(February 28, 2015) 

On February 27, 2015 the UK HM Revenue & Customs issued a press release announcing that on February 26, 2015 the United Kingdom of Great Britain and Northern Ireland and the Republic of Senegal 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). 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 respective ratification procedures.

 

·        Under the DTA dividend withholding taxes are limited to 5% of the gross amount of the dividends in case of qualifying shareholdings (at least 25 percent of the capital of the company paying the dividends), to 8% of the gross amount of the dividends if the beneficial owner is a pension scheme and to 10% of the gross amount of the dividends in all other cases;

 

·        Under the DTA interest withholding taxes are limited to 10% of the gross amount of the interest;

 

·        Under the DTA royalty withholding taxes are limited to 10% of 60% of payments of any kind received as a consideration for the use of, or the right to use, industrial, commercial or scientific equipment and to 10% of the gross amount of the royalties in other cases;

 

The articles on dividends (Article 10), interest (Article 11) and royalties (Article 12) contain similar anti-abuse clauses. (See below for further information)

 

Based on Article 2 (“Taxes Covered”) of the DTA, the existing taxes to which the DTA shall apply are in particular: 

a)     in Senegal:

(i)          the income tax on companies;

(ii)         the minimum income tax on companies;

(iii)        the income tax on individuals; and

(iv)        the capital gains tax on developed and undeveloped land;

b)     in the United Kingdom:

(i)           the income tax;

(ii)          the corporation tax; and

(iii)         the capital gains tax;

 

Paragraph 3 of Article 5 (“Permanent Establishment”) 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 (“Permanent Establishment”) of the DTA determines that the term “permanent establishment” also encompasses:

a)     the furnishing of 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.

 

With respect to insurance enterprises paragraph 7 of Article 5 (“Permanent Establishment”) of the DTA determines that notwithstanding the preceding provisions of this Article, an insurance enterprise of a Contracting State shall, except in regard to re-insurance, be deemed to have a permanent establishment in the other Contracting State if it collects premiums in the territory of that other State relating to the insurance of risks situated therein through a person other than an agent of an independent status to whom paragraph 8 applies.

 

Paragraph 2 of Article 10 (“Dividends”) of the DTA limits the dividend withholding tax to be withheld by the Source State as follows:

a)     5 per cent of the gross amount of the dividends if the beneficial owner is a company which holds directly at least 25 percent of the capital of the company paying the dividends;

b)     8 per cent of the gross amount of the dividends if the beneficial owner is a pension scheme established in that other State;

c)     10 per cent of the gross amount of the dividends in all other cases.

 

Paragraph 8 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 10 per cent of the gross amount of the interest if the beneficial owner of the interest is a resident of the other Contracting State.

 

Paragraph 8 of Article 11 (“Interest”) 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 debt-claim in respect of which the interest is paid to take advantage of this Article by means of that creation or assignment. 

 

Under paragraph 2 of Article 12 (“Royalties”) royalty withholding tax to be withheld by the Source State is maximized as follows: 

a)     10 per cent of the gross amount of the royalty payments of any kind 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;

b)      10 per cent of the adjusted amount (the “adjusted amount” means 60 per cent of the gross amount of the royalties) of the royalty payments of any kind received as a consideration for the use of, or the right to use, industrial, commercial or scientific equipment.

 

Paragraph 7 of Article 12 (“Royalties”) 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 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 24), the Exchange of Information (Article 25), and the Assistance in the Collection of Taxes (Article 26).

 

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.

 

Copyright – internationaltaxplaza.info

 

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