On 28 March 2019, Australia and Israel signed a new tax treaty, available on the Treasury’s website.
The new tax treaty reduces tax impediments to bilateral trade and investment. In particular, the tax treaty alleviates double taxation by lowering withholding tax rates (on cross border interest, dividend and royalty payments) and also includes OECD/G20 base erosion and profit shifting (BEPS) recommendations to target international tax avoidance practices.
The Australia-Israel tax treaty will enter into force once both countries have completed their domestic requirements to bring the new tax treaty into force, including amending Australia’s domestic law.
The Government has released draft legislation to implement the new treaty. The draft legislation and accompanying explanatory memorandum also includes amendments to ensure that Australia can exercise its taxing rights under the new tax treaty and all future tax treaties, by deeming certain income to have an Australian source.
The Government welcomes comments on the draft legislation and draft explanatory memorandum.