INTM162032A - UK residents with foreign income or gains: double taxation relief - claims and procedures - certifying residence where DTC contains a requirement for a company to be "subject to tax"
Finance Act 2009 introduced exemption from tax for most overseas dividends, except where the receipt is similar to interest.
If the DTC with the state in which the dividends arise does not contain a “subject to Tax” requirement there is no change to the existing guidance.
However, the fact that dividends are now exempt from UK tax means that where a double taxation convention contains the requirement for a company to be subject to tax on its income in the UK, then unless the company elects for those dividends to be taxable in the UK it will not be entitled to claim the benefits of the treaty. Thus it cannot claim a reduced rate of withholding tax under the terms of the treaty. Further information on whether any entity should be considered ‘subject to tax’ is available in INTM162020.
If a company receives dividends from a country where the DTC contains a “subject to tax” requirement, the existing certificate of residence at INTM162032 may no longer be issued because it is no longer “subject to tax” on all its income.
However, where a company makes an election for the dividends subject to the claim to be taxable in the UK, an amended certificate of residence may be issued as follows:
To whom it may concern
I certify that to the best of HM Revenue & Customs’ knowledge [Name and RO of company] as at [date] is a resident of the UK in accordance with Article 4 and fulfils the criteria of Article  of the Convention in force between the UK and [other State]. Having elected* to be subject to tax in respect of dividends received from (State or name and address of company), it is subject to tax on this income.
Office Stamp, Name and signature of Officer
* An election under Section 931R(2) of the Corporation Taxes Act 2009 for a distribution not to be exempt may be revoked at any time within 2 years from the end of the accounting period in respect of which it is made.
Where companies are in receipt of income not including dividends, the existing certificate at INTM162032 stating that the company is subject to tax on the income may be issued.