Article 4 of the Australia-New Zealand Double Tax Agreement: An Overview
Double tax agreements (DTAs) are bilateral agreements between two countries that aim to eliminate the possibility of double taxation for individuals and companies that operate in both countries. One such agreement is the Australia-New Zealand Double Tax Agreement, which was signed in 2008 and entered into force in 2010. Article 4 of this agreement deals with the concept of tax residence and provides guidance on how it should be determined.
Tax residence is the key determinant of a person`s liability to pay tax in a given country. According to Article 4 of the Australia-New Zealand Double Tax Agreement, an individual is considered a resident of a contracting state if they have a permanent home in that state, or if they stay there for a certain period of time. This period is usually 183 days or more in a given tax year. However, there are several exceptions to this rule, which are set out in the agreement.
The first exception relates to individuals who are residents of both Australia and New Zealand according to their domestic laws. In such cases, the person`s residence status is determined according to a number of factors, including where their personal and economic ties are strongest.
Another exception applies to government employees. If an individual is employed by the government of one contracting state and is stationed in the other contracting state, they will be considered a resident of the first state for tax purposes.
Finally, there is an exception for individuals who are temporary residents of one contracting state for the purposes of studying, teaching, or conducting research. In such cases, the person`s residence status will be determined according to their domestic laws.
Overall, the aim of Article 4 of the Australia-New Zealand Double Tax Agreement is to prevent double taxation and provide clarity on how tax residence should be determined. By understanding the rules set out in this article, individuals and companies can ensure that they comply with the tax laws of both countries and avoid unnecessary tax liabilities.