Exemption from UK withholding tax on interest and royalty payments made to an associated EU resident company
Exemption from UK withholding tax on interest and royalty payments made to an associated EU resident company

The following Tax practice note provides comprehensive and up to date legal information covering:

  • Exemption from UK withholding tax on interest and royalty payments made to an associated EU resident company
  • Conditions for exemption
  • Beneficial ownership
  • Exemption notice is required to pay interest gross
  • Paying royalties without deduction of tax under ITA 2007, s 914
  • Notification obligations
  • Interest payments
  • Royalty payments
  • Restrictions on exemption
  • Special relationship may restrict exemption
  • More...

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marks the end of the Brexit transition/implementation period entered into following the UK’s withdrawal from the EU. At this point in time (referred to in UK law as ‘IP completion day’), key transitional arrangements come to an end and significant changes begin to take effect across the UK’s legal regime. This document contains guidance on subjects impacted by these changes. Before continuing your research, see Practice Note: What does IP completion day mean for Tax?

Where a UK payer and an EU recipient (in this Practice Note, the EU recipient is referred to as the EU payee) are 25% associates, the EU payee is not liable to UK income tax on the interest or royalty payment. The payment can therefore be paid gross (ie without deduction for UK tax) by the UK payer (essentially a UK tax resident company or a UK permanent establishment (PE)) to the EU payee (essentially, an EU tax resident company or its PE in another EU Member State) provided no restriction applies.

The exemption:

  1. is restricted to the arm's length amount of the payment in cases where there is a special relationship between the payer and the payee, or

  2. does not apply at all where any person concerned with the creation or assignment of the loan or rights in respect of which

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