Double Tax Agreement between Australia and Denmark: A Comprehensive Guide

The Double Tax Agreement (DTA) between Australia and Denmark is a tax treaty signed by the two countries to minimize the incidence of double taxation on income earned by residents of either country in the other. This treaty is designed to promote bilateral trade and investment and provide greater certainty for taxpayers in both countries.

An Overview of the Agreement

The DTA between Australia and Denmark was signed in 1981 and has since undergone several revisions. The latest revision was signed in 2012 and entered into force on 1 January 2013. The DTA covers taxes on income and capital gains and applies to individuals, companies, and other entities.

Under the treaty, residents of one country can be taxed in the other country only on their income sourced from that country. The treaty also provides for reduced withholding tax rates on dividends, interest, and royalties paid to residents of the other country.

For instance, dividends paid by an Australian company to a Danish resident are taxed at a maximum rate of 15%, and interest and royalties paid are taxed at a maximum rate of 10%. These lower tax rates allow businesses to invest more freely in either country without the fear of being unduly taxed.

Who is Eligible for Benefits Under the Treaty?

The DTA applies to residents of Australia or Denmark who are liable to pay tax in either country. A resident is defined as any individual or company that is deemed liable to pay tax under the respective domestic laws of the country.

In the case of individuals, a person is considered a resident of a country if they have a permanent home, a habitual abode, or a center of vital interests in that country. In the case of companies, a company is deemed a resident of a country if it is incorporated under the laws of that country.

How to Claim Benefits Under the Treaty?

To claim benefits under the DTA, a taxpayer must provide a tax residency certificate from their home country to the tax authorities in the other country. The residency certificate is issued by the taxpayer`s home country and confirms their status as a resident for tax purposes.

The taxpayer must also provide evidence of the income they have earned in the other country and the tax paid in that country. This evidence can include bank statements, invoices, and receipts.

Conclusion

The Double Tax Agreement between Australia and Denmark is a vital tool for facilitating trade and investment between the two countries. It helps to avoid double taxation on income earned by residents of either country and promotes greater certainty for taxpayers.

Under the treaty, residents of Australia and Denmark can benefit from lower withholding tax rates on dividends, interest, and royalties. To claim these benefits, taxpayers must provide a tax residency certificate and evidence of the income earned in the other country.

If you are a resident of either Australia or Denmark and are earning income in the other country, it`s important to understand your rights and obligations under the DTA. This will help you avoid unnecessary tax liabilities and ensure that you can take full advantage of the benefits provided under the treaty.