On 12 October 2022, Australia and Iceland signed a new tax treaty.
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‑Iceland 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 minor technical amendments to notes of the International Tax Agreements Act 1953.
The Government welcomes comments on the draft legislation and draft explanatory memorandum.