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HMRC internal manual

International Manual

Description of double taxation agreements: Management and technical fees

Some agreements with developing countries contain an Article dealing specifically with fees of this kind.

Management and technical fees are defined in the Article. The definitions vary from agreement to agreement but generally cover payments of any kind for services of a technical, managerial or consultancy nature.

The Article gives primary taxing rights over the fees to the country in which the fees arise, this being deemed to be the country of which the payer is a resident. This may be contrasted with the rules concerning source in United Kingdom domestic law which are discussed in the case of Yates v GCA International Ltd (64TC37). It provides for a tax at a specified rate on the gross fees, but if the fees are `effectively connected’ (see INTM153110) with a permanent establishment or fixed base through which the recipient carries on business in that country, then such fees come within the business profits Article.

A recipient of such fees can sometimes elect to have the tax charged on the fees calculated as if he had a permanent establishment or fixed base in the country in which the fees arise. The United Kingdom will give a United Kingdom resident credit either for the tax deducted from the gross fees or for the tax calculated in accordance with the business profits or independent personal services Article. See INTM168062 for guidance concerning the amount of credit relief due.