[Article 12, paragraph 5], 2.242 In determining whether a permanent establishment exists in a third country, the principles set out in Article 5 (Permanent Establishment) apply. It authorises the reallocation of profits between related enterprises in Australia and NewZealand on an arms length basis where the commercial or financial arrangements between the enterprises differ from those that might be expected to operate between unrelated enterprises dealing wholly independently with one another. 2.6 The Convention also applies to third country residents in relation to Article 24 (Non-Discrimination) in its application to nationals of one of the treaty countries, Article 25 (Mutual Agreement Procedure) so far as the person is a national of one of the treaty countries, and in relation to the exchange of information under Article 26 (Exchange of Information) and the assistance in collection of tax debts under Article27 (Assistance in the Collection of Taxes). This is in keeping with the meaning of foreign income tax in subsection770-15(1) of the Income Tax Assessment Act 1997 (ITAA1997). 5.21 While the existing tax treaty has provided a good measure of protection against double taxation and prevention of fiscal evasion, it has become outdated in many respects and no longer adequately reflects the current tax treaty policies and practice of Australia or New Zealand. This will encourage the free movement of workers between Australia and NewZealand. The existing treaty maintains the domestic tax law treatment where the taxation treatment of the income, profit or gain from the disposal of property is not subject to specific rules in the treaty. Australia would recognise this obligation to obtain relevant information for treaty partner countries, even in the absence of an explicit provision to this effect. These provisions will facilitate cross-border secondments within an enterprise or company group and will simplify the taxation affairs of the receiving enterprise and the employee. Where the short-term visit exemption doesnt apply, Xavier, a New Zealand resident employee of a New Zealand company is sent to work in Australia. 5.75 Businesses with New Zealand resident employees or with employees or professionals performing services in New Zealand may need to make business system changes to calculate days during which services are provided in the other country, as under the Convention very short periods of service (five days or less) are disregarded and other provisions to moderate compliance costs are provided. Paragraph 6 of this Article provides for arbitration to be used to assist in resolving those cases. In the course of negotiations, the two delegations noted: With respect to taxation of income from insurance, it is understood that the term insurance includes reinsurance., 2.156 The principles of this Article will apply to profits which are derived by a resident of one of the countries (directly or through one or more interposed trusts) as a beneficiary of a trust, except where the trust is treated as a company for tax purposes.
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