On September 26, 2017 the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Belarus signed a Convention for the Elimination of Double Taxation with respect to Taxes on Income and on Capital and the Prevention of Tax Evasion and Avoidance (Hereafter: the DTA).
Although the DTA has been signed, it has not entered into force yet. For the new DTA to enter into force, the respective ratification procedures have to have been finalized in both countries. The Convention between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Union of Soviet Socialist Republics for the avoidance of double taxation with respect to taxes on income and on capital gains, signed in London on July 31, 1985, shall cease to apply between the United Kingdom and the Republic of Belarus from the last date upon which the provisions of this Convention have effect in accordance with Article 28, Paragraph 1 of the DTA (“ENTRY INTO FORCE”).
Below we will discuss a selection of provisions included in the DTA of which we think they might interest our readers.
The Pre-amble to the DTA reads as follows:
“The Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Belarus;
Desiring to further develop their economic relationship and to enhance their cooperation in tax matters;
Intending to conclude a Convention for the elimination of double taxation with respect to taxes on income and on capital without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance (including through treaty-shopping arrangements aimed at obtaining reliefs provided in this Convention for the indirect benefit of residents of third States);
Have agreed as follows:”
Based on Article 2, Paragraph 3 of the DTA (“TAXES COVERED”), the existing taxes to which the DTA shall apply are in particular:
a) in Belarus:
(i) the tax on income;
(ii) the tax on profits;
(iii) the income tax on individuals; and
(iv) the tax on immovable property;
b) in the United Kingdom:
(i) the income tax;
(ii) the corporation tax; and
(iii) the capital gains tax.
Article 2, Paragraph 4 subsequently arranges that the DTA shall apply also to any identical or substantially similar taxes that are imposed after the date of signature of the Convention in addition to, or in place of, the existing taxes.
Article 4, Paragraph 3 of the DTA (“RESIDENT”) arranges that Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then the competent authorities of the Contracting States shall endeavour to determine by mutual agreement the Contracting State of which that person shall be deemed to be a resident for the purposes of this Convention, having regard to all relevant factors.
Article 5, Paragraph 3 of the DTA (“PERMANENT ESTABLISHMENT”) arranges that a building site or a construction, installation or assembly project, or supervisory activities connected therewith, constitutes a permanent establishment only where such site, project or activities last more than twelve months.
Article 6, Paragraph 1 of the DTA (“INCOME FROM IMMOVABLE PROPERTY”) arranges that income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.
With respect to immovable property Article 13, Paragraph 1 of the DTA (“CAPITAL GAINS”) arranges that gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State.
Article 13, Paragraph 2 subsequently arranges that Gains derived by a resident of a Contracting State from the alienation of shares in a company, other than shares that are traded, regularly and in substantial volumes, on a Stock Exchange, or other comparable interests in a partnership or similar structure, where more than 50 per cent of the asset value of that company, partnership or structure derives directly or indirectly from immovable property situated in the other Contracting State, may be taxed in that other State.
Article 9, Paragraph 2 of the DTA (“ASSOCIATED ENTERPRISES”) contains a so-called appropriate adjustment clause.
If the beneficial owner of the dividends is a resident of the other Contracting State, Article 10, Paragraph 2 of the DTA (“DIVIDENDS”) maximizes the withholding tax a Source State is allowed to withhold over dividends to:
(i) 15 per cent of the gross amount of the dividends where those dividends are paid out of income (including gains) derived directly or indirectly from immovable property within the meaning of Article 6 by an investment company which distributes most of this income annually and whose income from such immovable property is exempted from tax;
(ii) 5 per cent of the gross amount of the dividends in all other cases.
If the beneficial owner of the interest is a resident of the other Contracting State, Article 11, Paragraph 2 of the DTA (“INTEREST”) maximizes the withholding tax a Source State is allowed to withhold over interest to 5 per cent of the gross amount of the interest.
If the beneficial owner of the royalties is a resident of the other Contracting State, Article 12, Paragraph 2 of the DTA (“ROYALTIES”) maximizes the withholding tax a Source State is allowed to withhold over royalties to 5 per cent of the gross amount of the royalties.
Principal Purpose Test
Article 27, Paragraph 3 of the DTA (“ENTITLEMENT TO BENEFITS”) contains an anti-abuse clause (Principal Purpose Test (PPT)).
Furthermore the DTA contains a.o. provisions regarding a Mutual Agreement Procedure (Article 24) and regarding the Exchange of Information (Article 25).
Click here to be forwarded to the text of the DTA as available on the website of the UK Government.
Are you looking for other DTAs? Then check our section DTAs & TIEAs, a very efficient way to locate numerous DTAs.
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