The Australian Government has moved to clarify the tax treatment of foreign investors, following concerns over the practical operation of the Investment Manager Regime (IMR) and the new tax system for managed investment trusts (MITs).
The aim of the IMR is to attract foreign investment to Australia and the promote the use of Australian fund managers, by removing tax impediments to investing in the country. Subject to meeting the appropriate tests, foreign funds that invest via an Australian fund manager are eligible to access IMR concessions in relation to disposal gains and losses, and can disregard certain Australian income tax consequences.
The Government said it is now clarifying that when a foreign investor invests in Australia through a foreign fund or through an independent Australian fund manager, the investor will be in the same tax position as if they had invested directly.
The Government will consult on whether a legislative amendment is required to ensure that the engagement of an Australian independent fund manager will not cause a fund that is legitimately established and controlled offshore to be deemed an Australian resident. Any legislative amendment would be retrospective to apply from the start of the IMR regime in 2015.
In 2016, the Government introduced a new tax system for MITs.
The Government said that the industry has identified potential differences in the capital gains tax (CGT) outcomes for investors in MITs and Attributions MITs (AMITs) may unnecessarily be preventing some MITs from opting in and becoming AMITs. It will clarify that investors in MITs will be required to adjust the cost base of their units in the MIT when it distributes an amount claimed to be non-assessable (the CGT concession amount).
This will mean that investors in MITs will no longer be able to exclude the distributions they receive in relation to these non-assessable amounts in recalculating their cost base, and CFT event E4 gains. E4 gains arise where an investor receives a non-assessable payment from a unit trust.
The Government will also move to ensure that a MIT with an income year starting on a date other than July 1 can opt into the AMIT regime from its first full income year starting on or after July 1, 2015. It will amend the meaning of fund payment to clarify that the fund payment for both MITs and AMITs should be calculated on taxable Australian property net capital gains only.
In addition, the Government will amend the MIT withholding provisions to clarify that they apply to the amount of the fund payment that is attributed to the taxpayer by an AMIT, and it will amend the meaning of an AMIT so that single unitholder widely held entities can access the AMIT regime. It will also amend the rounding adjustment and trustee shortfall tax provisions in the income tax law, to ensure that the discount capital gains are properly taken into account under the AMIT unders and overs regime.
Hungary and Kyrgystan have begun DTA negotiations, the Hungarian Ministry of Foreign Affairs and Trade announced on February 28, 2018.
Morocco and Cape Verde will begin DTA negotiations in March 2018, Morocco's Tax Agency announced.
The DTA signed between Mexico and Saudi Arabia entered into force on March 1, 2018, following the publication in Mexico's official Gazette of a law ratifying the agreement on February 26, 2018.
Bangladesh and Morocco signed a DTA on March 1, 2018.
Meeting over two days ending February 28, 2018, representatives from Pakistan and the Philippines agreed to renegotiate their DTA.
The UK and Mauritius signed a DTA on February 28, 2018.
Singapore signed a DTA with Tunisia on February 27, 2018.
Bahrain's King, Hamad bin Isa Al Khalifa, has approved a law ratifying the DTA Protocol signed with the Philippines, state media reported on February 20, 2018.
The Luxembourg Government on February 23, 2018, reported it is pushing for the negotiation of an amended DTA with Oman.
According to a monthly update from the Mexican Government, Mexico's DTA with Jamaica entered into force on February 24, 2018.
According to preliminary media reports, Switzerland's upper house of parliament of February 26, 2018, approved laws to ratify the DTAs signed with Kosovo and Pakistan and a Protocol with Latvia.
The Luxembourg Government announced that it is engaged in DTA negotiations with 15 countries, in a January 29, 2018, update, including newly DTA negotiations with the UK.
Ireland and Ghana signed a DTA on February 7, 2018.
According to a statement from the President's office, Iran's Cabinet on February 18, 2018, approved the signing of DTAs with Sweden, Lithuania, and Japan.
On February 19, 2018, the Philippines Senate adopted three resolutions ratifying agreements for the avoidance of double taxation with Mexico, Thailand, and Sri Lanka.
Japan and Spain have agreed a DTA in principle, to replace their existing pact, the Japanese Ministry of Foreign Affairs announced February 21, 2018.
The Armenian Ministry of Finance said February 22, 2018, that a DTA had been initialed after four days of negotiations with Iraq.
India's Ministry of Finance on February 22, 2018, revealed that an updated DTA between India and Kenya had been published in the Official Gazette, to replace the agreement in place between the two countries since 1985.
South Africa's DTA Protocol with Brazil entered into force on February 10, 2018.
Moldova's Cabinet on January 31, 2018, approved a law to ratify the DTA signed with Georgia in November 2017.
According to preliminary media reports, Kazakhstan's Senate on February 15, 2018, approved a law to ratify a Protocol to the DTA with Azerbaijan.
Poland published an order in its Official Gazette on February 8, 2018, to bring the DTA signed with Ethiopia in 2015 into force. The agreement entered into force on February 14, 2018.
Paraguay's Government on February 11, 2018, announced the signing of a DTA with Qatar.
Guernsey's TIEA with Portugal will enter into force March 15, 2018, according to a February 20, 2018, update from the Guernsey Government.
The Botswana Government has announced that the country will sign a DTA Protocol with Zimbabwe by the end of the year.