Modernising taxation of foreign sovereign investments
Consultation description
From 1 January 2029, the current non-codified sovereign immunity from direct tax regime will be modernised with a new sovereign tax status. The sovereign tax status regime will put the UK taxation of sovereigns on a statutory footing for the first time to improve transparency, and the sustainability of the regime. Under this new regime, foreign sovereigns will be primarily brought into the charge to UK tax on certain UK real estate income and gains but given bespoke access to the Real Estate Investment Trust regime with provision for a 15% rate on income and gains from both controlled and uncontrolled UK real estate investments. Investment management activities undertaken by sovereign investment offices and gains arising to State-operated Overseas Pension Funds will also be exempt from tax. This document sets out the proposed new regime and invites comment from those affected by 20 January 2027.