The United Kingdom has double taxation agreements ('DTAs') with
the other current European Union ('EU') member states with
provisions which reduce or exempt interest from United Kingdom
income. However, it is sometimes suggested that the obligation to
deduct income tax from cross-border interest and/or the requirement
to seek authorisation for exemption or deduction at a reduced rate
before payment is made gross or subject to a reduced rate of United
Kingdom tax are contrary to the principles of EU law, and the
Inspector may encounter the argument that the United Kingdom
requirements are discriminatory in their application to
cross-border payments within the EU. The Inspector should not
accept this argument. If the point is pressed, the Inspector should
consult the Thin Cap Team at CT & VAT, International CT.
The EU member states at 1 November 2006 are Austria,
Belgium, Cyprus, the Czech Republic, Denmark, Estonia, Finland,
France, Germany, Greece, Hungary, Ireland, Italy, Latvia,
Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal,
Slovakia, Slovenia, Spain, Sweden and the United Kingdom. The
precise terms of the DTAs vary and the specific provisions of the
relevant DTA should be consulted.
