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HMRC internal manual

International Manual

Distribution exemption: Exemption for small companies: qualifying territories

What is a qualifying territory?

CTA09/S931C(1) provides that a territory is a qualifying territory if there is a double taxation treaty between the UK and the territory that includes a non-discrimination provision in a standard form, as described in CTA09/S931C(4). A list of these territories may be found at INTM412090.

CTA09/S931C affords the Treasury a regulation-making power to provide that:

  • certain territories meeting the criteria set out in S931C(1) are not qualifying territories;
  • certain territories not meeting the criteria in S931C(1) are qualifying territories.

The regulations provide that a territory is not a qualifying territory for the purpose of CTA09/S931B in respect of any company that is specifically denied treaty benefits according to the terms of the relevant treaty. A distribution by such a company will not be exempt in the hands of a small company.

At 31 January 2011 treaties with the following territories have provisions which deny benefits to certain companies, as described below.


Companies established under the International Business Companies Act(s).


Companies established under the International Business Companies Act(s).


Persons entitled to any special tax benefits under various Cyprus enactments are excluded from benefiting from treaty reduced rates / exemption of UK tax on dividends, interest and royalties.


Companies established under enactments relating to International Business Companies and International Finance Companies.


Holding companies established under the Luxembourg 1929 Act and 1937 Act.


Persons carrying on offshore business activity under the Labuan Offshore Business Activity Act 1990 and its 2004 amendment.


Persons entitled to special tax benefits under various enactments.