UK Tax Treaties with other countries

The United Kingdom has signed Double Taxation Agreements (DTA) with 149 countries.
The DTA aim to eliminate double taxation of income in one country and pay to residents of another country.
Most treaties are based on the OECD Model Taxation Convention.

UK Tax Treaties with Taiwan
UK Tax Treaties with China

E-mail: lon4ww@evershinecpa.com
Ms. Anny Lin, speak both English and Chinese.
WeChat: annylin8008
Skype: annylin8008

We set up below judgment criteria on Treaty application:

Scenario:
If you are not a United Kingdom legal resident, and if your resident country has DTA with the United Kingdom, and if you are without PE (Permanent Establishment), please go to Section A.
If you are not a United Kingdom legal resident, and if your resident country has DTA with the United Kingdom, and if you are with PE (Permanent Establishment) please go to Section B.
If you are not a United Kingdom legal resident, and if your resident country has no DTA with the United Kingdom, please go to Section C.

Section A:
Scenario: If you are not a United Kingdom legal resident, and if your resident country has DTA with United Kingdom, and if you are without PE (Permanent Establishment), it will be redeemed as “non-United Kingdom Domestic Sourced Income”.
That means the United Kingdom will levy zero-tax.
However, you still need to send the zero-tax application to the United Kingdom Tax Bureau for being approved.
Below, we will let you understand through Q&A.

DTA-Q-10:
英國的哪些外國法律居民公司可以依DTA申請沒有常設機構(PE)下零稅率?
In United Kingdom, which foreign legal resident company can apply for zero tax rate without PE under DTA?

DTA-A-10:
The United Kingdom has signed DTAs with 149 countries:

DTA-Q-20:

為什麼在DTA下該國外資沒有常設機構 (PE)之外資所得，可以享受零稅率?
Why does the Country’s foreign capital without a permanent establishment (PE) in the United Kingdom, under the DTA enjoy zero tax rate?

DTA-A-20:
It follows Article 5 and Articles 7 in the DTA Treaty. The article defines if the foreign entity has PE in the United Kingdom.
Article 7 regulates if no PE, non-United Kingdom domestic sourced income will not be levied tax in the United Kingdom.

DTA-A-Q30:
哪些情況被視為沒有PE，外資在該國設立子公司會被視為外資的在該國的子公司嗎? Under what circumstances are deemed to have no PE, and will the establishment of a foreign-funded subsidiary in the United Kingdom be regarded as a foreign-funded subsidiary in United Kingdom?

DTA-A-30:
According to DTA Article 5 item 7, A Wholly Foreign Owned subsidiary in the United Kingdom will not be treated as PE because it is a separate legal entity.
That means if a United Kingdom Subsidiary pay service fee to non-United Kingdom Parent Company through service contract signed between subsidiary and non -United Kingdom Parent company
as an investor, a non-United Kingdom Parent Company can apply zero tax.
As for if paid amount is reasonable, it will get involved TP (Transfer Pricing) judgment by the United Kingdom Tax Bureau.
Please see the United Kingdom Transfer Pricing webpage

DTA-Q-40:
外資在英國設立分公司或辦事處，可否適用沒有PE下的零稅率?
If a foreign company establishes a branch or office in the United Kingdom, can the zero-tax rate without PE be applied?

DTA-A-40:
According to DTA Article 5 item 2, If a foreign company sets up a branch or Office in the United Kingdom, then will be considered as United Kingdom domestic Income.
But According to DTA Article 5 item 4, if an Office is only doing a preparatory or auxiliary activity, will apply zero-tax rate.

DTA-Q-50:
英國依DTA沒有PE下零稅率申請的程序為何?
What is the procedure for the United Kingdom to apply for zero tax rate under DTA without PE?

DTA-A-50:
Applications for relief at source from the UK withholding tax may be made to the HMRC Double Taxation Treaty Team, using the forms which can be retrieved in HMRC.
https://www.gov.uk/government/publications/international-tax-double-taxation-treaty-relief-form-dt-company

1. Form DT Company
2. Send the completed form DT-Company to the taxation authorities of the company’s country of residence.
   By doing this, you can consent to the residence’s tax authorities certifying to HMRC that the company is resident in the other country within the meaning of the Double Taxation Convention between the UK and that country.
3. Next, the taxation authorities of the country of residence will then either send the certified form direct to HMRC or return the form to you to send to HMRC.
4. In some cases, the residence’s tax authorities may not wish to stamp and sign the form DT-Company. If so, please ask them to provide a separate ‘standalone’ certificate to confirm that the company is resident for tax purposes in that country within the meaning of the Double Taxation Convention with the UK.

Section B:

Scenario:
If you are not a United Kingdom legal resident, and if your resident country has DTA with the United Kingdom, and if you are with PE (Permanent Establishment), your income will be considered as United Kingdom domestic sourced income.
As for levying Tax Rate, please be aware:
if United Kingdom Tax rate > DTA Rate, adopt DTA Rate; if United Kingdom Tax rate < DTA Rate, adopt United Kingdom Rate.
Below, we will let you understand through Q&A.

DTA-Q-60:
被視為英國來源所得的判定要素?
What are the factors that are deemed to be the country’s domestic source income?

DTA-A-60:
There is no UK source definition in tax legislation but there is guidance in case law.
The income arises or where it is derived from UK has a UK source and income arising outside the UK has a non-UK source or foreign source.
The location of the asset producing the income is not always the source of income.
For example, the source of dividends is where the paying company is resident and not where the shares are registered.

DTA-Q-70:
DTA第五條及第七條優先於英國來源所得的判定要素?
Do Article 5 and Article 7 in the DTA take precedence over the United Kingdom determination factors on United Kingdom domestic sourced income?

DTA-A-70:
When DTA is applied, in the event of a different PE definition between United Kingdom domestic tax laws and Article 5 in the DTA, the definition under the DTA shall prevail the domestic regulations.
When DTA is applied, if a foreign company is defined as without PE (Permanent Establishment) in the United Kingdom, then will be considered non-United Kingdom domestic sourced income, in the event business profit is relevant to this issue, the clause in Article 7 in the DTA zero-rate tax can be applied accordingly.
In this scenario, please see section A.

DTA-Q-80:
當非英國稅務居民有英國來源所得，不考慮DTA 情況下，英國稅法扣繳稅率多少?
When non-tax residents of the United Kingdom have the United Kingdom domestic sourced income, what is the withholding tax rate according to United Kingdom tax regulations excluding DTA?

DTA-A-80:
Generally, the withholding tax rates under domestic law are:
Business Profits – 20%
Dividend – 0% (Note 1)
Interest (General loan) – 20% (Note 2)
Royalties fee – 20% (Note 3)
Technical services – 0%
Professional services – 0%

Note:

1. UK does not impose withholding tax on dividends. 20% is for dividends paid by a real estate investment trust (REIT).
2. 20% applicable to payments of interest to the non-resident company. 0% applicable for payment where the beneficial owner of the interest is a UK resident company or a UK permanent establishment, also interest paid to or by a UK bank, interest on Eurobond, and interest on short term loan (<12 months).
3. 0% is applicable to royalties on film and video and equipment.

DTA-Q-90:
If DTA Tax Rate is higher than the United Kingdom tax rate, apply which tax rate?

DTA-A-90
As for levying Tax Rate, please be aware:
if United Kingdom Tax rate > DTA Rate, adopt DTA Rate; if United Kingdom Tax rate < DTA Rate, adopt United Kingdom Rate.

DTA-Q-A0:
當非英國稅務居民有英國來源所得，依DTA優惠稅率申請的程序為何?
When non-tax residents of the United Kingdom have United Kingdom domestic sourced income, what is United Kingdom’s application procedure based on the DTA preferential tax rate?

DTA-A-A0:
Applications for relief at source from UK withholding tax may be made to the HMRC Double Taxation Treaty Team, using the forms which can be retrieved in HMRC.
https://www.gov.uk/government/publications/international-tax-double-taxation-treaty-relief-form-dt-company

1. 1. Form DT-Company
   2. Send the completed form DT-Company to the taxation authorities of the company’s country of residence. By doing this, you can consent to the residence’s tax authorities certifying to HMRC that the company is resident in the other country within the meaning of the Double Taxation Convention between the UK and that country.
   3. Next, the taxation authorities of the country of residence will then either send the certified form direct to HMRC or return the form to you to send to HMRC.
      In some cases, the residence’s tax authorities may not wish to stamp and sign the form DT-Company.
      If so, please ask them to provide a separate ‘standalone’ certificate to confirm that the company is resident for tax purposes in that country within the meaning of the Double Taxation Convention with the UK.

Section C:

DTA-Q-B0:
As an investor, if your country has not signed DTA with the United Kingdom, what kinds of tax rates when you have a United Kingdom relevant income?

DTA-A-B0:
The withholding tax rates under domestic law are:
Business Profits – 20%
Dividend – 0% (Note 1)
Interest (General loan) – 20% (Note 2)
Royalties fee – 20% (Note 3)
Technical services – 0%
Professional services – 0%

Note:

1. The UK does not impose withholding tax on dividends. 20% is for dividends paid by a real estate investment trust (REIT).
2. 20% applicable to payments of interest to the non-resident companies. 0% applicable for payment where the beneficial owner of the interest is a UK resident company or a UK permanent establishment, also interest paid to or by a UK bank, interest on Eurobond and interest on short term loan (<12 months).
3. 0% is applicable to royalties on film and video and equipment.

Please be aware of below Warning:
The above contents are digested by Evershine R&D  and Education Center in October 2021.
Regulations might be changed as time goes forward and different scenarios will adopt different options.
Before choosing options, please contact us or consult with your trusted professionals in this area.

Contact Us

London Evershine BPO Service Limited Corp.
E-mail: lon4ww@evershinecpa.com
Ms. Anny Lin， in both English and Chinese.
WeChat: annylin8008
Skype: annylin8008

For how to exchange data files between your Finance Accounting System and Evershine Cloud Accounting Information System,
please send an email to HQ4lon@evershinecpa.com
Dale Chen, Principal Partner/CPA in Taiwan+China+UK will be accountable to your case.
Email address: dalechen@evershinecpa.com
Linkedin address: Dale Chen

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