4 shall apply only in relation to those years that may be determined by the Treasurer of Australia and the Minister of Finance of Vietnam in letters exchanged for this purpose.

6.        Where a resident of Vietnam derives income, profits or gains which under the law of Australia and in accordance with this agreement may be taxed in Australia, Vietnam shall allow as a credit against its tax on the income, profits or gains an amount equal to the tax paid in Australia.

ARTICLE 24

Mutual Agreement Procedure

1.        Where a person who is a resident of a Contracting State considers that the actions of the competent authority of one or both of the Contracting States result or will result for the person in taxation not in accordance with this Agreement, the person may, notwithstanding the remedies provided by the national laws of those States, present a case to the competent authority of the Contracting State of which the person is a resident. The case must be presented within 3 years from the first notification of the action giving rise to taxation not in accordance with this Agreement.

2.        The competent authority shall endeavour, if the claim appears to it to be justified and if it is not itself able to arrive at an appropriate

SCHEDULE—continued

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. The solution so reached shall be implemented notwithstanding any time limits in the national laws of the Contracting States.

3.        The competent authorities of the Contracting States shall jointly endeavour 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 25

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 national laws of the Contracting States concerning the taxes to which this Agreement applies in so far as the taxation under those laws 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 national 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 the competent authority of 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; or

(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; or

(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.

SCHEDULE—continued

ARTICLE 26

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 international agreements.

ARTICLE 27

Entry into Force

This Agreement shall enter into force on the date on which the Contracting States exchange notes through the diplomatic channel notifying each other that the last of such things has been done as is necessary to give this Agreement the force of law in Australia and in Vietnam, as the case may be, and, in that event, this Agreement shall have effect:

(a)  in Australia:

(i) in respect of withholding tax on income that is derived by a nonresident, in relation to income derived on or after 1 July in the calendar year next following that in which the Agreement enters into force;

(ii) in respect of other Australian tax, in relation to income, profits or gains of any year of income beginning on or after 1 July in the calendar year next following that in which the Agreement enters into force;

(b)  in Vietnam:

(i) in respect of taxes withheld at source, in relation to taxable amounts paid on or after 1 January following the calendar year in which the Agreement enters into force;

(ii) in respect of other Vietnamese tax, in relation to income, profits or gains arising in the calendar year following the calendar year in which the Agreement enters into force, and in subsequent calendar years.

ARTICLE 28

Termination

The Agreement shall continue in effect indefinitely, but either of the Contracting States may, on or before 30 June in any calendar year beginning after the expiration of 5 years from the date of its entry into force, give to the other Contracting State through the diplomatic channel written notice of termination and, in that event, this Agreement shall cease to be effective:

(a) in Australia:

SCHEDULE—continued

(i) in respect of withholding tax on income that is derived by a nonresident, in relation to income derived on or after 1 July in the calendar year next following that in which the notice of termination is given;

(ii) in respect of other Australian tax, in relation to income, profits or gains of any year of income beginning on or after 1 July in the calendar year next following that in which the notice of termination is given;

(b) in Vietnam:

(i) in respect of taxes withheld at source, in relation to taxable amounts paid on or after 1 January following the calendar year in which the notice of termination is given;

(ii) in respect of other Vietnamese tax, in relation to income, profits or gains arising in the calendar year following the calendar year in which the notice of termination is given, and in subsequent calendar years.

IN WITNESS WHEREOF the undersigned, duly authorised thereto, have signed this Agreement.

DONE in duplicate at Hanoi, this thirteenth day of April, One thousand nine hundred and ninety-two in the English and Vietnamese languages, both texts being equally authentic.

SCHEDULE—continued

“SCHEDULE 39                                                    Section 3

AGREEMENT BETWEEN

AUSTRALIA

AND

THE KINGDOM OF SPAIN

FOR THE AVOIDANCE OF DOUBLE TAXATION

AND THE PREVENTION OF FISCAL EVASION

WITH RESPECT TO TAXES ON INCOME

Australia and the Kingdom of Spain,

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:

ARTICLE 1

Personal Scope

This Agreement shall apply to persons who are residents of one or both of the Contracting States.

ARTICLE 2

Taxes Covered

(1)    The existing taxes to which this Agreement shall apply are:

(a)   in the case of Australia:

the income tax, and the resource rent tax in respect of offshore projects relating to exploration for or exploitation of petroleum resources, imposed under the federal law of the Commonwealth of Australia;

(b)  in the case of Spain:

(i) the Income Tax on Individuals (el Impuesto sobre la renta de las Personas Fisicas); and

(ii) the Corporation Tax (el Impuesto sobre sociedades).

(2)    This Agreement shall also apply to any identical or substantially similar taxes which are imposed under the federal law of the Commonwealth of Australia or the law of Spain after the date of signature of this Agreement in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify

SCHEDULE—continued

each other of any substantial changes which have been made in the laws of the respective States relating to the taxes to which this Agreement applies within a reasonable time after such changes.

ARTICLE 3

General Definitions

(1) In this Agreement, unless the context otherwise requires:

(a)  the term “Australia”, when used in a geographical sense, excludes all external territories other than:

(i) the Territory of Norfolk Island;

(ii) the Territory of Christmas Island;

(iii) the Territory of Cocos (Keeling) Islands;

(iv) the Territory of Ashmore and Cartier Islands;

(v) the Territory of Heard Island and McDonald Islands; and

(vi) the Coral Sea Islands Territory,

and includes any area adjacent to the territorial limits of Australia (including the Territories specified in subparagraphs (i) to (vi) inclusive) in respect of which there is for the time being in force, consistently with international law, a law of Australia dealing with the exploitation of any of the natural resources of the seabed and subsoil of the continental shelf and superjacent waters;

(b)    the term “Spain” means the Spanish State and, when used geographically, means the territory of the Spanish State including any area outside the territorial sea in which, in accordance with international law and domestic legislation, the Spanish State may exercise jurisdiction or sovereign rights with respect to the seabed, its subsoil and superjacent waters and their natural resources;

(c)     the terms “Contracting State”, “one of the Contracting States” and “other Contracting State” means Australia or Spain, as the context requires;

(d)    the term “person” includes an individual, 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 body corporate for tax purposes;

(f) the terms “enterprise of one of the Contracting States” and “enterprise of the other Contracting State” means an enterprise carried on by a resident of Australia or an enterprise carried on by a resident of Spain, as the context requires;

SCHEDULE—continued

(g) the term “tax” means Australian tax or Spanish tax, as the context requires;

(h) the term “Australian tax” means tax imposed by Australia, being tax to which this Agreement applies by virtue of Article 2;

(i) the term “Spanish tax” means tax imposed by Spain, being tax to which this Agreement applies by virtue of Article 2;

(j) the term “competent authority” means:

(i) in the case of Australia, the Commissioner of Taxation or an authorised representative of the Commissioner; and

(ii) in the case of Spain, the Minister of Economy and Finance or an authorised representative of the Minister.

(2)        In this Agreement, the terms “Australian tax” and “Spanish 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)        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 State in force relating to the taxes to which this Agreement applies, at the time of the application.

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 Australia, if the person is a resident of Australia for the purposes of Australian tax; and

(b)    in the case of Spain, if the person is a resident of Spain for the purposes of the law of Spain relating to Spanish taxes.

(2)        A person is not a resident of a Contracting State for the purposes of this Agreement if the person is liable to tax in that State in respect only of income from sources in that State.

(3)        Where by reason of the preceding provisions of this Article an individual is a resident of both Contracting States, then the status of the person shall be determined in accordance with the following rules:

(a)     the person shall be deemed to be a resident solely of the Contracting State in which a permanent home is available to the person;

(b)     if a permanent home is available to the person in both

SCHEDULE—continued

Contracting States, or if in neither of them, the person shall be deemed to be a resident solely of the Contracting State with which the person’s economic and personal relations are the closer.

For the purposes of the preceding subparagraphs, an individual’s citizenship or nationality of one of the Contracting States shall be a factor in determining the degree of the individual’s personal and economic relations with that Contracting State.

(4) 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 its place of effective management is situated.

ARTICLE 5

Permanent Establishment

(1)        For the purposes of this Agreement, the term “permanent establishment”, in relation to an enterprise, means a fixed place of business through which the business of the 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, an oil or gas well, a quarry or any other place of extraction of natural resources;

(g)     an agricultural, pastoral or forestry property;

(h) a building site or construction, installation or assembly project which exists for more than twelve months.

(3)    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;

SCHEDULE—continued

(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:

(a)     it carries on supervisory activities in that State for more than twelve months in connection with a building site, or a construction, installation or assembly project which is being undertaken in that State; or

(b)    a structure, installation, drilling rig, ship or other like substantial equipment is used:

(i) for the exploration for, or exploitation of, natural resources; or

(ii) in activities connected with that exploration or exploitation,

in either case if used continuously or those activities continue for a period of more than twelve months.

(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 firstmentioned State if:

(a)     the person has, and habitually exercises in that State, an authority to conclude contracts binding the enterprise, unless the activities of that person are limited to those mentioned in paragraph (3) and are such that, if exercised through a fixed place of business, would not make that fixed place of business a permanent establishment under the provisions of that paragraph; or

(b)    in so acting, the person manufactures or processes in that State for the enterprise goods or merchandise belonging to the enterprise, provided that this provision shall apply only in relation to the goods or merchandise so manufactured or processed.

(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

SCHEDULE—continued

broker, general commission agent or any other agent of an independent status, and is acting in the ordinary course of the person’s business as such a broker or agent.

(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.

(8)       The principles set forth in the preceding paragraphs of this Article shall be applied in determining for the purposes of paragraphs (5) of Article 11 and paragraph (5) of Article 12 of this Agreement 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 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)       In this Article, the term “real property”:

(a)  in the case of Australia, has the meaning which it has under the laws of Australia, and shall also include:

(i) a lease of land and any other interest in or over land,

whether improved or not;

(ii) a right to receive variable or fixed payments as consideration for the exploitation of or the right to explore for or exploit, or in respect of the proceeds from the exploitation of, mineral deposits, oil or gas wells, quarries or other places of extraction or exploitation of natural resources; and

(b)  in the case of Spain, means immovable property according to the laws of Spain, and shall also include:

(i) property accessory to immovable property;

(ii) rights to which the provisions of the general law respecting landed property apply;

(iii) usufruct of immovable property; and

(iv) a right to receive variable or fixed payments as consideration for the exploitation of or the right to explore for or exploit, or in respect of the proceeds from the exploitation of, mineral deposits, oil or gas wells, quarries

SCHEDULE—continued

or other places of extraction or exploitation of natural resources.

(3)        A lease of land, any other interest in or over land and any right referred to in any of the subparagraphs of paragraph (2) shall be regarded as situated where the land, mineral deposits, oil or gas wells, quarries or natural resources, as the case may be, are situated, or where the exploration may take place.

(4)        The provisions of paragraph (1) shall apply to income derived from the direct use, letting or use in any other form of real property.

(5)        The provisions of paragraphs (1), (3) and (4) shall also apply to the income from real property of an enterprise and to income from real property used for the performance of independent personal services.

(6)        Where the ownership of shares or other rights in a company or other entity entitles the owner of such shares or rights to the enjoyment in any manner, direct use, letting or use in any other form of real property held by the company or other entity, the income from such enjoyment, direct use, letting, or use in any other form of such rights may be taxed in the Contracting State in which the real property is situated.

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 that permanent establishment.

(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

SCHEDULE—continued

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)        Nothing in this Article shall affect the application of any law of a Contracting State relating to the determination of the tax liability of a person in cases where the information available to the competent authority of that State is inadequate to determine the profits to be attributed to a permanent establishment, provided that that law shall be applied, so far as the information available to the competent authority permits, consistently with the principles of this Article.

(6)        Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article.

(7)        Nothing in this Article shall affect the operation of any law of a Contracting State relating to tax imposed on profits from insurance with non-residents provided that if the relevant law in force in either Contracting State at the date of signature of this Agreement is varied (otherwise than in minor respects so as not to affect its general character) the Contracting States shall consult with each other with a view to agreeing to any amendment of this paragraph that may be appropriate.

(8)        Where:

(a)      a resident of one of the Contracting States is beneficially entitled, whether directly or through one or more trusts, to a share of the business profits of an enterprise carried on in the other Contracting State by the trustee of a trust estate other than a trust estate which is treated as a company for tax purposes; and

(b)      in relation to that enterprise, that trustee has, in accordance with the principles of Article 5, a permanent establishment in that other State,

the enterprise carried on by the trustee shall be deemed to be a business carried on in that other State by that resident through a permanent establishment situated therein and the resident’s share of business profits shall be attributed to that permanent establishment.

SCHEDULE—continued

ARTICLE 8

Ships and Aircraft

(1)        Profits from the operation of ships or aircraft derived by a resident of one of the Contracting States shall be taxable only in that State.

(2)        Notwithstanding the provisions of paragraph (1), profits of the kind referred to in that paragraph from operations of ships or aircraft confined solely to places in the other Contracting State may be taxed in that other State.

(3)        The provisions of paragraphs (1) and (2) shall apply in relation to the share of the profits from the operation of ships or aircraft 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.

(4)        For the purposes of this Article, profits derived from the carriage by ships or aircraft of passengers, livestock, mail, goods or merchandise shipped in a Contracting State for discharge at another place in that State shall be treated as profits from operations of ships or aircraft confined solely to places in that State.

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)    Nothing in this Article shall affect the application of any law of a Contracting State relating to the determination of the tax liability of a person, including determinations in cases where the information available to the competent authority of that State is inadequate to determine the income co be attributed to an enterprise, provided that

SCHEDULE—continued

that law shall be applied, so far as it is practicable to do so, consistently 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 charged to tax in that other State, 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 firstmentioned State shall make an appropriate adjustment to the amount of tax charged on those profits in the firstmentioned State. In determining such an adjustment, due regard shall be had to the other provisions of this Agreement 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, 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, 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 dividends.

(3)        The term “dividends” in this Article means income from shares and other income assimilated to income from shares by the law, relating to tax, of the Contracting State of which the company making the distribution is a resident.

(4)        In the case of Spain, paragraph (2) of this Article shall not apply to income which under the provisions of the Spanish taxation law relating to transparent companies (Regimen de Transparencia Fiscal) is attributable to shareholders of such companies, whether or not distributed to such shareholders. Such income may be taxed by Spain in accordance with its domestic law as long as its is not subject to the Spanish corporation tax (Impuesto Sobre Sociedades).

(5)        The provisions of paragraph (2) shall not apply if the person beneficially entitled to the dividends, being a resident of one of the Contracting States, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a

SCHEDULE—continued

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 such permanent establishment or fixed base. In any such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

(6) Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company’s undistributed profits to a tax on the company’s undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly or profits or income arising in such other State.

ARTICLE 11

Interest

(1)        Interest arising in one of the Contracting States, being interest to which a resident of the other Contracting State is 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 10 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, whether or not secured by mortgage and whether or not carrying a right to participate in profits, and interest from any other form of indebtedness as well as all other income assimilated to income from money lent by the law, relating to tax, of the Contracting State in which the income arises.

(4)        The provisions of paragraph (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 base situated therein, and the indebtedness in respect of which the interest is paid is effectively connected with such 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 or local authority of

SCHEDULE—continued

that State or a person who is a resident of that State. Where, however, the person paying the interest, whether the person is a resident of one of the Contracting States or not, has in one of the Contracting States 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 such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

(6)       A person is a resident of one of the Contracting States for the purpose of paragraph (5) if the person is a resident of that State within the operation of the law of that State relating to its tax, irrespective of the manner in which paragraph (3) or paragraph (4), as the case may be, of Article 4 operates in relation to that person.

(7)       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 lastmentioned amount. In that case, the excess part of the amount of the interest paid shall remain taxable according to the law, relating to tax, of each Contracting State, but subject to the other provisions of this Agreement.

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 be taxed in the Contracting State in which they arise, and according to the law of that State, but the tax so charged shall not exceed 10 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 industrial, commercial or scientific equipment;

SCHEDULE—continued

(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 subparagraph (a), any such equipment as is mentioned in subparagraph (b) or any such knowledge or information as is mentioned in subparagraph (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 or supply of any property or right referred to in this paragraph.

(4)        The provisions of paragraph (2) shall not apply if 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 personal services from a fixed base situated therein, and the property or right in respect of which the royalties are paid or credited is effectively connected with such 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 State itself or a political subdivision or local authority of that State or a person who is a resident of that State. Where, however, the person paying the royalties, whether the person is a resident of one of the Contracting States or not, has in one of the Contracting States 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 in the State in which the permanent establishment or fixed base is situated.

(6)        A person is a resident of one of the Contracting States for the purposes of paragraph (5) if the person is a resident of that State within the operation of the law of that State relating to its tax, irrespective of the manner in which paragraph (3) or paragraph (4), as the case may be, of Article 4 operates in relation to that person.

(7)        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 or credited,

SCHEDULE—continued

having regard to what they are paid or credited 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 lastmentioned amount. In that case, the excess part of the amount of the royalties paid or credited shall remain taxable according to the law, relating to tax, of each Contracting State, but subject to the other provisions of this Agreement.

ARTICLE 13

Alienation of Property

(1)        Income or gains derived by a resident of one of the Contracting States from the alienation of real property referred to in Article 6 and, as provided in that Article, situated in the other Contracting State, may be taxed in that other State.

(2)        Income or gains from the alienation of property, other than real property referred to in Article 6, that forms part of the business property of a permanent establishment which an enterprise of one of the Contracting States has in the other Contracting State or pertains to a fixed base available to a resident of the firstmentioned State in that other State for the purpose of performing independent personal services, including income or gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such a fixed base, may be taxed in that other State.

(3)        Income or gains from the alienation of ships or aircraft operated in international traffic, or of property other than real property referred to in Article 6 pertaining to the operation of those ships or aircraft, shall be taxable only in the Contracting State of which the enterprise which operated those ships or aircraft is a resident.

(4)        Income or gains derived by a resident of one of the Contracting States from the alienation of shares or comparable interests in a company, the assets of which consist wholly or principally of real property in the other Contracting State of a kind referred to in Article 6, may be taxed in that other State.

(5)        Income or gains from the alienation of shares, or comparable interests in a company other than those mentioned in paragraph (4) of this Article which is a resident of one of the Contracting States may be taxed in that Contracting State if the recipient of the income or gains, during a 12 month period preceding such alienation, had a participation, directly or indirectly, of at least 10 per cent in the capital of that company.

(6)        Nothing in this Agreement affects the application of a law of a Contracting State relating to the taxation of gains of a capital nature

SCHEDULE—continued

derived from the alienation of property other than that to which any of the preceding paragraphs of this Article apply.

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 unless a fixed base is regularly available to the individual in the other Contracting State for the purpose of performing the individual’s activities. If such a fixed base is available to the individual, the income may be taxed in the other State but only so much of it as is attributable to activities exercised from that fixed base.

(2)        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 the independent activities of physicians, lawyers, engineers, architects, dentists and accountants.

ARTICLE 15

Dependent Personal Services

(1)        Subject to the provisions of Articles 16, 18 and 19, 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 firstmentioned 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 of that other State;

(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

SCHEDULE—continued

aircraft operated in international traffic by a resident of one of the Contracting States may be taxed in that State.

ARTICLE 16

Directors’ Fees

Directors’ fees and similar payments derived by a person who is a resident of one of the Contracting States in the person’s 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.

ARTICLE 17

Entertainers

(1)       Notwithstanding the provisions of Articles 14 and 15, income derived by entertainers (such as theatrical, motion picture, radio or television artistes 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 paragraphs (1) and (2), income derived by a resident of one of the Contracting States as an entertainer, from activities as an entertainer exercised in the other Contracting State, shall be exempt from tax in the other Contracting State if the visit to that other State is substantially supported by public funds of the firstmentioned State or a political subdivision or local authority thereof, in connection with the performance of such activities.

ARTICLE 18

Pensions and Annuities

(1)        Subject to the provisions of paragraph (2) of Article 19, pensions and annuities paid to a resident of one of the Contracting States shall be taxable only in that State.

(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.

SCHEDULE—continued

(3) Any alimony or other maintenance payment arising in one of the Contracting States and paid to a resident of the other Contracting State shall be taxable only in the firstmentioned State.

ARTICLE 19

Government Service

(1)    Remuneration, other than a pension or annuity, paid by one of the Contracting States or a political subdivision or local authority of that State to any individual in respect of services rendered in the discharge of governmental functions shall be taxable only in that State. However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that other State and the recipient is a resident of that other 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)  (a) Any pension paid by, or out of funds created by, a Contracting State or a political subdivision or local authority of that Contracting State to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State.

      (b) However, such pension shall be taxable only in the other Contracting State if the individual is a resident of, and a citizen or national of, that State.

(3)    Notwithstanding the provisions of paragraphs (1) and (2), the provisions of Articles 15, 16 and 18 shall apply to remuneration and pensions in respect of services rendered in connection with a business carried on by a Contracting State or a political subdivision or a local authority thereof.

ARTICLE 20

Students

Where a student, 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 that other State solely for the purpose of the education of the student, receives payments from sources outside that other State for the purpose of maintenance or education of the student, those payments shall be exempt from tax in that other State.

SCHEDULE—continued

ARTICLE 21

Income Not Expressly Mentioned

(1)        Items of income of a resident of one of the Contracting States which are not expressly mentioned in the foregoing Articles of this Agreement shall be taxable only in that State.

(2)        However, any such income derived by a resident of one of the Contracting States from sources in the other Contracting State may also be taxed in that other State.

(3)        The provisions of paragraph (1) shall not apply to income derived by a resident of one of the Contracting States where that income is effectively connected with a permanent establishment or fixed base situated in the other Contracting State. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

ARTICLE 22

Source of Income

Income, profits or gains derived by a resident of one of the Contracting States which, under any one or more of Articles 6 to 8, 10 to 17 and 21, may be taxed in the other Contracting State shall, for the purposes of Article 23 and of the income tax laws of the respective Contracting States, be deemed to be income from sources in that other State.

ARTICLE 23

Methods of Elimination of Double Taxation

(1)        Subject to the provisions of the law of Australia from time to time in force which relate to the allowance of a credit or other relief against Australian tax of tax paid in a country outside Australia (which shall not affect the general principle hereof), Spanish tax paid under the law of Spain and in accordance with this Agreement, whether directly or by deduction, in respect of income derived by a person who is a resident of Australia from sources in Spain shall be allowed as a credit or be relieved against Australian tax payable in respect of that income.

(2)        Where a company which is a resident of Spain and is not a resident of Australia for the purposes of Australian tax pays a dividend to a company which is a resident of Australia and which controls directly or indirectly not less than 10 per cent of the voting power of the firstmentioned company, the credit referred to in paragraph (1) shall include the Spanish tax paid by that firstmentioned company in respect of that portion of its profits out of which the dividend is paid.

(3)        In the case of Spain, double taxation will be avoided in the following manner:

SCHEDULE—continued

(a)  where a resident of Spain derives income or gains which, in accordance with the provisions of this Agreement, may be taxed in Australia, Spain shall allow:

(i) as a deduction from the tax on the income of that resident, an amount equal to the tax on income or gains paid in Australia; and

(ii) in the case of a dividend paid by a company which is a resident of Australia to a company which is a resident of Spain and which holds directly at least 25 per cent of the capital of the company paying the dividend, the deduction allowable shall include, in addition to the amount deductible under subparagraph (i) of this paragraph, that part of the tax effectively paid by the firstmentioned company on the profits out of which the dividend is paid, which relates to such dividends, provided that such amount of tax is included, for this purpose, in the taxable base of the receiving company;

such deduction in either case shall not, however, exceed that part of the tax on income or gains, as computed before the deduction is given, which is attributable, as the case may be, to the income or gains which may be taxed in Australia; and

(b)  where in accordance with any provision of this Agreement income or gains derived by a resident of Spain is exempt from tax in Spain, Spain may nevertheless, in calculating the amount of tax on the remaining income or gains of such resident, take into account the exempted income or gains.

ARTICLE 24

Mutual Agreement Procedure

(1)        Where a person who is 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 the person in taxation not in accordance with this Agreement, the person may, notwithstanding the remedies provided by the national laws of those States, present a case to the competent authority of the Contracting State of which the person is a resident. The case must be presented within three years from the first notification of the action giving rise to taxation not in accordance with this Agreement.

(2)        The competent authority shall endeavour, if the 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. The solution so reached shall be

SCHEDULE—continued

implemented notwithstanding any time limits in the national laws of the Contracting States.

(3)        The competent authorities of the Contracting States shall jointly endeavour 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 25

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 the competent authority of 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 26

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 international agreements.

SCHEDULE—continued

ARTICLE 27

Entry into Force

This Agreement shall enter into force on the date on which the Contracting States exchange notes through the diplomatic channel notifying each other that the last of such things has been done as is necessary to give this Agreement the force of law in Australia and in Spain, as the case may be, and thereupon this Agreement shall have effect:

(a)     in both Contracting States, in respect of 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 Agreement enters into force;

(b)    in Australia, in respect of other tax, in relation to income of any year of income beginning on or after 1 July in the calendar year next following that in which the Agreement enters into force;

(c)     in Spain, in respect of other taxes on income, in relation to taxes chargeable for the taxable year beginning on or after 1 January in the calendar year next following that in which the Agreement enters into force.

ARTICLE 28

Termination

This Agreement shall continue in effect indefinitely, but either of the Contracting States may, on or before 30 June in any calendar year beginning after the expiration of 3 years from the date of its entry into force, give to the other Contracting State through the diplomatic channel written notice of termination and, in that event, this Agreement shall cease to be effective:

(a)     in both Contracting States, in respect of 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 notice of termination is given;

(b)    in Australia, in respect of other Australian tax, in relation to income of any year of income beginning on or after 1 July in the calendar year next following that in which the notice of termination is given;

(c)     in Spain, in respect of other taxes on income, in relation to taxes chargeable for any taxable year beginning on or after 1 January in the calendar year next following that in which the notice is given.

SCHEDULE—continued

IN WITNESS WHEREOF the undersigned, duly authorised thereto, have signed this Agreement.

DONE in duplicate at Canberra this TWENTY FOURTH day of MARCH One thousand nine hundred and ninety-two in the English and Spanish languages, both texts being equally authentic.

SCHEDULE—continued

PROTOCOL TO THE AGREEMENT

BETWEEN

AUSTRALIA

AND

THE KINGDOM OF SPAIN

FOR THE AVOIDANCE OF DOUBLE TAXATION

AND THE PREVENTION OF FISCAL EVASION

WITH RESPECT TO TAXES ON INCOME

Australia and the Kingdom of Spain,

Having regard to the Agreement between Australia and the Kingdom of Spain for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income signed today at Canberra (in this Protocol called “the Agreement”),

Have agreed as follows:

If, in an agreement for the avoidance of double taxation that may subsequently be made between Australia and a third State, there is included a Non-discrimination Article, Australia shall immediately inform the Kingdom of Spain in writing through the diplomatic channel and shall enter into negotiations with the Kingdom of Spain in order to provide the same treatment for the Kingdom of Spain as may be provided for the third State.

This protocol shall form an integral part of the Agreement.

IN WITNESS WHEREOF the undersigned, duly authorised thereto, have signed this Protocol.

DONE in duplicate at Canberra this TWENTY-FOURTH day of MARCH One thousand nine hundred and ninety-two in the English and Spanish languages, both texts being equally authentic.

NOTE

1. No. 82, 1953, as amended. For previous amendments, see No. 25, 1958; No. 88, 1959; Nos. 19 and 29, 1960; No. 71, 1963; No. 112, 1964; No. 105, 1965; No. 17, 1966; Nos. 39 and 86, 1967; No. 3, 1968; No. 24, 1969; No. 48, 1972; Nos. 11 and 216, 1973; No. 129, 1974; No. 119, 1975; Nos. 52, 55 and 143,

NOTE—continued

1976; No. 134, 1977; No. 87, 1978; Nos. 23 and 127, 1980; Nos. 28, 110, 143 and 154, 1981; Nos. 51 and 57, 1983; Nos. 123 and 125, 1984; Nos. 168 and 173, 1985; Nos. 49, 51 and 112, 1986; No. 165, 1989; No. 121, 1990; and Nos. 5, 96 and 214, 1991.

[Minister’s second reading speech made in—

House of Representatives on 16 September 1992

Senate on 4 November 1992]