UK Gov’t Amends View On DTA Residence Articles
UK tax authority HM Revenue and Customs (HMRC) has announced a change of view on the interpretation of the company residence articles in 16 double taxation agreements (DTAs).
The change was prompted by an agreement with Jersey on the interpretation of the company residence tie-breaker article in their 1952 DTA. HMRC subsequently reviewed 16 other DTAs containing identical or very similarly-worded provisions.
HMRC said that it now takes the view that the better interpretation of the equivalent provisions in those DTAs is that they include a tie-breaker clause to decide where a company is to be treated as resident for the purposes of the affected DTAs. HMRC’s previous view was that a dual-resident company – such as a company resident in the UK by virtue of incorporation and resident in the other jurisdiction by virtue of management and control – was not a resident of either jurisdiction and was therefore outside the scope of the DTA.
HMRC said that, for the purposes of applying the affected DTAs, the relevant provisions should now be read as treating such a dual-resident company as a resident of the jurisdiction in which it is managed and controlled. In cases where the company is managed and controlled in both the UK and the other jurisdiction, it will remain outside the scope.
The change of view will affect the UK’s DTAs with the following jurisdictions: Antigua; Belize; Brunei; Burma; Greece; Grenada; Guernsey; the Isle of Man; Jersey; Kiribati; Malawi; Monserrat; St Kitts and Nevis; Sierra Leone; the Solomon Islands; and Tuvalu.
