Replaced by new DTA, which applies in UK from 1st April 2003 for
CT, 6th April 2003 for IT and 1st January 2004 for PRT. For US
withholding taxes it applies from 1st May 2003 and for other US
taxes from 1st January 2004. See DT19939O and grandfathering
provisions.
(1) In accordance with the provisions and subject to the
limitations of the law of the United States (as it may be amended
from time to time without changing the general principle hereof),
the United States shall allow to a resident or national of the
United States as a credit against the United States tax the
appropriate amount of tax paid to the United Kingdom; and, in the
case of a United States corporation owning at least 10 per cent of
the voting stock of a corporation which is a resident of the United
Kingdom from which it receives dividends in any taxable year, the
United States shall allow credit for the appropriate amount of tax
paid to the United Kingdom by that corporation with respect to the
profits out of which such dividends are paid. Such appropriate
amount shall be based upon the amount of tax paid to the United
Kingdom, but the credit shall not exceed the limitations (for the
purpose of limiting the credit to the United States tax on income
from sources outside of the United States) provided by United
States law for the taxable year. For the purposes of applying the
United States credit in relation to tax paid to the United Kingdom:
(a) the TAXES referred to in paragraphs (2) (b) and (3) of
Article 2 (Taxes covered) shall be considered to be income taxes;
(b) the amount of 5 or 15 per cent, as the case may be,
withheld under paragraph (2) (a) (i) or (ii) of Article 10
(Dividends) from the tax credit paid by the United Kingdom shall be
treated as an income tax imposed on the recipient of the dividend;
and
(c) that amount of tax credit referred to in paragraph
(2)(a)(i) of Article 10 (Dividends) which is not paid to the United
States corporation but to which an individual resident in the
United Kingdom would have been entitled had he received the
dividend shall be treated as an income tax imposed on the
corporation paying the dividend.
(2) Subject to the provisions of the law of the United
Kingdom regarding the allowance as a credit against United Kingdom
tax of tax payable in a territory outside the United Kingdom (as it
may be amended from time to time without changing the general
principle hereof):
(a) United States tax payable under the laws of the United
States and in accordance with the present Convention, whether
directly or by deduction, on profits or income from sources within
the United States (excluding in the case of a dividend, tax payable
in respect of the profits out of which the dividend is paid) shall
be allowed as a credit against any United Kingdom tax computed by
reference to the same profits or income by reference to which the
United States tax is computed;
(b) in the case of a dividend paid by a United States
corporation to a corporation which is resident in the United
Kingdom and which controls directly or indirectly at least 10 per
cent of the voting power in the United States corporation, the
credit shall take into account (in addition to any United States
tax creditable under (a)) the United States tax payable by the
corporation in respect of the profits out of which such dividend is
paid.
(3) For the purposes of the preceding paragraphs of this
Article, income or profits derived by a resident of a Contracting
State which may be taxed in the other Contracting State in
accordance with this Convention shall be deemed to arise from
sources within that other Contracting State, except that where the
United States taxes on the basis of citizenship, the United Kingdom
shall not be bound to give credit to a United States national who
is resident in the United Kingdom on income from sources outside
the United States as determined under the laws of the United
Kingdom and the United States shall not be bound to give credit for
United Kingdom tax on income received by such national from sources
outside the United Kingdom, as determined under the laws of the
United States.
(4) Notwithstanding sub-paragraph (a) of paragraph (1) of
this Article, the amount of United Kingdom petroleum revenue tax
allowable as a credit against United States tax shall be limited to
the amount attributable to United Kingdom source taxable income in
the following way, namely:
(a) the amount of United Kingdom petroleum revenue tax on
income from the extraction of minerals from oil or gas wells in the
United Kingdom to be allowed as a credit for a taxable year shall
not exceed the amount, if any, by which the product of the maximum
statutory United States tax rate applicable to a corporation for
such taxable year and the amount of such income exceeds the amount
of other United Kingdom tax on such income.
(b) The lesser of
(i) the amount of United Kingdom petroleum revenue tax on
income from the extraction of minerals from oil or gas wells in the
United Kingdom that is not allowable as a credit under the
preceding sub-paragraph, or
(ii) 2 per cent of such income for the taxable year shall be
deemed to be income taxes paid or accrued in the two preceding or
five succeeding taxable years, to the extent not deemed paid or
accrued in a prior taxable year, and shall be allowable as a credit
in the year in which it is deemed paid or accrued subject to the
limitation in sub-paragraph (a) above.
(c) The provisions of sub-paragraphs (a) and (b) shall
apply, separately, mutatis mutandis (but with the deletion, in the
case of (b), of the words `the lesser of (i)` and `or (ii) 2 per
cent of such income for the taxable year`), to the amount of United
Kingdom Petroleum Revenue Tax on income from initial
transportation, initial treatment and initial storage of minerals
from oil or gas wells in the United Kingdom.
