Double Taxation Relief
All the information you need to find out if you can claim double taxation relief
Who can claim?
Individuals and Companies
If a company has income from a source in one country and is resident in another, it may be liable to pay tax in both countries under their tax laws. To avoid double taxation in this situation, the UK has negotiated double taxation treaties with more than 100 countries. Companies resident in a country with which the UK has a double taxation treaty may be able to claim exemption or partial relief from UK tax on certain types of income from UK sources.
- other concerns, such as partnership, pension funds and trusts for example
Interest, royalties, pensions and purchased annuities
A company or individuals resident in a double taxation treaty country which receives income from interest, royalties, pensions or purchased annuities from UK sources may be able to apply for relief from UK tax.
The relief available depends upon the terms of each double taxation treaty. If it is, relief at source is normally allowed on future payments of the income. Payer to pay the income either:
- without tax deducted
- with tax deducted at a reduced rate of tax as laid down in the double taxation treaty
Where tax has already been deducted from previous payments of the income, the repayment can be claimed back.
Property income distributions paid by UK Real Estate Investment Trusts
From 1 January 2007, property income distributions are paid after deduction of basic rate Income Tax.
Company ‘portfolio’ shareholders
Some of the UK’s double taxation treaties provide for payment to a resident of the other country of part of the tax credit attached to UK dividends. But in practice, the amount that the UK retains under the double taxation treaty covers the whole of the tax credit. So if a company ‘portfolio’ shareholder made a double taxation treaty claim for payment of tax credit, there would be no balance of tax credit remaining for HMRC to pay.
Direct investor companies
The UK’s double taxation conventions with the following countries provide an entitlement to a tax credit to direct investor companies which controls 10% or more of the voting power in the UK company paying the dividend:
- Belgium, Italy, Luxembourg, Netherlands, Sweden
- Switzerland (for dividends paid before 6 April 2009)
This is equal to half the tax credit to which a UK resident individual would be entitled and for payment of the excess of that half tax credit over their liability to UK tax. The UK tax liability is 5% of the aggregate of the dividend and the half tax credit.
You do not need to send tax vouchers with the completed claim form, but you should keep them safe in case they are needed later to support the claim.
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