INTM630530 - Royalty Withholding: UK Source: Interaction with Diverted Profits Tax: Credit for UK or foreign tax on the same profits – general rules

FA15/S100 provides that relief is available where corporation tax, or a similar tax applicable outside the UK, has been paid on profits liable to the Diverted Profits Tax (DPT).

FA15/100(2A) determines that relief is not permitted against a charge to Diverted Profits Tax to the extent that charge arises by virtue of FA15/S88(5)(b), that is, relating to payment of a royalty as discussed as section [INTM630510]. The effect of FA15/S100(2A) is that the rules that provide for credit against DPT for foreign tax on the same profits do not apply to the element of notional PE profits attributable to royalty payments.

However, relief may be available if the amount is included in the relevant taxable income of a connected party (see section INTM630540) or if relief would have been available under a Double Taxation Agreement or the Interest and Royalties Directive (see section INTM630550).