Taxation Ruling

TR 92/14

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

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contents para
What this Ruling is about
1
Ruling
3
A. International Organisation
B. Persons
High Officer
Representative
Holder of an office
Experts/consultants
Pensions
Exemption with progression
Documentary evidence
Date of effect
17
Explanations
18
Background
Set up of law
Regulations

Preamble

This Ruling, to the extent that it is capable of being a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953, is a public ruling for the purposes of that Part. Taxation Ruling TR 92/1 explains when a Ruling is a public ruling and how it is binding on the Commissioner.

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

Regulations prescribed under the IO(P+I)Act 1963
Title Statutory Rules
  Year No.
Asian Development Bank 1986 70
1983 133
1972 181
1969 50
1967 175
Asia-Pacific Telecommunity 1981 6
Asian and Pacific Development Centre 1983 132
Association of Iron Ore Exporting Countries 1982 150
Association of Tin Producing Countries 1984 85
Australia-Indonesia Zone of Cooperation 1991 444
1990 228
Bank for International Settlements 1989 284
CAB International 1990 26
Commission for the Conservation of 1985 327
Antarctic Marine Living Resources 1984 216
(*repealed by S.R. 1985 No. 327) 1983 145
1983 22
1982 111*
1981 261*
Common Fund for Commodities 1985 20
Commonwealth Secretariat 1986 71
(*repealed by S.R. 1972 No. 175) 1982 136
1972 175
1971 7*
Customs Cooperation Council 1979 72
European Bank for Reconstruction and Development 1992 110
European Economic Community 1986 184
(Declaration as an Overseas Organisation)
European Launcher Development Organisation 1978 215
(*repealed by S.R.1978 No.215) 1968 158*
INTELSAT 1984 283
International Organisation for Migration 1991 457
(*repealed by S.R. 1991 No. 457) 1990 143* 1986 69*
International Atomic Energy Agency 1986 72
1986 68
1871 30
International Bauxite Association
1976 251
International Centre for Settlement of Investment Disputes 1991 42
International Cocoa Organisation 1991 260
(*repealed by S.R. 1991 No. 260) 1973 198*
International Coffee Organisation 1991 259
(*repealed by S.R. 1991 No. 259) 1978 214*
International Court of Justice 1986 73
1967 80
International Exhibitions Bureau 1989 339
1986 239
1973 174
International Jute Organisation 1984 52
International Lead and Zinc Study Group 1982 151
International Maritime Satellite Organisation 1982 210
International Organisations 1986 65
(Declaration)
(Repeal) 1982 154*
(*repealed by S.R.1986 No.65) 1981 325*
International Organisations 1986 63
(Privileges and Immunities)(Repeal) 1963 13
(repealed by S.R.1986 No.63)
International Organisations (Privileges 1986 64
and Immunities of Specialised Agencies)(Repeal) 1962 105*
(*repealed by S.R.1986 No.64)
International Sugar Organisation 1984 463
1982 153
1978 213
International Tin Council 1991 261
(*repealed by S.R.1991 No. 261) 1982 155*
International Tropical Timber Organisation 1984 477
International Wheat Organisation 1982 152
Organisations associated with the 1986 111
Asian and Pacific Council 1972 52*
(*repealed by S.R.1986 No.111) 1968 85
(repealed by S.R.1972 No. 52) 1969 104
1968 54
Organisation for Economic Cooperation 1983 7
and Development
SITA (Societe Internationale de 1989 285
Telecommunications Aeronautiques)
South East Asia Treaty Organisation 1986 57
(Repeal)
(*repealed by S.R.1986 No.57) 1967 50*
South Pacific Bureau for Economic 1986 74
Cooperation 1973 114
South Pacific Commission 1986 75
1970 171
South Pacific Forum Fisheries Agency 1984 476
South Pacific Nuclear Free Zone 1986 359
Consultative Committee
Specialised Agencies 1991 319
1989 341
1986 240
1986 67
Tuvalu Trust Fund 1987 241
Twelfth Antarctic Treaty Consultative 1986 56
Meeting (Repeal) 1986 55
(*repealed by S.R.1986 No.56) 1983 151*
(repealed by S.R.1986 No. 55) 1983 32
United Nations 1986 241
1986 66
World Tourism Organisation (Repeal) 1989 340
(*repealed by S.R.1989 No.340) 1984 276*

Footnotes

[F1]
Paragraph 7 of the First Schedule of the IO(P+I)A.

[F2]
Paragraph 8 of the First Schedule of the IO(P+I)A.

[F3]
eg, the regulations for the Bank of International Settlement provide exemption from tax on income or gains the Bank derives from investments in Australia, if that income or gain would be subject to withholding tax under section 128B(5) of the Income Tax Assessment Act 1936 (ITAA) if it were not so exempt or would be included in the assessable income of the Bank under sections 26BB or 26C of the ITAA.

[F4]
An exception is the Common Fund for Commodities where exemption is provided under regulation 5 of Statutory Rules 1985 No 20. However, the exemption is restricted under subregulation 7(4) to taxes:

.
that apply only because the obligations or securities are issued or guaranteed by the Fund; and
.
that would not apply but for the location of an office or other place of business of the fund or the place at which, or the currency in which, the obligations or securities were issued, made payable or paid.

[F5]
Part 1 of the Second Schedule of the IO(P+I)A.

[F6]
see Article 34 of the Vienna Convention on Diplomatic Relations.

[F7]
Paragraph 7 of Part 1 of the Third Schedule of the IO(P+I)A.

[F8]
Paragraph 2 of Part 1 of the Fourth Schedule of the IO(P+I)A.

[F9]
Paragraph 2A of Part 1 of the Fifth Schedule of the IO(P+I)A.

[F10]
The exemption is denied if the person is an Australian resident and the services are rendered in Australia, unless the person is not an Australian citizen and came to Austalia solely to perform his or her duties.

[F11]
The exemption is denied if the person is an Australian citizen.

[F12]
Case M90, 80 ATC 648, 24CTBR(NS) Case 65.

Previously released in draft form as TR92/D26

References

ATO references:
NO 90/6840-6

ISSN 1039 - 0731

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

TR 92/14 history
  Date: Version: Change:
You are here 5 November 1992 Original ruling  
  20 January 1999 Consolidated ruling Addendum
  27 March 2019 Withdrawn  

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