Taxation Ruling

TR 92/14

Income tax: taxation privileges and immunities of prescribed International Organisations and their staff

This version is no longer current. Please follow this link to view the current version.

• Please note that the PDF version is the authorised version of this ruling.
  This document has changed over time. View its history.

Preamble

What this Ruling is about

1. This Ruling describes the operation of privileges and immunities relating to taxation that apply to International Organisations and persons working for these organisations. International Organisations include the United Nations organisations, the OECD, the International Court of Justice and the International Atomic Energy Agency.

2. The privileges and immunities law is administered by the Department of Foreign Affairs and Trade (DFAT), and in this regard this Ruling reflects the views of both the DFAT and the Australian Taxation Office (ATO).

Ruling

A. The International Organisation

3. An International Organisation may be accorded privileges and immunities in the nature of exemption from income tax to the extent described in the First Schedule to the International Organizations (Privileges and Immunities) Act 1963 (IO(P+I)A). Exemption from liability to tax (other than importation or exportation duties) may be provided for the organisation, its income, property, assets and transactions and the organisation may be exempt from the liability to collect taxes^[F1]. Exemption from taxes may also be provided for obligations and securities issued or guaranteed by the organisation, and interest and dividends on such obligations and securities^[F2].

4. To determine whether and to what extent exemptions may apply to a particular International Organisation, it is necessary to examine the regulations for that organisation made under the IO(P+I)A. For example, while the exemption from liability to tax is available to a number of organisations, including the United Nations organisations and Specialised Agencies, it is restricted^[F3] or not available at all to other organisations. In this regard, a comprehensive list of organisations and their related regulations is attached to this Ruling.

5. The exemption in respect to taxes of obligations and securities and related interest and dividends has generally not been made available to International Organisations^[F4].

B. Persons engaged by the organisation

6. Persons engaged by an International Organisation may be accorded privileges and immunities in the nature of exemption from taxation as described in the Second, Third, Fourth and Fifth Schedules to the IO(P+I)A. Tax exemptions may be available to a High Officer, Representative, Officer, or expert or consultant. As with the organisation itself, it is necessary to examine the regulations of the particular International Organisation to ascertain to what taxation exemptions, if any, a person may be entitled.

Holder of a High Office

7. This phrase usually refers to the senior officer and his or her deputy, ie, the Secretary-General, Director, etc, of the organisation. This person may have the privileges and immunities equivalent to those of a diplomatic agent^[F5] - ie, a diplomatic agent under the Vienna Convention on Diplomatic Relations. These privileges and immunities include exemption from all dues and taxes, personal or real, national, regional or municipal, subject to a number of exceptions including taxes on private immovable property in Australia, private income sourced in Australia and investments in commercial undertakings in Australia^[F6].

Representative

8. A representative accredited to, or attending a Conference convened by an International Organisation may also be accorded like privileges and immunities of a diplomatic agent, including those relating to taxation as referred to in the preceding paragraph^[F7].

Holder of an office

9. A holder of an office in an International Organisation may have exemption from tax on salaries and emoluments received from the organisation^[F8].

10. Notwithstanding this, it is usual to provide in the regulations relating to that particular organisation that where an official is a resident of Australia, the remuneration received by that person, to the extent to which it is for services rendered in Australia, is generally not exempt from taxation. However, the remuneration will be exempt where the person, although a resident, is not an Australian citizen and came to Australia solely for the purpose of performing the duties of the office held by him or her in the particular organisation. This requirement does not apply in respect of all prescribed International Organisations.

Experts/consultants

11. Persons serving on a Committee or participating in the work of, or performing a Mission on behalf of an International Organisation may be accorded exemption from tax on salaries and emoluments received from the organisation^[F9].

12. This usually covers experts and consultants engaged by the organisation. Generally, Australia's policy is that experts and consultants are not exempt from tax in Australia. However, limited exemption has been provided under regulations in the following cases - Asian Development Bank^[F10] , Common Fund for Commodities,^[F11] Customs Cooperation Council and the International Court of Justice.

Pensions

13. A pension received from a prescribed International Organisation is not exempt from tax in Australia as the IO(P+I)A does not extend tax exemptions to a former officer of an International Organisation.

14. The assessability of pensions paid by an International Organisation came before the Board of Review^[F12] where a pension recipient sought exemption from tax under former paragraph 23(y) of the Income Tax Assessment Act 1936 (ITAA). The Board dismissed the taxpayer's claim that the pension was an emolument of an official of a prescribed organisation, holding that the term emolument related to a monetary benefit paid to a serving officer, rather than as including pension payments to a former official. Consequently, the pension received as a result of former employment with the United Nations was not exempt under former paragraph 23(y).

Exemption with progression

15. Salaries or emoluments that are exempt from Australian tax under the privileges and immunities legislation are not taken into account in calculating the Australian tax on other assessable income derived by the person. This is in contrast to foreign earnings of a person working overseas that are exempt from Australian tax under sections 23AF or 23AG of the ITAA. These earnings are subject to what is generally referred to as 'exemption with progression', where they are taken into account in calculating the Australian tax on other assessable income the person has derived.

Documentary evidence

16. Documentary evidence would be satisfied by a statement from the relevant International Organisation indicating that a person is engaged by that organisation and the relevant capacity in which the person is engaged (High Office, consultant, etc).

Date of effect

17. This Ruling sets out the current practice of the Australian Taxation Office and is not concerned with a change in interpretation. Consequently, it applies (subject to any limitations imposed by statute) for years of income commencing both before and after the date on which it is issued.

Explanations

Background

18. Under its domestic law Australia declares its right to impose income tax generally on the world-wide income of Australian residents (as defined in the ITAA) and on the Australian source income of non-residents. Departure from these principles, in the form of privileges and immunities, are contained in specific provisions of Australia's domestic law.

19. Prior to 1988, Income Tax Regulation 4AB prescribed for the purposes of the application of paragraphs 23(x) and (y) of the ITAA, those organisations which were to be exempted from Australian income tax liability and the extent to which officials of such organisations were also to be exempt from Australian income tax on their official salaries and emoluments. Income Tax Regulation 4AB and paragraphs 23(x) and (y) of the ITAA were repealed in 1988 because their application was duplicated in regulations made under the IO(P+I)A.

20. With this repeal, all privileges and immunities of International Organisations and their staff are now governed by the IO(P+I)A and the regulations of the particular International Organisation made under that Act. As a consequence, administration of privileges and immunities in relation to International Organisations was passed from the ATO to the DFAT.

Set up of current law

21. The legal framework for providing privileges and immunities in respect of International Organisations generally consists of three parts:

(a)

an international obligation . Generally, Australia may enter an international obligation in the form of an international agreement (usually a convention) or undertake to accept arrangements provided in the Articles of Association of a particular organisation. An example of the former is, in the case of Specialised Agencies of the United Nations, the Convention on Privileges and Immunities of Specialised Agencies of the United Nations. An international agreement establishes an international obligation to give internal effect to the terms of the agreement through the legislative process, but usually does not in itself provide enforceable rights.

(b)

the relevant Act . The IO(P+I)A is the legislative vehicle for the privileges and immunities of International Organisations. The Act provides a broad framework for the privileges and immunities that may be accorded and a basis and power for regulations to be made. The Act has five Schedules stating the type and extent of privileges and immunities that may be granted to the organisation, a high office, a person attending conferences as a representative, a holder of an office, and a person attending committees or participating in the work of or performing a mission on behalf of the organisation.

(c)

enabling regulations . Privileges and immunities generally do not arise unless and until enabling regulations are made (e.g.,, Specialised Agencies (Privileges and Immunities) regulations). Not all the privileges and immunities contained in the Act, or in the respective Convention or Articles of Association, are necessarily granted under the regulations. To determine whether income tax exemptions apply, and what those exemptions are, it is necessary to examine the regulations of the particular International Organisation.

Regulations

22. A list of all organisations and their related regulations prescribed under the IO(P+I)A is attached.

Commissioner of Taxation
5 November 1992

ATTACHMENT

Previously released in draft form as TR92/D26

References

ATO references:
NO 90/6840-6

Related Rulings/Determinations:

TD 92/153

Subject References:
- Australian source income
- consultants
- exemption with progression
- experts
- high officials
- holders of an office
- international organisations
- officials
- pensions
- privileges and immunities
- regulations
- representatives

Legislative References:
- International Organisations (Privileges and Immunities) Act 1963
- ITAA 23AF
ITAA 23AG

Case References:
Case M90
80 ATC 648
24 CTBR(NS) 585