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The Federal Court (Bennett J) has held that the full amount of payments made by an Australian subsidiary (IBM Australia Limited) of the taxpayer (International Business Machines Corporation) under a software licence agreement were "royalties" as defined in Article 12(4) of the Australian United States of America double tax agreement, and  were therefore liable to withholding tax.

The taxpayer's arguments that part of the payments were not for the right to use software but for the right to distribute software to third parties was rejected by the Court: International Business Machines Corporation v FCT [2011] FCA 335 (Federal Court, Bennett J, 12 April 2011).


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