International tax concepts ― overview

Produced by Tolley in association with Anne Fairpo

The following Corporation Tax guidance note Produced by Tolley in association with Anne Fairpo provides comprehensive and up to date tax information covering:

  • International tax concepts ― overview
  • Common situations
  • Determining company residence
  • Overseas company establishing in the UK
  • UK company establishing outside the UK
  • Is a holding company required?
  • How will investments or trading operations be financed?
  • Tax treatment of intellectual property
  • Transfer pricing planning

International tax concepts ― overview

Common situations

International tax is relevant to a number of different situations, the most common of which are outlined below. Also, see the A–Z of international tax terminology guidance note for an explanation of some of the terms which are frequently encountered when advising on international tax matters, together with links to additional material.

Determining company residence

The concept of residence is important because it typically determines where a company is subject to tax. In the UK, corporation tax is chargeable on the worldwide profits of any company that is resident in the UK. A non-UK resident company is within the charge to corporation tax only if it carries on a trade here through a permanent establishment (PE). See the Residence of companies guidance note for further details.

Overseas company establishing in the UK

An overseas company establishing in the UK will need to determine if it has a PE here and whether it should establish a branch or a subsidiary, as this will determine the way in which the profits will be taxed. See the Setting up in the UK ― branch or subsidiary and Permanent establishment guidance notes.

Transactions made between the parent company and subsidiary may be subject to the UK transfer pricing rules, which could result in an adjustment being required in the UK corporation tax return if such transactions are not considered by HMRC to be carried out on an arm’s length basis. The maintenance of appropriate documentary evidence is also required by the UK transfer pricing regime. See the Transfer pricing rules ― overview guidance note.

Even without a branch or a subsidiary, there may be withholding tax or UK filing requirements to consider. See the Non-UK companies subject to UK tax guidance note for further details.

The potential application of the diverte

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