Australian Tax Treaties
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.
Dividends paid by a company which is a resident of a Contracting State for the purposes of its tax, being dividends to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State.
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:
(a) 5 per cent of the gross amount of the dividends, to the extent to which those dividends are paid out of profits that have borne the normal rate of company tax, where those dividends are paid to a company (other than a partnership) which holds directly at least 10 per cent of the capital of the company paying the dividends; and
(b) 15 per cent of the gross amount of the dividends in all other cases,
provided that if the relevant law in either Contracting State at the date of signature of this Agreement is varied, 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.
3
For the purposes of paragraph 2, profits have borne the normal rate of company tax:
(a) in Romania, where they have been subject to the profits tax; and
(b) in Australia, to the extent to which the dividends have been fully " franked " in accordance with its law relating to tax.
4
The term " dividends " in this Article means income from shares and other income assimilated to income from shares by the law, relating to tax, of the Contracting State of which the company making the distribution is a resident for the purposes of its tax.
5
The provisions of paragraphs 1 and 2 shall not apply if the person beneficially entitled to the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated in that other State, or performs in that other State independent personal services from a fixed base situated in that other State, and the holding in respect of which the dividends are paid is effectively connected with that permanent establishment or fixed base. In that case the provisions of Article 7 or Article 14, as the case may be, shall apply.
6
Dividends paid by a company which is a resident of a Contracting State, being dividends to which a person who is not a resident of the other Contracting State is beneficially entitled, shall be exempt from tax in that other State except in so far as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or fixed base situated in that other State. This paragraph shall not apply in relation to dividends paid by any company which is a resident of Australia for the purposes of Australian tax and which is also a resident of Romania for the purposes of Romanian tax.
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