Question:
I have a UK company, which is fully owned and managed by me, who lives outside the UK (i.e. Australia). I understand that a permanent establishment (PE) would be created in Australia. Would the UK company still be taxed in the UK and then double taxation relief claimed in Australia, or would I claim an Australian PE with nil profits in the UK under the double tax treaty? To confirm, it is not a property company, and there are no UK employees in the short term.
Arthur Weller replies:
HMRC’s guidance at www.gov.uk/hmrc-internal-manuals/international-manual/intm120030 states that a dual resident company is resident in the country that has priority per the relevant double tax treaty.
Article 4 paragraph 4 of
www.gov.uk/government/uploads/system/uploads/attachment_data/file/496636/uk-australia-dtc_-_in_force.pdf states that in this situation the company should be considered resident only in the country in which its place of effective management is situated. In this case, this is Australia. HMRC’s International Tax manual (at INTM120030) states that a treaty non-resident company, such as in this case, is not UK resident for tax purposes (per CTA 2009, s 18).
Note - This question first appeared in our February 2018 issue of Business Tax Insider and the answer was not quite clear. So, we are reprinting the question with a clearer answer.
