How companies claim Double Taxation Relief and the types of income covered by the double taxation treaties.
If a company has income from a source in one country and is resident in another, it may be liable to pay tax in both countries under their tax laws. To avoid double taxation in this situation, the UK has negotiated double taxation treaties with more than 100 other countries. Companies resident in a country with which the UK has a double taxation treaty may be able to claim exemption or partial relief from UK tax on certain types of income from UK sources. The precise conditions of exemption or relief can be found in the text of the relevant treaty.
Who can claim?
Relief from UK tax provided in a double taxation treaty isn’t automatic. You have to apply to HM Revenue and Customs (HMRC). Only the overseas person or concern receiving the income can apply.
Applications for relief at source and claims to repayment of UK Income tax may be made by:
- other concerns, such as partnership, pension funds, trusts etc
Interest, royalties, pensions and purchased annuities
A company resident in a double taxation treaty country which receives income from interest, royalties, pensions or purchased annuities from UK sources may be able to apply for relief from UK tax.
The relief available depends upon the terms of each double taxation treaty and HMRC will decide whether an application is allowable. If it is, relief at source is normally allowed on future payments of the income. HMRC will direct the payer to pay the income either:
- without tax deducted
- with tax deducted at a reduced rate of tax as laid down in the double taxation treaty
Where tax has already been deducted from previous payments of the income, the repayment of UK tax is made by HMRC.
EU cross-border interest and royalties
If your company receives interest or royalties from ‘associated companies’ in the UK, you can read about claiming relief from UK Income Tax. You can use form EU Interest and Royalties to apply for relief at source from UK income tax.
Specialised interest and royalty applications
There is separate guidance if your company is claiming relief on interest and royalty payments paid from a UK company (including syndicates) or if it’s an overseas corporate lender.
Forms to claim Double Taxation Relief on interest, royalties, pensions and purchased annuities
You can use HMRC’s form to:
- apply for relief at source from UK Income Tax on interest, royalties, pensions and purchased annuities
- claim repayment of UK Income Tax already deducted
You don’t need to send tax vouchers with your completed claim form. But you should keep them safe in case they are needed later to support your claim. If you have any doubt about how you have completed the form, you can send vouchers if you think it will help.
You can download the form for where your company is resident from the links below:
- New Zealand
- South Africa
- United States of America
If your company’s country of residence is not shown, please use form DT-Company.
Please send your applications to:
Large Business Tax Treaty Team
Castle Meadow Road
Helpline telephone number: 03000 547584
Property income distributions paid by UK Real Estate Investment Trusts
From 1 January 2007, property income distributions are paid after deduction of basic rate Income Tax.
The claim form is available to download and after completion needs to be certified by the taxation authorities of your country of residence to confirm that you’re a resident of that country.
Company ‘portfolio’ shareholders
Some of the UK’s double taxation treaties provide for payment to a resident of the other country of part of the tax credit attached to UK dividends. But in practice, the amount that the UK retains under the double taxation treaty covers the whole of the tax credit. So if a company ‘portfolio’ shareholder made a double taxation treaty claim for payment of tax credit, there would be no balance of tax credit remaining for HMRC to pay.
Direct investor companies
The UK’s double taxation conventions with the following countries provide an entitlement to a tax credit to direct investor companies which controls 10% or more of the voting power in the UK company paying the dividend:
- Switzerland (for dividends paid before 6 April 2009)
This is equal to half the tax credit to which a UK resident individual would be entitled and for payment of the excess of that half tax credit over their liability to UK tax. The UK tax liability is 5% of the aggregate of the dividend and the half tax credit.
- Amount of UK dividend paid to direct investor company (£1 million).
- UK tax credit (£111,111.11).
- One half of the tax credit (£55,555.55).
- Aggregate amount of dividend plus the half tax credit (£1,055,555.55).
- 5% of the aggregate amount (£52,777.77).
The amount payable to the direct investor company is the amount at step 3 less the amount at step 5 (£2,777.78).
If your company is resident in Netherlands you can use form Netherlands/Direct Investor Company/Credit. If your company is resident in Switzerland you can use form Switzerland/Direct Investor Company/Credit.
If you company is resident in Belgium, Italy, Luxembourg or Sweden you can get the claim form by contacting HMRC’s Large Business Double Taxation Treaty Team Helpline, Telephone: 03000 547584 , Fax:03000 564002. If you’re calling from outside the UK, Telephone: + 44 3000 547584.
To make sure that you get the correct claim form please:
- give the company’s full name and address
- say that it is a direct investor company receiving UK dividends
You don’t need to send tax vouchers with the completed claim form, but you should keep them safe in case they’re needed later to support the claim.