New Australia-Finland Taxation Treaty Signed

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New Australia-Finland Taxation Treaty Signed



The Treasurer and the Finnish Minister of Finance today signed a new tax treaty between Australia and Finland to replace the existing, outdated treaty.

The new treaty will enhance the important investment relationship between Australia and Finland, further assisting trade and investment flows, while reflecting current tax treaty policies and practices of the two countries.

It will substantially reduce withholding tax on certain dividend, interest and royalty payments in line with Australia’s tax treaties with the United States and the United Kingdom, and more recently with France and Norway.

These changes reduce the cost to Australian businesses of accessing intellectual property, equity and finance for expansion.

In turn, the new treaty reduces obstacles inhibiting further corporate expansion into Finland.

The new treaty will broadly update taxation arrangements between Australia and Finland. In particular, it will align capital gains tax treatment more closely with Organisation for Economic Cooperation and Development (OECD) practice and provide for improved integrity measures.

This new treaty is consistent with the Government’s response to the Review of International Taxation Arrangements and updates another important part of Australia’s treaty network.

The new treaty will enter into force when both countries advise that they have completed their domestic requirements. Legislation for this purpose will be introduced in the Australian Parliament as soon as practicable.

The new treaty, which highlights the close cooperation between Australia and Finland, was signed on the occasion of the G-20 meeting in Melbourne.  International forums such as the G-20 provide valuable opportunities for Australia to forge stronger relationships with our global partners.

Copies of the new treaty are available on the Treasury’s website


20 November 2006


Appendix 1 – Technical changes to the treaty

The new treaty is a comprehensive taxation agreement and contains provisions for the avoidance of double taxation and the prevention of fiscal evasion in relation to income flowing between Australia and Finland.

It replaces the existing Australia-Finland tax treaty (signed in 1984 and amended by Protocol in 1997).

The new treaty provides that dividends, interest and royalties paid from one country (the source country) to a person who is a resident in the other country will generally remain taxable in both countries, but with limits on (and in some instances an exemption from) the tax that the source country may charge on residents of the other country.


Under the new treaty, an exemption in the source country will apply on inter-corporate non-portfolio dividends where the recipient holds directly at least 80 per cent of the voting power of the company paying the dividend, subject to certain conditions. A 5 per cent rate limit applies on all other non-portfolio inter-corporate dividends where the recipient holds directly at least 10 per cent of the voting power of the company paying the dividend. A general limit of 15 per cent continues to apply for all other dividends.


Source country tax on interest will continue to be limited to 10 per cent. However, no tax will be chargeable in the source country on interest derived by:

  • the government or a political or administrative subdivision or local authority of the other country (including a bank performing central banking functions); or
  • a financial institution resident in the other country.

The exemptions are subject to certain safeguards.


The general limit for royalties will be reduced from 10 to 5 per cent. The new treaty also provides that amounts derived from equipment leasing (including certain container leasing) will be excluded from the royalty definition. Such amounts would either be treated as profits from international transport operations or as business profits.

Other features

In modernising the tax treaty arrangements in line with Australia’s current tax law and treaty policies and practice, the new treaty contains:

  • a revised list of taxes covered;
  • revised thresholds for the source country taxation of business profits, including provisions that ensure that Australia’s taxing rights over our natural resources are suitably protected;
  • comprehensive alienation of property provisions which align the capital gains tax treatment more closely with the OECD’s practice while preserving Australia’s taxing rights over Australian assets with a physical connection with Australia, such as mining rights and other interests related to Australian real property;
  • improved integrity measures to provide for more effective exchange of information on a broader range of taxes, including goods and services tax, and to provide for reciprocal assistance in collection of taxes; and
  • new rules to prevent tax discrimination against nationals and Australian businesses operating in Finland and vice versa.

    The new treaty will enter into force 30 days after the Australian and Finnish governments exchange diplomatic notes advising that the constitutional processes required for entry into force have been completed.

In Australia, this process involves tabling the new treaty and a National Interest Analysis in the Parliament for review by the Joint Standing Committee on Treaties. Legislation will also be required to complete the necessary procedures for entry into force, and a Bill for that purpose will be introduced into Parliament as soon as practicable.

Upon entry into force, the new treaty will have effect according to the tenor of the entry into force provisions.