Australia: ATO guidance on treaty shopping arrangements

Guidance on treaty shopping arrangements used to obtain reduced withholding tax rate benefits

Guidance on treaty shopping arrangements to obtain reduced withholding tax rate benefits

The Australian Taxation Office (ATO) on 20 July 2022 released its latest advice and guidance that includes a taxpayer alert on treaty shopping arrangements used to obtain reduced withholding tax rate benefits.

The guidance—TA 2022/2 (Treaty shopping arrangements to obtain reduced withholding tax rates)—expresses the ATO’s concerns relating to treaty shopping arrangements designed to obtain the benefit of a reduced withholding tax rate under an income tax treaty. The concern of the tax authority was that some taxpayers have entered into, or are considering implementing, arrangements that typically involve the interposition of related entities in treaty jurisdictions to obtain a more favourable tax outcome.

The guidance is not intended to cover the field of treaty shopping arrangements and is limited to arrangements that inappropriately access treaty benefits under an income tax treaty in relation to Australian royalty or dividend payments.

 

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