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HMRC internal manual

Double Taxation Relief Manual

From
HM Revenue & Customs
Updated
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Estonia: Interest

Estonian tax on interest is reduced to nil in some cases and otherwise to 10 per cent of the gross amount, where the UK resident recipient is the beneficial owner of the interest (Article 11(2)), except where the debt-claim in respect of which the interest is paid is effectively connected with a permanent establishment or fixed base which the UK resident recipient has in Estonia. In the latter circumstances, the provisions of the Business Profits Article (Article 7) or the Independent Personal Services Article (Article 14) will apply

Paragraph 6 of the Exchange of Notes contains a “Most Favoured Nation” provision, relating to interest paid in respect of a loan made, guaranteed or insured by a financial institution of a public character. The effect of this provision is that from 21 May 2006, (the date the Estonia/Netherlands Convention entered into force) no source state tax is permitted under the Convention in respect of the interest on such a loan.