17 Sep

Double Taxation Agreement Brexit

The United Kingdom and Northern Ireland are currently subject to the Double Taxation Convention of 30 April 1969, BGBl. No 390/1970, as amended by bgBl. III, No 135/2010, aimed at avoiding international double taxation in the field of income taxes. The European Commission also provides a wealth of information on these and related issues, including customs duties, excise duties (indirect taxes), rules of origin and VAT. Here`s a look at the future after Brexit. Moving closer to 1 January 2021, EUROPEAN tax authorities will publish more clarifications, guidelines and advance rulings on how UK institutions (including pension funds), businesses and citizens should be taxed. Not all of them make happy reading. To protect UK plc`s interests, more reliance needs to be made on the existing network of double taxation treaties with European countries in the UK. Advisors need to be familiar with each other`s nuances. If the withdrawal agreement negotiated between Britain and the EU comes into force and an orderly Brexit were to happen afterwards, customs policy will not change for the next two years. The Withdrawal Agreement provides for a transitional period at least until the end of 2020, during which EU legislation will remain in force. The DOUBLE TAXATION AGREEMENTS CONCLUDED BY THE UK with all EU countries will not change. Any double taxation treaty is signed between two countries and, in the case of the United Kingdom, directly with other nations, including those of the European Union.

The Parent/Subsidiary Directive allows European subsidiaries to pay dividends without withholding tax to their EU parent companies and the Interest Rates and Licensing Directive removes withholding taxes on interest and royalties. While the UK has an extensive network of double taxation treaties that can be used, all withholding taxes on dividends, interest and royalties between taxpayers in the UK and EU Member States only reduce the withholding tax rate that must be applied. In the UK, in the absence of a proper contract or EU directive, the payment of interest and royalties from the UK would be subject to a 20% withholding tax, meaning that beneficiaries will be able to seek compensation through “extrapolation clauses” in legal agreements. As far as dividends are concerned, UK companies are normally exempt from corporation tax, so any withholding tax would be an absolute cost. Conversely, this should not be a problem for EU beneficiaries for the payment of dividends by UK companies, given that the UK does not receive withholding tax on dividends. However, for individuals who moved to the UK before Brexit came into effect and requested the tax deferral due to the relocation at the time, the subsequent Brexit does not entail immediate taxation. In such cases, therefore, the capital gain is generally taxed only when the asset in question is actually sold at a later date. If, in other circumstances, the payment of tax in instalments has been requested, the subsequent Brexit will also not result in the immediate payment of open instalments (no account should be taken of the contrary statement in paragraph 6157b of the Austrian Income Tax Directives 2000). . .

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