UK and International Tax news

Double Tax Treaty Passport Scheme Update

Friday 22nd July 2011

The Double Taxation Treaty Passport Scheme [DTTPS] for overseas corporate lenders applies only to loans taken out on or after 1 September 2010.  The DTTPS for overseas corporate lenders FAQs have been recently updated with answers to questions asked since the Scheme was introduced last year. 

The DTTPS works as follows:

  • An overseas corporate lender in a country with which the UK has a double taxation treaty that includes an interest or income from a debt-claims Article, may apply for a ‘Treaty Passport’ from HMRC.
  • If a Treaty Passport is granted by HMRC, the passport holder is entered onto the publicly available register with a unique DTTP number.
  • Prospective UK resident corporate borrowers should check HMRC’s online register (Register of Double Taxation Passport holders) to verify the lender’s Treaty Passport holder status.
  • If the UK borrower enters into a loan agreement with a lender who is registered as a Treaty Passport holder, the lender will notify them of their passport holder status and reference number.
  • The UK borrower should then notify HMRC within 30 working days of the ‘passported’ loan. The notification should be made using form DTTP2. Form DTTP2 can be completed and sent to HMRC online or it can be downloaded, filled in and returned to HMRC by post. 
  • HMRC will use the DTTP2 notification details to issue a ‘Direction’ to the UK borrower to pay the interest with income tax deducted at the rate set out in the relevant Double Taxation Treaty.
  • For non-Treaty Passport situations, the normal ‘certified double taxation claim’ remains the default method for applying for Double Taxation Treaty Relief.

Any overseas corporate entity or concern treated by its country of residence as corporation for tax purposes may apply for recognition as a Double Taxation Treaty Passport Holder.

UK borrowers can use online form DTTP2 to tell HMRC about a ‘passported’ loan and, by using the online form, HMRC should have all the information needed to consider making a Direction.  The DTTPS only applies to loans taken out on or after 1 September 2010.

If you would like more details on the operation of the scheme,  please contact Keith Rushen on +44 (0)20 7486 2378.

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