Double taxation treaty passport scheme
June 12, 2013
The double taxation treaty passport scheme is a special scheme for overseas corporate lenders that applies to loans taken out on or after 1 September 2010. Individuals are not eligible to use the scheme. The use of the scheme provides for a quicker and more
efficient method of obtaining double taxation treaty relief than would otherwise be the case. A number of changes were made to the scheme from April 2013 to make the scheme easier to use.
HMRC provide the following explanation of how the scheme works:
- 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 a 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 of the making of a 'passported' loan.
- 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.