Australia is the latest country to enact new rules concerning the sale of certain properties by non-residents.
Specifically, Australia has introduced a requirement to withhold 10% tax on the purchase price of real property and indirect real property interests purchased from a non-resident vendor.
Tax authorities in Australia recently announced that, starting July 1, 2016, resident and non-resident purchasers will be required to withhold 10% of the purchase price of relevant Australian assets (i.e., taxable Australian real property assets and indirect Australian real property interests) purchased from a non-resident vendor (subject to certain exclusions, including where direct taxable Australian real property has a market value of less than $2 million).
A vendor is considered a "non-resident" unless it obtains a clearance certificate that confirms its residency status during the sale process. If a clearance certificate is not obtained, the purchaser must withhold 10% from the purchase price. The vendor can apply to vary the amount of withholding tax if no capital gain is expected, or if the capital gain is less than the withholding tax. The non-resident vendor may claim the amount of withholding tax as a credit in its Australian income tax return.
This taxation regime is similar to section 116 of Canada's Income Tax Act, which generally requires purchasers to withhold tax on an acquisition from a non-resident vendor of a certain taxable Canadian property, unless the non-resident vendor has a certificate of compliance from the CRA.
For more information see KPMG's TaxNewsFlash "Foreign resident withholding tax — vendor considerations," or contact your KPMG adviser.
Information is current to August 23, 2016. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500