Tie breakers—when tax treaties impact on the UK tax residence of companies
Published by a LexisNexis Tax expert
Practice notesTie breakers—when tax treaties impact on the UK tax residence of companies
Published by a LexisNexis Tax expert
Practice notes
Each jurisdiction applies its own domestic law test to determine when a company is treated as tax resident there. A company can be resident in more than one jurisdiction, and potentially taxed more than once, on the same profits. For instance, a company incorporated outside the UK whose board of directors takes all its decisions in the UK could be treated as tax resident in both the other jurisdiction (since it is incorporated there) and the UK (since the board takes its decisions in the UK). This is where a double tax treaty (DTT), and in particular, a residence tie breaker clause, can help.
A residence tie breaker is only relevant if:
- •
a company is tax resident in two jurisdictions under their domestic rules
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there is a DTT between those two jurisdictions
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in accordance with the definition of ‘resident’ applicable to the relevant DTT, the company is resident in each of those two jurisdictions, and
- •
the DTT contains a residency tie breaker
If there is
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Jurisdiction(s):
United Kingdom
Key definition:
Jurisdiction definition
What does Jurisdiction mean?
Jurisdiction means both the authority or power of the court to determine a dispute between parties as well as the territory over which the legal authority of a court extends.
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