Unilateral relief for foreign tax
Unilateral relief for foreign tax

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

  • Unilateral relief for foreign tax
  • Rule 1: General rule for unilateral relief
  • Rule 2: Special rule for accrued income profits
  • Rule 3: Interaction between double tax treaties and rules 1 and 2
  • Rule 4: Special rules for tax on foreign dividends
  • Rule 5: Tax charged directly on dividend
  • Rules 6–8: Underlying tax
  • Rule 9: Credit for spared tax
  • Key conditions for unilateral relief
  • Same income or gain
  • More...

Unilateral relief, like double tax relief, aims to relieve double taxation. Subject to certain conditions being satisfied and specific limits, unilateral relief:

  1. is generally provided by way of a credit against, and thereby reduces, UK income, corporation or capital gains tax for foreign tax suffered on the same income or gain

  2. is available where tax relief is not available under a double tax treaty, and

  3. is available to:

    1. UK tax resident persons, and

    2. foreign resident persons whose UK branch or agency or, in the case of a company, UK permanent establishment, suffers third country tax (ie foreign tax imposed by a territory other than its territory of residence), but

  4. does not apply to foreign tax imposed on income or gains attributable to a foreign exempt permanent establishment of a UK tax resident company

Unilateral relief does not apply to foreign dividends that are exempt from UK corporation tax. This is because if they are exempt, there is no UK tax which can be reduced by way of a credit for any foreign tax paid.

Generally, the rules quantifying an amount of income, gain or credit, including those limiting the amount of a credit, as well as the administrative regime applicable to claiming unilateral relief follow the rules which apply to claims for relief under a double tax treaty and are outside the scope of this note.


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