ATO Interpretative Decision - ATO ID 2008/63

Income Tax
Assessable Income: Irish Common Contractual Fund - residency for the purposes of the Irish Agreement

Issue

Is an Irish Common Contractual Fund (CCF) a resident of Ireland for the purposes of Schedule 20 of the International Tax Agreements Act 1953 (the Irish Agreement)?

Decision

No. The CCF is not a resident of Ireland for the purposes of the Irish Agreement.

Facts

The CCF is not a legal entity in Ireland and is not subject to tax in Ireland. It acts as a pooled investment vehicle for the assets of pension funds and invests these assets on behalf of those funds.

Irish CCF's are regulated by the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2003 (the Regulations). According to the Regulations a CCF is a contractual arrangement under which participants participate in the co-ownership of assets.

The CCF receives Australian sourced income from investing the funds of the CCF.

The CCF is not a resident of Australia for the purposes of Australian tax.

Reasons for Decision

Article 4(1)(b) of the Irish Agreement provides that a person will be a resident of Ireland if they are:

liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature but not if he is liable to tax in Ireland in respect only of income from sources therein.

Even though the trustees of the CCF in their non-trustee capacity may be residents of Ireland for the purposes of the Irish treaty, it is the residency status of the trustees in their capacity's as trustees of the CCF that is relevant for the purposes of the treaty.

The trustees of the CCF do not satisfy the residency definition in the Irish Agreement as they are not liable to tax in Ireland on income they receive in their capacity as trustees of the CCF. Furthermore, there is no tax imposed at the level of the CCF in Ireland as it is treated as a flow-through vehicle for Irish tax purposes.

This approach follows the one taken in Taxation Ruling TR 2005/14 Income Tax: Application of the Australia/New Zealand Double Tax Agreement to New Zealand Resident Trustees of New Zealand Foreign Trusts. Paragraph 7 and 8 of TR 2005/14 states:

7. For the purposes of determining residency under the NZ Agreement of a trustee of a New Zealand Foreign Trust, the relevant person is the trustee (and not the trust).

8. Article 4(2) of the NZ Agreement provides that a person is not a resident of a Contracting State where they are liable to tax in that State in respect of income from sources in that State only. It is considered that in applying Article 4(2) to these trustees we look to how they are taxed on trust income in their capacity as trustees in New Zealand. How the trustee may be taxed in respect of income derived in their non-trustee capacity is not considered relevant to this issue.

As a result, the CCF is not a resident of Ireland for the purposes of the Irish Agreement.

Date of decision: 21 April 2008

[For further information on the above decision see the following link: http://law.ato.gov.au/atolaw/view.htm?docid=AID/AID200863/00001 .]