A double tax agreement (DTA) is a treaty between two countries that stops the same income being taxed twice. Australia has comprehensive tax treaties with 46 jurisdictions. They cut the 30% withholding tax on unfranked dividends and royalties and the 10% on interest. Under the Australia-US DTA the limits are 15% on dividends (5% for a 10% holding, 0% for an 80% holding), 10% on interest and 5% on royalties. AusBusinessRegister.com.au, a registered tax agent (TPB 26386942), advises foreign-owned Australian companies on treaty rates and withholding.
A double tax agreement (DTA) is a treaty that stops the same income being taxed twice: once where it is earned and again where the owner lives. Australia has comprehensive tax treaties with 46 jurisdictions.
For a foreign company in Australia, a DTA mainly cuts the withholding tax on dividends, interest and royalties sent home. Without a treaty, Australia withholds 30% from unfranked dividends and royalties and 10% from interest.
What Is a Double Tax Agreement?
A DTA is a bilateral treaty. Australia's treaties have the force of law through the International Tax Agreements Act 1953. For foreign companies operating in Australia, a DTA typically:
- caps withholding tax on dividends, interest and royalties paid from Australia to the treaty country
- defines a permanent establishment, which decides when a foreign company's Australian activity is taxable here
- allocates taxing rights between the two countries for each type of income
- gives a dispute process through the two tax authorities.
Countries with DTAs with Australia
Treasury lists comprehensive income tax treaties in force with these 46 jurisdictions:
| # | Country | # | Country | # | Country |
|---|---|---|---|---|---|
| 1 | Argentina | 17 | Ireland | 33 | Russia |
| 2 | Austria | 18 | Israel | 34 | Singapore |
| 3 | Belgium | 19 | Italy | 35 | Slovakia |
| 4 | Canada | 20 | Japan | 36 | South Africa |
| 5 | Chile | 21 | Kiribati | 37 | Spain |
| 6 | China | 22 | Korea (Republic of) | 38 | Sri Lanka |
| 7 | Czech Republic | 23 | Malaysia | 39 | Sweden |
| 8 | Denmark | 24 | Malta | 40 | Switzerland |
| 9 | Fiji | 25 | Mexico | 41 | Taiwan |
| 10 | Finland | 26 | Netherlands | 42 | Thailand |
| 11 | France | 27 | New Zealand | 43 | Turkey |
| 12 | Germany | 28 | Norway | 44 | United Kingdom |
| 13 | Hungary | 29 | Papua New Guinea | 45 | United States |
| 14 | Iceland | 30 | Philippines | 46 | Vietnam |
| 15 | India | 31 | Poland | ||
| 16 | Indonesia | 32 | Romania |
Two notes on the count. Treasury's table also lists Greece, but that is an airline profits agreement only, not a full DTA. The Taiwan agreement is an arrangement of less than treaty status, given effect by the International Tax Agreements Act 1953.
Notable absence: Hong Kong. Australia has no DTA with Hong Kong, and the Australia-China treaty does not cover it. Default withholding rates apply to payments to Hong Kong residents.
Withholding Tax Rates by Country
These are the treaty limits on Australian withholding tax for the countries our clients come from most. "Company holding" means a company that holds at least the percentage of voting power shown. For how the Australian payer withholds and reports the tax, see our guide to withholding tax in Australia.
| Country | Dividends (portfolio) | Dividends (company holding) | Interest | Royalties |
|---|---|---|---|---|
| United States | 15% | 5% (10%+ holding), 0% (80%+ holding) | 10% (0% for unrelated financial institutions) | 5% |
| United Kingdom | 15% | 5% (10%+ holding), 0% (80%+ holding) | 10% (0% for unrelated financial institutions) | 5% |
| Singapore | 15% | 15% (no lower rate) | 10% | 10% |
| China | 15% | 15% | 10% | 10% |
| Japan | 10% | 5% (10%+ holding), 0% (80%+ holding) | 10% (0% for unrelated financial institutions) | 5% |
| India | 15% | 15% | 15% | 10% or 15% |
| Germany | 15% | 5% (10%+ holding), 0% (80%+ holding) | 10% (0% for unrelated financial institutions) | 5% |
| Canada | 15% | 5% on the franked part (10%+ holding) | 10% | 10% |
| New Zealand | 15% | 5% (10%+ holding), 0% (80%+ holding) | 10% (0% for unrelated financial institutions) | 5% |
| Indonesia | 15% | 15% | 10% | 10% or 15% |
| Malaysia | 15% | 0% on the franked part (10%+ holding) | 15% | 15% |
| Korea (Republic of) | 15% | 15% | 15% | 15% |
Without a DTA: 30% on unfranked dividends and royalties, 10% on interest.
Notes:
- The 0% dividend rates need an 80% holding for 12 months and other conditions, such as a limitation on benefits test.
- Singapore, China, India, Indonesia and Korea have no lower dividend rate for company holdings. Fully franked dividends still have no withholding tax under Australian law.
- Where two royalty rates are shown, the lower rate applies to some types, such as equipment rental.
Rates are the treaty limits, checked against the treaty texts (as modified by the Multilateral Instrument where relevant). The exact rate depends on the treaty wording and your structure. Ask a tax adviser before relying on a rate.
The Australia-US DTA
The Australia-US tax treaty is a 1982 convention, amended by a 2001 protocol that has been in force since May 2003. The protocol lowered the dividend and royalty limits and added a 0% rate for large corporate holdings.
| Payment from Australia to the US | Treaty limit |
|---|---|
| Dividends, general | 15% |
| Dividends to a US company with at least 10% of the voting power | 5% |
| Dividends to a US company with 80% or more of the voting power for 12 months, meeting the limitation on benefits test | 0% |
| Interest, general | 10% |
| Interest to an unrelated financial institution, or a government body | 0% |
| Royalties | 5% |
For a US parent with an Australian subsidiary, the practical result is simple. Fully franked dividends carry no Australian withholding tax. Unfranked dividends are usually taxed at 0% or 5%. See our US company expanding to Australia guide for setup.
Countries Without DTAs
If your company is based in a country without a DTA with Australia, the default withholding rates apply:
| Payment Type | Default Rate |
|---|---|
| Unfranked dividends | 30% |
| Interest | 10% |
| Royalties | 30% |
| Fully franked dividends | Nil |
Countries and territories without a DTA include Hong Kong, the United Arab Emirates, Brazil, Saudi Arabia and Nigeria. Many low-tax jurisdictions, such as the Cayman Islands and the British Virgin Islands, have only a tax information exchange agreement, which does not reduce withholding tax.
For companies from these places, paying fully franked dividends is the main way to avoid dividend withholding tax.
Interaction with Franking Credits
- Fully franked dividends have no withholding tax, with or without a DTA. This comes from Australian law, not the treaty.
- A DTA reduces withholding on the unfranked part of dividends, and on interest and royalties.
- Foreign shareholders cannot claim refunds of franking credits. The benefit is the withholding exemption.
See our profit repatriation guide for how franking works, and the Australian company tax rate guide for the 30% and 25% rates.
Permanent Establishment Under DTAs
DTAs define when a foreign company's activities in Australia create a permanent establishment (PE). If a PE exists, the business profits of that PE are taxable in Australia.
Under most of Australia's DTAs, which follow the OECD model, a PE includes:
- a fixed place of business, such as an office, branch, factory or workshop
- a building or construction project that lasts longer than the period set in the treaty
- a dependent agent who habitually concludes contracts for the company.
Activities that are only preparatory or auxiliary do not usually create a PE. Examples are storing or displaying goods, buying goods, and collecting information or market research.
This matters for a representative office, which is meant to stay below the PE threshold. See also our permanent establishment guide.
How to Claim DTA Benefits
The payer (your Australian company) applies the treaty rate when it makes the payment, provided:
- the recipient is a tax resident of the treaty country
- the recipient is the beneficial owner of the income, not just a conduit
- the payer holds evidence of the recipient's residency, usually a certificate of tax residency from the foreign tax authority.
If too much tax was withheld, the foreign recipient can apply to the ATO for a refund of the excess.
Treaty rates start with the right Australian structure. AusBusinessRegister.com.au sets up subsidiaries and branches (company registration From $900 (+ $636 ASIC fees)) and provides taxation services (From $1,500/yr) for foreign companies operating in Australia.
Country-Specific Guides
Our country guides cover treaty points, FIRB and practical setup for companies from:
How AusBusinessRegister.com.au Can Help
Your structure (subsidiary, branch or representative office) decides how a DTA applies to your payments. AusBusinessRegister.com.au assists with:
- Company formation: an Australian subsidiary, From $900 (+ $636 ASIC fees)
- Branch registration: registering your foreign company in Australia, From $1,500 (+ $636 ASIC fees)
- Resident director: every Australian Pty Ltd needs at least one Australian-resident director, From $6,000/yr + GST
- R&D tax incentive: an Australian subsidiary doing R&D for a parent in a treaty country may still be able to claim
- Taxation services: tax returns and treaty questions for foreign-owned companies
Request a quote to discuss your Australian company setup.
Frequently Asked Questions
What is a double tax agreement?
A double tax agreement (DTA), or tax treaty, is a treaty between two countries that stops the same income being taxed in both. It caps the withholding tax on dividends, interest and royalties, sets when a business has a taxable presence (a permanent establishment), and gives a way to resolve disputes.
How many double tax agreements does Australia have?
Australia has comprehensive income tax treaties with 46 jurisdictions, listed on Treasury's income tax treaties page. Treasury's table has 47 entries, but the Greece entry is an airline profits agreement only.
Does Australia have a tax treaty with the US?
Yes. The Australia-US convention was signed in 1982 and amended by a protocol signed in 2001, which has been in force since May 2003.
What is the withholding tax rate under the Australia-US tax treaty?
Dividends: 15%, or 5% for a US company holding at least 10% of the voting power, or 0% for a US company that has held 80% or more for 12 months and meets the limitation on benefits test. Interest: 10%, or 0% for unrelated financial institutions. Royalties: 5%.
Does Australia have a DTA with Hong Kong?
No. Australia has no double tax agreement with Hong Kong, and the Australia-China agreement does not cover Hong Kong. Australia's default withholding rates apply: 30% on unfranked dividends and royalties and 10% on interest.
Do franked dividends avoid withholding tax without a DTA?
Yes. Fully franked dividends paid to foreign residents have no Australian withholding tax under domestic law, whether or not a treaty applies. Only the unfranked part is taxed.
Do DTAs remove withholding tax completely?
Sometimes. The US, UK, Japan, Germany and New Zealand treaties allow 0% on dividends to a company holding 80% or more that meets extra conditions, and several allow 0% on interest paid to unrelated financial institutions. Most treaties reduce the rate rather than remove it.
How do you claim a reduced DTA rate?
The Australian payer applies the treaty rate when it pays. The recipient must be a tax resident of the treaty country and the beneficial owner of the income, and the payer should hold evidence such as a certificate of tax residency. If too much was withheld, the recipient can ask the ATO for a refund.
This content is general information only and is not legal, financial or tax advice. Laws and regulations change often. For advice on your circumstances, speak to a qualified adviser.