Australian Tax Treaties
Korean Convention
CONVENTION BETWEEN THE GOVERNMENT OF AUSTRALIA AND THE GOVERNMENT OF THE REPUBLIC OF KOREA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME
CHAPTER IV
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METHODS OF ELIMINATION OF DOUBLE TAXATION
ARTICLE 24
(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 hereof), Korean tax paid under the law of Korea 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 Korea shall be allowed as a credit against Australian tax payable on the income on which the Korean tax was paid. However, where the income is a dividend paid by a company which is a resident of Korea, the credit shall only take into account such tax in respect thereof as is additional to any tax payable by the company on the profits out of which the dividend is paid.
(2)
In the case of a resident of Korea, double taxation shall be avoided in accordance with this paragraph. Subject to the provisions of Korean tax law regarding the allowance as a credit against Korean tax of tax payable in any country other than Korea (which shall not affect the general principle hereof) Australian tax payable (excluding in the case of a dividend tax payable in respect of the profits out of which the dividends are paid) under the laws of Australia and in accordance with this Convention, whether directly or by deduction, in respect of income from sources within Australia shall be allowed as a credit against Korean tax payable in respect of that income. The credit shall not, however, exceed that proportion of Korean tax which the income from sources within Australia bears to the entire income subject to Korean tax.
(3)
(a) For the purposes of paragraph (4), the term " Korean tax forgone " means -
(b) In subparagraph (a), the term " the relevant legislation " means those provisions of the laws of Korea relating to Korean tax which are agreed in letters exchanged from time to time between the Minister of Finance of Korea and the Treasurer of Australia for the purposes of this paragraph.
(4)
(a) For the purposes of paragraph (1), an amount of Korean tax forgone shall be deemed to be an equivalent amount of Korean tax paid;
(b) For the purposes of the income tax law of Australia -
(5)
Paragraphs (3) and (4) shall not apply in relation to income derived in any year of income after the year of income that ends on 30 June in the calendar year fifth following the calendar year in which this Convention is signed or any later date that may be agreed by the Governments of the Contracting States in letters exchanged for this purpose.
The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the MLI) has modified the application of this tax treaty. A synthesised text of the MLI and this tax treaty is available to facilitate the understanding of how the MLI modifies this tax treaty.
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 hereof), Korean tax paid under the law of Korea 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 Korea shall be allowed as a credit against Australian tax payable on the income on which the Korean tax was paid. However, where the income is a dividend paid by a company which is a resident of Korea, the credit shall only take into account such tax in respect thereof as is additional to any tax payable by the company on the profits out of which the dividend is paid.
(2)
In the case of a resident of Korea, double taxation shall be avoided in accordance with this paragraph. Subject to the provisions of Korean tax law regarding the allowance as a credit against Korean tax of tax payable in any country other than Korea (which shall not affect the general principle hereof) Australian tax payable (excluding in the case of a dividend tax payable in respect of the profits out of which the dividends are paid) under the laws of Australia and in accordance with this Convention, whether directly or by deduction, in respect of income from sources within Australia shall be allowed as a credit against Korean tax payable in respect of that income. The credit shall not, however, exceed that proportion of Korean tax which the income from sources within Australia bears to the entire income subject to Korean tax.
(3)
(a) For the purposes of paragraph (4), the term " Korean tax forgone " means -
(i) in the case of interest derived by a resident of Australia which is exempted from Korean tax in accordance with the relevant legislation, the amount which, under the law of Korea and in accordance with this Convention, would have been payable as Korean tax if the interest had not been so exempt and if the tax referred to in paragraph (2) of Article 11 were not to exceed 10 per cent of the gross amount of the interest; and
(ii) in the case of royalties derived by a resident of Australia which are exempted either wholly or partly from Korean tax in accordance with the relevant legislation, the amount or, where the royalties are partly exempt, the additional amount which, under the law of Korea and in accordance with this Convention, would have been payable as Korean tax if the royalties had not been so wholly or partly exempt, and if the tax referred to in paragraph (2) of Article 12 were not to exceed 10 per cent of the gross amount of the royalties.
(b) In subparagraph (a), the term " the relevant legislation " means those provisions of the laws of Korea relating to Korean tax which are agreed in letters exchanged from time to time between the Minister of Finance of Korea and the Treasurer of Australia for the purposes of this paragraph.
(4)
(a) For the purposes of paragraph (1), an amount of Korean tax forgone shall be deemed to be an equivalent amount of Korean tax paid;
(b) For the purposes of the income tax law of Australia -
(i) an amount of interest referred to in subparagraph (3)(a)(i) shall be deemed to be increased by the amount of Korean tax forgone in respect of that interest; and
(ii) an amount of royalties referred to in subparagraph (3)(a)(ii) shall be deemed to be increased by the amount of Korean tax forgone in respect of those royalties.
(5)
Paragraphs (3) and (4) shall not apply in relation to income derived in any year of income after the year of income that ends on 30 June in the calendar year fifth following the calendar year in which this Convention is signed or any later date that may be agreed by the Governments of the Contracting States in letters exchanged for this purpose.
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