Israel, Australia ratify double taxation avoidance treaty

To alleviate double taxation, the treaty will lower withholding tax (or retention tax) rates on cross-border interest, dividend and royalty payments.

By EYTAN HALON
The national flags of Australia and Israel are seen outside the building housing the Australian Embassy in Tel Aviv (photo credit: REUTERS)
The national flags of Australia and Israel are seen outside the building housing the Australian Embassy in Tel Aviv
(photo credit: REUTERS)
Israel and Australia have signed and ratified a treaty for the avoidance of double taxation, the Finance Ministry announced on Sunday after years of negotiation.
The bilateral agreement establishes new taxation rules for income and assets connected to both countries, in addition to existing domestic taxation regulation. The treaty is in line with the OECD’s model tax convention and will enter into force on January 1, 2020. To alleviate double taxation, the treaty will lower withholding tax or retention tax rates on cross-border interest, dividend and royalty payments.
The treaty additionally includes various clauses to determine the status of individuals and companies who are residents of both countries. This should create opportunities to prevent double taxation and distribution of tax rights between states.
In addition, the treaty regulates and enables improved exchange of information between Australian and Israeli tax authorities. The new regulations also give effect to the OECD and G20’s recommendation on base erosion and profit shifting (BEPS), an international effort to tackle tax avoidance and increase transparency.
Treasurer of Australia Josh Frydenberg and Assistant Treasurer Michael Sukkar said that following the ratification of the treaty by the Australian government earlier this month, “Australia and Israel share a close friendship with strong ties... The new treaty will enhance the bilateral economic relationship between Australia and Israel by reducing taxation barriers that could impede economic activity between the two countries, providing greater certainty for taxpayers in both countries and improving the integrity of the tax system.”
According to data published by the Australian Department of Foreign Affairs and Trade, there are approximately 9,800 Israelis living in Australia, primarily in Victoria and New South Wales, and, in turn, between 10,000 and 12,000 Australians residing in Israel. In 2018, bilateral trade amounted to nearly $1.3 billion.