(February 22, 2015)
On February 19, 2015 the UK HM Revenue & Customs issued a press release announcing that on February 18, 2015 the United Kingdom of Great Britain and Northern Ireland and the People’s Democratic Republic of Algeria signed a Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion and Tax Fraud with respect to Taxes on Income and on Capital Gains (Hereafter: DTA), amending the existing convention for the avoidance of double taxation and the prevention of fiscal evasion and tax fraud with respect to taxes on income and on capital. Although the DTA has been signed, it has not yet entered into force. The DTA will enter into force once both countries have completed their legislative procedures.
Based on Article 2 of the DTA, the existing taxes to which this Agreement shall apply are in particular:
(a) in the United Kingdom:
(i) the income tax;
(ii) the corporation tax; and
(iii) the capital gains tax;
(b) in Algeria:
(i) the tax on global income;
(ii) the tax on the profits of companies;
(iii) the tax on professional activity; and
(iv) royalties and taxes on results relating to activities of prospecting, research, exploitation and transport of hydrocarbons by way of pipelines;
Paragraph 3 of Article 5 of the DTA determines that a building site or construction or installation project constitutes a permanent establishment only if it lasts more than six months.
Paragraph 4 of Article 5 of the DTA determines that the term “permanent establishment” also encompasses:
(a) the performing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose, but only if activities of that nature continue (for the same or a connected project) within a Contracting State for a period or periods aggregating more than 183 days within any twelve-month period commencing or ending in the fiscal year concerned;
(b) for an individual, the performing of services in a Contracting State by that individual, but only if the individual’s stay in that State is for a period or periods aggregating more than 183 days within any twelve-month period commencing or ending in the fiscal year concerned.
Under paragraph 2 of Article 10 of the DTA (Dividends) dividend withholding tax to be withheld by the Source State is maximized as follows:
(a) 5 per cent of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) which holds directly at least 25 per cent of the capital of the company paying the dividends;
(b) 15 per cent of the gross amount of the dividends in all other cases.
Paragraph 6 of Article 10 (Dividends) contains an Anti-Abuse clause stating the following: “No relief shall be available under this Article if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the shares or other rights in respect of which the dividend is paid to take advantage of this Article by means of that creation or assignment.”
Under paragraph 2 of Article 11 (Interest) interest withholding tax to be withheld by the Source State is maximized at 7 per cent of the gross amount of the interest if the beneficial owner of the interest is a resident of the other Contracting State.
Article 11 (Interest) contains an Anti-Abuse clause similar to the one included in Article 10 (Dividends). Paragraph 8 of Article 11 of the DTA (interest) determines: “No relief shall be available under this Article if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the debt-claim in respect of which the interest is paid to take advantage of this Article by means of that creation or assignment.”
Under Article 12 of the DTA (Royalties) Royalty withholding taxes are maximized at 10 per cent of the gross amount of the royalties received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work (including cinematograph films), any patent, trade mark, design or model, plan, secret formula or process, or for information (know-how) concerning industrial, commercial or scientific experience, if the beneficial owner of the royalties is a resident of the other Contracting State.
Like Articles 10 and 11 also Article 12 of the DTA (Royalties) contains an Anti-Abuse clause. Paragraph 7 of Article 12 reads as follows: “No relief shall be available under this Article if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the rights in respect of which the royalties are paid to take advantage of this Article by means of that creation or assignment.”
The agreement a.o. also provides for: a Mutual Agreement Procedure (Article 23), the Exchange of Information (Article 24), and the Assistance in the Collection of Taxes (Article 25).
For further information click here to be forwarded to the full text of the DTA as published on the website of the UK Government, which will open in a new window.
If you are interested in efficiently locating texts of more DTAs then click here to be forwarded to our section DTAs where you can link to numerous governmental websites on which you can find links to the texts of DTAs as concluded by that State.
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