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.
On July 10, 2018, officials from Kenya and Portugal signed a DTA.
On July 11, 2018, San Marino and the United Arab Emirates signed a DTA.
The UAE's Cabinet on June 13, 2018, approved DTAs signed with Saudi Arabia, Rwanda, and Turkmenistan.
A law to ratify the Azerbaijan-Morocco DTA was tabled before Morocco's Cabinet on June 14, 2018.
Qatar's Government on June 14, 2018, confirmed that it had completed its domestic ratification procedures in respect of a DTA signed with Argentina.
Ukraine's Cabinet on June 6, 2018, approved a law to ratify a DTA Protocol signed with the United Kingdom.
Luxembourg and Vietnam agreed to continue negotiations towards a DTA Protocol at a June 15 meeting.
Sweden's Parliament on June 7, 2018, approved an amendment to the country's DTA with Switzerland to clarify the scope of the term pension fund in the agreement.
Switzerland's lower house of Parliament on May 29, 2018, approved DTAs with Kosovo and Pakistan.
The Moroccan Government has approved for ratification a DTA with the Republic of the Congo, it announced on May 29, 2018.
Argentina has approved a protocol to its DTA with Brazil, the Argentinian Official Gazette reported on May 23, 2018.
Brazil's upper house of Parliament on May 30, 2018, approved a protocol updating the DTA with Norway.
Hong Kong and Finland on May 24, 2018, signed a DTA.
Legislation ratifying a new DTA between Russia and Japan was submitted to the Russian State Assembly (the Duma) for approval on May 22, 2018.
Vietnam and Macau signed a DTA on April 16, according to a statement released by the Vietnamese Ministry of Finance on May 11, 2018.
Talks are continuing on a DTA between Jordan and Switzerland, according to a statement released by Jordan's Foreign Ministry on May 14, 2018.
The Czech Senate approved a law to ratify the DTA with Ghana on May 17, 2018.
The Philippines-Thailand DTA entered into force on March 5, and the Philippines' DTA with Sri Lanka on March 14, the Filipino tax agency announced on May 17, 2018. They will be effective from January 1, 2019.
Jordan's Minister of Planning and International Cooperation met with Luxembourg's Finance Minister to discuss enhanced cooperation between the two countries in a number of areas and agreed to seek to conclude a DTA.
Uzbekistan and Lithuania are to engage in talks towards a DTA, Uzbekistan's state news agency reported May 9, 2018.
Two Georgian committees approved the text of a DTA with Saudi Arabia and forwarded it for ratification, according to a May 17 announcement on the Georgian parliament's website.
Hong Kong gazetted an order to ratify its DTA with Saudi Arabia on May 18, 2018.
Talks are continuing on a DTA between Turkey and Afghanistan, according to a statement released by Turkey's Ministry of the Interior on May 11, 2018.
A new DTA between Finland and Spain will enter into force in January 2019, according to a May 18, 2018, announcement from the Finnish tax authority.
Andorra and Cyprus have signed a DTA, Andorra's Government announced on May 18, 2018.