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| HMRC Launches Tax Treaty Passport Scheme |
by Amanda Banks, Tax-News.com, London
Thursday, September 02, 2010
HM Revenue and Customs (HMRC) launched a new form on September 1 to enable UK corporate borrowers to inform them about a loan from a Double Taxation Treaty Passport Holder.
Under the scheme an
overseas company or equivalent opaque entity will apply for a passport to
HMRC using an application form 'DTTP1.' If successful, it will be
granted DT Treaty Passport Holder status and allocated a unique DTTP
reference to be used for all matters to do with the Passport scheme. A
UK corporate borrower (or a foreign corporate borrower making UK source
interest payments) may then apply the “treaty rate” of withholding tax
from the start of the loan, relying on the lender’s passport holder
status.
The Scheme was launched at a meeting held at HMRC in London on April
1, 2010, and overseas lenders could begin registering for a Treaty
Passport from June 1, 2010.
Here is a basic outline of how the Scheme will operate:
- An overseas corporate lender in a country with which the UK has
a double tax treaty that includes an interest or income from
debt-claims Article may apply for a 'Treaty Passport' from HMRC.
- If a Treaty Passport is granted by HMRC, the passport holder
will be entered into a publicly available register with a unique 'DTTP'
number. The register will be made available online on the HMRC website.
- The online register can be consulted by a prospective UK
resident corporate borrower to verify the lender’s Treaty Passport
holder status.
- If the UK borrower enters into a loan agreement with a lender
who is registered as a Treaty Passport holder the lender will notify
them of their passport holder status and reference number.
- The UK borrower will notify HMRC within 30 days of the
'Passported' loan.
- HMRC will use the DTTP2 notification details to issue a
Direction to the borrower to pay the interest with income tax deducted
at the rate set out in the relevant double tax treaty.
- For non-Treaty Passport situations, the normal 'certified DT
claim' remains the default method for applying for DT treaty relief.
- The DT Treaty Passport Scheme is for overseas corporate lenders
only. Individuals are not eligible.
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