Recent Case Law. In 1997, the Federal Court handed down its decision of Lamesa61. The Court was not required to directly consider the application of Art 7 of the DTA between Australia and the Netherlands. However, it is interesting to note that at the hearing, the Commissioner conceded that, as the non- resident company did not carry on business in Australia through a PE, Art 7 prevented the taxation of the income, unless another article of the treaty applied. The facts of Lamesa are complex. Aware that a certain Australian company ("Arimco") was the subject of a takeover bid at an undervalued price, a US entity acquired the share capital of an Australian entity ("ARL"). ARL then acquired the shares in ARM. The US entity purchased the share capital of a company incorporated in the Netherlands ("Lamesa") and the ARL shares were transferred to Lamesa. ARM then made a successful takeover bid for Arimco. Subsequently, ARL was listed and Lamesa disposed of its interest in ARL for a substantial profit. The Commissioner assessed Lamesa pursuant to s 25(1)(b) of the ITAA36, which provided that the assessable income of a non-resident includes income derived directly or indirectly from Australian sources. Lamesa claimed that the profits were excluded from Australian tax by virtue of Art 7 of the DTA. The Commissioner conceded that Art 7 would provide relief to Lamesa, provided that Art 13 of the DTA did not apply. This article does not examine this decision in detail. Suffice to say that the Commissioner accepted that the Business Profits Article could apply in this instance. Einfeld J observed that it was "common ground that Lamesa has the protection of Article 7".62 Accordingly, the decision bolsters the argument that a gain made from the disposal, by a non- resident, of shares in an Australian entity can be protected by the Business Profits Article. This is despite the fact that the taxpayer was assessed pursuant to the income provisions and not the CGT provisions of Australian tax law.
Recent Case Law. In addition to the abovementioned agreements and the Convention, recent cases demonstrate mutual assistance and co-operation between SARS and foreign tax authorities in the enforcement of tax debts, and highlight increasing global efforts to combat cross-border tax evasion and attempts to conceal or dissipate assets. In Commissioner: South African Revenue Service v Xxxx and Another 2014 (3) SA 453 (GP), a request by the Australian Tax Office (ATO) to SARS to assist in the collection of taxes allegedly owed by Xx Xxxx to the ATO, was confirmed by the North Gauteng High Court who granted a preservation order over the assets of Xx Xxxx.. The request for assistance by the ATO was made in terms of Article 25A of the double taxation agreement entered into between South Africa and Australia on 1 July 1999, and amended by a Protocol signed on 31 March 2008. Article 25A, which relates to mutual assistance in the collection of taxes, came into force on 1 July 2010. Article 25A of the double taxation agreement requires SARS and the ATO to assist each other in the collection of taxes. Where a tax debt is enforceable in Australia, and is owed by a person who cannot under the laws of Australia prevent its collection, then at the request of the ATO, SARS is required to collect the tax debt and take measures of conservancy, as if it were an amount due to SARS (and vice versa in respect of a tax debt due in in South Africa). Article 25A also provides that the competent authorities of South Africa and Australia may, by mutual agreement, settle the mode of application of Article 25A. Xxxx argued that the ATO could not rely on the provisions of Article 25A in respect of taxes which arose during years of assessment commencing prior to the entry into force of Article 25A. The High Court rejected this argument and held that Article 25A has no temporal limitation. In reaching this conclusion, the Court relied on Article 2.3 of the double taxation agreement, which provides that, for purposes of Article 25A, the double taxation agreement applies to taxes of “every kind and description”. Accordingly, all taxes arising since the inception of the double taxation agreement in 1999 can be collected in terms of the provisions of Article 25A. Similar arguments were raised and rejected by the English Court of Appeal in the case of Ben Nevis (Holdings) Ltd & Anor v Commissioner for HM Revenue and Customs [2013] EWCA Civ 578, in which the English Court held that Article 25A of the double tax...
