Question

Topic: Are tax Treaties necessary? Refer to the ‘Australian – UK Tax Treaty’.( 20 Marks)Topic: Are tax Treaties necessary? Refer to the ‘Australian – UK Tax Treaty’.( 20 Marks)

Answer 1

- WHAT IS TAX TREATIES

Tax treaties are the bilateral/ two party agreement between two countries; inorder to resolve the problems arises out of the double taxtation of active and passive income of their respective citizens. When taking the cases of individual or business, if they make investment in foriegn country , the issue of such country should tax on the investors income.

- WHAT IS AUSTRALIAN - UK TAX TREATY

It is known as the double-tax agreements, these agreements helps the australian citizens from making double taxation. If you are a australian citizen doing a business in UK, tax treaty ensures you that your income is not taxed in to UK and again in Australia. Such convention was signed in august 21st 2003, and came into force on 17th december 2003 , effective in UK from april 1st 2004 onwards

- the existing convention/agreement shall applied in :

IN THE CASE OF AUSTRALIA:

• the income tax
• the fringe benefits tax
• the resource rent tax in respect of specified projects

IN THE CASE OF UNITED KINGDOM

• the income tax
• the corporation tax
• the capital gains tax

- WHAT ARE THE IMPORTANCE OF TAX TREATIES

• It is an effectively incentive to the only investors of a country
• Mainly developed to attract investments from other countries
• It determines how much tax is levied on income from securities owned by a non-resident.
• Inorder to avoid the double taxation of income received.

tax treaties are so important, since it's a major competitive advantage, and helps in avoidance of double taxation, and helps in the determination of tax levied on income, capital estate and wealth.