- A residence tie breaker for individuals which is clear and straightforward to apply.
- A residence tie breaker for companies to be determined by the mutual agreement of the two tax authorities having regard to where the company is effectively managed, incorporated and other factors, almost certainly around where the senior decisions are made.
- The inclusion of a non-discrimination clause. This clause is already present in the majority of the UK’s DTAs, and will prevent the application of a range of restrictive measures within the UK tax legislation, such as the late paid interest rules and the application of transfer pricing for Small or Medium-Sized Enterprises (SMEs), whilst affording the benefits of measures such as withholding tax exemptions for qualifying private placements and the dividend exemption for SMEs. This aspect of the new DTAs will undoubtedly put the Crown Dependencies on a much fairer and equal footing with competitor jurisdictions including other international finance centres.
- The inclusion of interest and royalty withholding tax reliefs, broadly in line with the reliefs the UK has incorporated into some of its other recently concluded DTAs. Full relief will apply in a broad range of situations, including for individuals and pension schemes, banks and other lenders, and companies 75% or more beneficially owned (directly or indirectly) by residents of the same jurisdiction, as well as listed entities meeting certain requirements. The interest withholding tax reliefs may significantly increase the attractiveness of the Crown Dependencies as a place to lend into the UK, including by way of qualifying private placements. The Double Tax Treaty Passport Scheme will also be available to Crown Dependency lenders to make the process of claiming withholding tax relief administratively easier.
- Capital gains tax relief from the sale of shares in ‘land rich’ entities, where there is substantial and regular trading of the shares on a recognised stock exchange (such as The International Stock Exchange). This may go some way to alleviate the impact felt by the Crown Dependencies of the UK’s ongoing reform of the taxation of UK property. In March 2016 the DTAs were updated with immediate effect to close the perceived abuse of relieving provisions within those DTAs for trading structures. HMRC is now seeking to bring all UK property owning companies into the charge to capital gains tax on all types of UK property gains from April 2019, including where such gain arises from the sale of shares rather than on a direct asset sale. While the latter has been preserved, it would seem that the new DTAs will afford certain exemptions for the former which are not currently envisaged within the ongoing consultation into the introduction of the UK domestic rules, although the impact is likely to be limited in practice.
- In Guernsey and the UK, in respect of withholding taxes, for amounts paid or credited, on or after the first day of the second month next following the date on which the Agreement enters into force.
- In Guernsey, in respect of income tax, for any year of charge beginning on or after 1 January next following the entry into force date.
- In the UK, in respect of income tax and capital gains, for any year of assessment beginning on or after 6 April next following the entry into force date. In respect of corporation tax, for any financial year beginning on or after 1 April next following the entry into force date.
If you would like to discuss any aspect of the above, please do not hesitate to contact one of the Deloitte team below.