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Double tax
A new comprehensive double taxation convention between the UK and the Faroes has been signed. Among the features agreed are dividend withholding rates of 5% for companies with a direct holding of at least 10% of the capital of the company paying the dividends and 15% for all other cases. Interest and royalties will be taxed only in the state of residence of the recipient.
A protocol to the double taxation convention between the UK and Switzerland has also been agreed. This eliminates taxation at source on dividends where the beneficial owner of the dividends has a substantial participation in the payer or is a pension scheme. It also amends the exchange of information article by providing that, in future, information will be exchanged in cases of tax fraud or the like, and in cases involving holding companies.
The protocol also contains measures relating to pensions. In future, lump sum payments may be taxed only by the state in which they arise. Also, pension contributions paid to a scheme recognised for tax purposes in one country may, under certain conditions, be deductible in the other country.
The convention and the protocol will enter into force once both countries have completed their legislative procedures. In the UK the provisions will take effect from 1 April (for corporation tax purposes), and from 6 April (for income tax and capital gains tax purposes) in the calendar year following the date of entry into force. In the Faroes and Switzerland, the provisions will take effect from 1 January in the calendar year following the date of entry into force.
HMRC news release dated 28 June 2007
