Double Tax Agreement (DTA) is an international agreement between two countries to avoid double taxation on income and profits arising in one country but derived from another. Every year, numerous businesses and individuals move between Australia and New Zealand, and DTA plays an essential role in ensuring they are not subjected to double taxation. In this article, we will discuss the Double Tax Agreement between New Zealand and Australia.
The Double Tax Agreement between Australia and New Zealand came into effect on 27th October 1978. The purpose of the agreement is to eliminate double taxation on income and capital gains arising in one country but derived from another. The agreement covers taxes on income, company income, and petroleum resource rent tax.
According to the DTA, an individual or business will be considered a resident of the country where they have a permanent home or place of abode. If an individual has a permanent home in both countries, they will be considered a resident of the country where the individual has a more substantial economic connection.
The agreement also provides relief from double taxation for dividends, interest, royalties, and capital gains tax. Dividends paid by a company resident in one country to a resident of another country will be taxed at a maximum rate of 15% in the country where the recipient is a resident. Similarly, interest paid by a resident in one country to a resident in another country will be taxed at a maximum rate of 10%.
Moreover, the agreement also provides relief from taxation on certain types of income, including income from employment and income from pensions. Income from employment exercised in either country for a period not exceeding 183 days in any 12-month period will only be taxed in the country of residency. Similarly, income from pensions and annuities paid to a New Zealand resident by the Australian government or a resident of Australia will only be taxed in New Zealand.
In conclusion, the Double Tax Agreement between Australia and New Zealand is a crucial agreement that ensures individuals and businesses are not subjected to double taxation on their income and capital gains. The agreement also promotes trade and investment between the two countries. If you are a business or individual who conducts transactions in both countries, it is essential to understand the implications of the DTA. It could potentially save you a considerable amount of money in tax.