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HMRC internal manual

International Manual

DT Agreements: Luxembourg - Income from a UK source paid to a resident of Luxembourg

UK dividends paid to a resident of Luxembourg - direct investor

See INTM343540 for an explanation of ‘directinvestor’.

Article 10(3)(c) provides that a direct investor company is entitled to a tax credit equalto half the tax credit to which a UK individual would be entitled, and to payment of theexcess of that tax credit after retention of 5% of the aggregate of the UK dividend plusthe half tax credit. Examples of the way in which relief is calculated can be found at INTM343540.

For this relief to be allowed, Article 10(3)(d)(i) also requires the direct investorcompany to be the beneficial owner of the dividend, and to have acquired the shareholdingfor bona fide commercial reasons.