The EU Directive on Interest and Royalty payments between associated companies of different Member States (Council Directive 2003/49/EC) came into force on 1 January 2004 and is implemented as UK law by ss757-767 Income Tax (Trading and Other Income) Act 2005.
HMRC’s Guidance Note has now been brought up to date so that the list of types of companies which can claim under the Directive, and the list of taxes that the company (or permanent establishment) claiming exemption from UK income tax must be subject to in a Member State, take account of the twelve countries that have joined the EU in the last five years.
The UK requires companies (and permanent establishments) resident in other Member States to establish their entitlement to exemption from UK income tax. They may do this by making a claim to HM Revenue & Customs Residency (‘HMRC Residency’) – the claim form can be downloaded (EU Interest & Royalties: www.hmrc.gov.uk/cnr/eu-claim-form.pdf). The claim must be certified by the tax authority of the EU Member State in which the claimant is resident.
Note – royalty relief at source can be given by the payer if that payer has a reasonable relief that all the conditions of exemption are met.
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Tags: exemption, groups, royalty, withholding