The government has published three draft orders which will give effect to the new comprehensive double taxation agreements signed in July with Jersey, Guernsey and the Isle of Man. These new DTAs update the current arrangements in line with OECD/G20 BEPS minimum standards, besides introducing other changes. The new DTAs have not yet entered into force.
The draft orders are the:
Double Taxation Relief and International Tax Enforcement (Isle of Man) Order 2018;
Double Taxation Relief and International Tax Enforcement (Guernsey) Order 2018; and
Double Taxation Relief and International Tax Enforcement (Jersey) Order 2018.
Each of the draft instruments include the following changes that have no equivalent in the current arrangements (from 1955 and 1952 respectively):
Article 1 (persons covered) includes provisions relating to transparent entities and the taxation of a territory’s own residents, as recommended by the BEPS project;
Article 10 (dividends) provides for dividends paid by a company resident in one territory to a beneficial owner resident in the other territory to be exempt from tax in the paying territory, with dividends paid by REIT residents subject to a withholding tax of 15%;
Article 11 (interest) exempts from withholding tax interest arising in one territory and beneficially owned by a resident of the other territory, but only where the beneficial owner of the interest falls under one of the categories specified;
Article 12 (royalties) exempts from withholding tax royalties arising in one territory and beneficially owned by a resident of the other territory, but only where the beneficial owner of the royalties falls under one of the categories specified;
Article 15 (directors’ fees) mirrors the current OECD model article and provides that directors’ fees etc. can be taxed in the territory where the company paying them is a resident;
Article 20 (other income) follows the approach of the current OECD model article and provides that income not dealt with elsewhere in the agreement will be taxable only in the territory in which the beneficial owner is resident;
Article 21 (miscellaneous rules applicable to certain offshore activities) contains rules primarily in respect of the exploration for, or exploitation of, oil and gas resources;
Article 23 (entitlement to benefits) introduces the ‘principal purpose test’ (agreed under BEPS Action 6) denying treaty benefits to those seeking to secure a result contrary to the object and purpose of the arrangements; and
Article 24 (non-discrimination) seeks to prevent one territory imposing discriminatory taxes (or requirements) on the entities, permanent establishments and enterprises of the other.
The government has published three draft orders which will give effect to the new comprehensive double taxation agreements signed in July with Jersey, Guernsey and the Isle of Man. These new DTAs update the current arrangements in line with OECD/G20 BEPS minimum standards, besides introducing other changes. The new DTAs have not yet entered into force.
The draft orders are the:
Double Taxation Relief and International Tax Enforcement (Isle of Man) Order 2018;
Double Taxation Relief and International Tax Enforcement (Guernsey) Order 2018; and
Double Taxation Relief and International Tax Enforcement (Jersey) Order 2018.
Each of the draft instruments include the following changes that have no equivalent in the current arrangements (from 1955 and 1952 respectively):
Article 1 (persons covered) includes provisions relating to transparent entities and the taxation of a territory’s own residents, as recommended by the BEPS project;
Article 10 (dividends) provides for dividends paid by a company resident in one territory to a beneficial owner resident in the other territory to be exempt from tax in the paying territory, with dividends paid by REIT residents subject to a withholding tax of 15%;
Article 11 (interest) exempts from withholding tax interest arising in one territory and beneficially owned by a resident of the other territory, but only where the beneficial owner of the interest falls under one of the categories specified;
Article 12 (royalties) exempts from withholding tax royalties arising in one territory and beneficially owned by a resident of the other territory, but only where the beneficial owner of the royalties falls under one of the categories specified;
Article 15 (directors’ fees) mirrors the current OECD model article and provides that directors’ fees etc. can be taxed in the territory where the company paying them is a resident;
Article 20 (other income) follows the approach of the current OECD model article and provides that income not dealt with elsewhere in the agreement will be taxable only in the territory in which the beneficial owner is resident;
Article 21 (miscellaneous rules applicable to certain offshore activities) contains rules primarily in respect of the exploration for, or exploitation of, oil and gas resources;
Article 23 (entitlement to benefits) introduces the ‘principal purpose test’ (agreed under BEPS Action 6) denying treaty benefits to those seeking to secure a result contrary to the object and purpose of the arrangements; and
Article 24 (non-discrimination) seeks to prevent one territory imposing discriminatory taxes (or requirements) on the entities, permanent establishments and enterprises of the other.
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