TaxPersonal Tax21 MARCH 2000 BUDGET-TAX RELEIF FOR BRANCHES OF EU/EEA RESIDENTS

21 MARCH 2000 BUDGET-TAX RELEIF FOR BRANCHES OF EU/EEA RESIDENTS

Residents of other EU/EEA Member States may claim double taxation relief for past years in respect of the income and gains of their United Kingdom branches and agencies.

Residents of other EU/EEA Member States may claim double taxation relief for past years in respect of the income and gains of their United Kingdom branches and agencies.

United Kingdom law already allows branches or agencies of non-residents to have the benefit of double taxation relief in some circumstances. Following a decision by the European Court of Justice last September the relief will now be available more generally to branches or agencies of residents of other EU/EEA Member States, subject to the normal time limits for claiming the relief.

Claims should be sent to the office which deals with the tax affairs of the branch or agency.

DETAILS

1. On 21 September 1999 the European Court of Justice decided in the case Compagnie de Saint-Gobain v Finanzamt Aachen-Innenstadt (Case C-307/97) that Germany could not deny the company, which was resident in France, double taxation relief in respect of the income of its permanent establishment in Germany if such relief would be allowed to a German resident.

2. United Kingdom law enables relief for foreign tax to be claimed by persons who are resident in the United Kingdom. The relief extends also to non-residents but is currently restricted to foreign tax on the interest income of the branch or agency of a non-resident bank and on the income and gains of the branch or agency of a non-resident life insurance company. For the future, as foreshadowed in a discussion paper on double taxation relief for companies published by the Inland Revenue in March 1999, the Government proposes that the relief should be extended to the income and gains of branches and agencies of non-residents generally. See today’s Budget Note entitled Double Taxation Relief for Companies. (REVBN2D)

3. As regards the past, residents of other EU/EEA Member States who have not been able to claim double taxation relief under existing United Kingdom law in respect of the income and gains of their United Kingdom branches and agencies are invited to make claims to relief, subject to the normal time limits, as if the restrictions mentioned in the previous paragraph did not apply. If the profits include dividends from other non- resident companies, relief will be available for underlying tax if all the conditions for relief that apply if a dividend is paid to a United Kingdom resident company are met as regards the dividend and the non-resident companies concerned.

4. The time limit for claiming credit relief is six years from the end of the year of assessment or accounting period concerned (except that if relief is claimed against income tax or capital gains tax for 1996/97 or later, it must be claimed on or before the 5th anniversary of the 31 January following the end of the year of assessment concerned).

NOTES FOR EDITORS

1. The United Kingdom may tax the profits of a branch or agency which a non-resident person has in the United Kingdom. Double taxation may occur if the profits are taxed also in another country where they arise.

2. Underlying tax is the tax paid by subsidiary companies on the profits out of which they pay dividends.

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