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DESIRING to amend the Convention between Canada and Australia for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income signed at Canberra on 21 May 1980 (in this Protocol referred to as the “Convention”),

HAVE AGREED as follows:

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• 2 Paragraph 3 of Article 3 of the Convention shall be deleted and replaced by the following:

  • “3 As regards the application of this Convention at any time by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning that it has at that time under the law of that State concerning the taxes to which the Convention applies, any meaning under the applicable tax law of that State prevailing over a meaning given to the term under other law of that State.”.

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Article 6 of the Convention shall be deleted and replaced by the following:

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• 2 For the purposes of this Convention, the term “real property” in relation to a Contracting State, shall have the meaning which it has under the law of that State and shall include:

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  • (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.

• 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.

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• 2 A new paragraph 8 shall be added to Article 7 of the Convention as follows:

  • “8 Where:

    • (a) 

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

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Paragraph 4 of Article 8 of the Convention shall be deleted and replaced by the following:

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

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• 1 Paragraphs 2, 4 and 6 of Article 10 of the Convention shall be deleted and respectively replaced by the following:

  • “2 However, those dividends may also 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:

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    and if the relevant law of either Contracting State is varied in a manner that bears upon this provision, otherwise than in minor respects so as not to affect its general character, the Contracting States shall consult each other with a view to agreeing to any amendment of this paragraph that may be appropriate.”.

  • “4 The term “dividends” as used in this Article means income from shares, as well as other amounts which are subjected to the same taxation treatment as income from shares by the law of the State of which the company making the distribution is a resident for the purposes of its tax.”; and

  • “6 Canada may impose, on the earnings attributable to a permanent establishment in Canada of a company which is a resident of Australia or on the earnings of such company attributable to the alienation of real property situated in Canada where the company is carrying on a trade in real property, a tax (in this paragraph referred to as a “branch tax”) in addition to the tax that would be chargeable on the earnings of a company that is a resident of Canada, except that any branch tax so imposed shall not exceed 5 per cent of the amount of such earnings that have not been subjected to such branch tax in previous taxation years. For the purposes of this provision, the term “earnings” means the earnings attributable to the alienation of such real property situated in Canada as may be taxed by Canada under the provisions of Article 6 or paragraph 1 of Article 13, and the profits, including any gains, attributable to a permanent establishment in Canada in a year and previous years after deducting therefrom all other taxes, other than the branch tax referred to herein, imposed on such profits in Canada.”.

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• 1 Paragraph 3 of Article 12 of the Convention shall be deleted and replaced by the following:

  • “3 The term “royalties” as used 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:

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    • (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

• 2 A new paragraph 7 shall be added to Article 12 of the Convention as follows:

  • “7 Without prejudice to whether or not such payments would be dealt with as royalties under this Article in the absence of this paragraph, the term “royalties” as used in this Article shall not include payments or credits made as consideration for the supply of, or the right to use, source code in a computer software program, provided that the right to use the source code is limited to such use as is necessary to enable effective operation of the program by the user.”.

• 3 A new paragraph 8 shall be added to Article 12 of the Convention as follows:

  • “8 Without prejudice to whether or not such payments would be dealt with as royalties under this Article in the absence of this paragraph, the term “royalties” as used in this Article shall include payments or credits, whether periodical or not, and however described or computed, to the extent to which they are made as consideration for:

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Article 13 of the Convention shall be deleted and replaced by the following:

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• 4 Income, profits or gains derived by a resident of a Contracting State from the alienation of any shares or other interests in a company, or of an interest of any kind in a partnership, trust or other entity, where the value of the assets of such entity, is derived principally, whether directly or indirectly (including through one or more interposed entities, such as, for example, through a chain of companies), from real property situated in the other Contracting State, may be taxed in that other State.

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• 6 Where an individual who ceases to be a resident of a Contracting State, and immediately thereafter becomes a resident of the other Contracting State, is treated for the purposes of taxation in the first-mentioned State as having alienated a property and is taxed in that State by reason thereof, the individual may elect to be treated for the purposes of taxation in the other State as if the individual had, immediately before becoming a resident of that State, disposed of and re-acquired the property for an amount equal to its fair market value at that time.”.

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• 2 Paragraph 4 of Article 15 of the Convention shall be renumbered as paragraph 3.

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Article 23 of the Convention shall be deleted and replaced by the following:

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• 1 In the case of Australia, double taxation shall be avoided as follows:

  • (a) 

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

• 2 In the case of Canada, double taxation shall be avoided as follows:

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  • (b) 

    subject to the existing provisions of the law of Canada regarding the allowance as a credit against Canadian tax of tax payable in a territory outside Canada and to any subsequent modification of those provisions (which shall not affect the general principle hereof) where a company which is a resident of Australia pays a dividend to a company which is a resident of Canada and which controls directly or indirectly at least 10 per cent of the voting power in the first-mentioned company, the credit shall take into account the tax payable in Australia by that first-mentioned company in respect of the profits out of which such dividend is paid; and

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A new paragraph 6 shall be added to Article 24 of the Convention as follows:

• “6 For the purposes of paragraph 3 of Article XXII (Consultation) of the General Agreement on Trade in Services, the Contracting States agree that, notwithstanding that paragraph, any dispute between them as to whether a measure falls within the scope of this Convention may be brought before the Council for Trade in Services, as provided by that paragraph, only with the consent of both Contracting States. Any doubt as to the interpretation of this paragraph shall be resolved under paragraph 3 of this Article or, failing agreement under that procedure, pursuant to any other procedure agreed to by both Contracting States.”.

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A new Article 26A shall be added to the Convention immediately after Article 26 as follows:

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Nothing in this Convention shall be construed as preventing Canada from imposing a tax on amounts included in the income of a resident of Canada with respect to a partnership, trust, or controlled foreign affiliate, in which that resident has an interest.”

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