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HMRC internal manual

International Exchange of Information Manual

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The DAC: Meaning of cross-border transaction

IEIM550400: The DAC: Meaning of cross-border transaction

A ‘cross-border transaction’ is defined at Article 3 paragraph 16 of the DAC.  The definition refers to a transaction or series of transactions where one or more of the following apply:

 

  • Not all of the parties to the transaction or series of transactions are tax resident in the UK
  • Any of the parties to the transaction or series of transactions is tax resident in more than one jurisdiction; (i.e. one of the parties has dual residency)
  • One of the parties to the transaction or series of transactions carries on business in another jurisdiction through a permanent establishment and the transaction or series of transactions forms part or the whole of the business of the permanent establishment
  • Arrangements made by a person in respect of business activities in another jurisdiction which that person carries on through a permanent establishment (see example below)

 

There is no definition of the term ‘business’.

 

The ruling must be exchanged if one or more of the above apply and the transactions or series of transactions have a cross border impact.  There is no definition of the term ‘cross border impact’.

 

The other jurisdiction involved in the ruling does not have to be in the EU.

 

 

Example

Company D is resident in the UK.  It has permanent establishment in country E.  Company D obtains a non-statutory clearance from HMRC regarding Foreign Branch Exemption.

 

The ruling is exchangeable under the DAC, because:

 

It is an arrangement made by a person in respect of business activities in another jurisdiction which that person carries on through a permanent establishment (company D carries on a business though a permanent establishment in Country E):

 

There is a cross border impact in that HMRC has agreed the tax treatment of the permanent establishment in Country E.  For the purposes of the DAC it is irrelevant whether there is a DTA between the UK and Country E.

 

The ruling also falls to be exchanged under Action 5 (see IEIM 541300).