United States-United Kingdom Income Tax Treaty

United States-United Kingdom Income Tax Treaty is a bilateral tax treaty between the United States and the United Kingdom, aimed at avoiding double taxation and fiscal evasion. The treaty was signed on April 16, 1945, by Cordell Hull, the United States Secretary of State, and Halifax, 1st Earl of, the British Ambassador to the United States, and entered into force on April 25, 1945. This treaty is an important part of the tax law of both countries, including the Internal Revenue Code of the United States and the Income and Corporation Taxes Act 1988 of the United Kingdom. The treaty has been amended several times, including by the London protocol of July 31, 1964, signed by Dean Rusk, the United States Secretary of State, and Patrick Gordon Walker, the British Secretary of State for Foreign Affairs.

● Introduction

The United States-United Kingdom Income Tax Treaty is a comprehensive agreement that provides a framework for the taxation of income between the two countries. The treaty is based on the Organisation for Economic Co-operation and Development (OECD) Model Tax Convention on Income and on Capital, which provides a standard template for bilateral tax treaties. The treaty applies to taxes on income and capital gains imposed by the United States and the United Kingdom, including the federal income tax in the United States and the income tax and corporation tax in the United Kingdom. The treaty also provides for the exchange of information between the Internal Revenue Service (IRS) of the United States and Her Majesty's Revenue and Customs (HMRC) of the United Kingdom, as provided for in the Treaty on Mutual Legal Assistance in Criminal Matters between the United States and the United Kingdom.

● Background and History

The United States-United Kingdom Income Tax Treaty has a long history, dating back to the Revenue Act of 1932, which authorized the President of the United States to negotiate tax treaties with foreign countries. The treaty was negotiated by Cordell Hull, the United States Secretary of State, and Neville Chamberlain, the Prime Minister of the United Kingdom, and was signed on April 16, 1945. The treaty was ratified by the United States Senate on June 4, 1945, and by the Parliament of the United Kingdom on July 25, 1945. The treaty has been amended several times, including by the London protocol of July 31, 1964, and the Washington, D.C. protocol of March 31, 2001, signed by Paul O'Neill, the United States Secretary of the Treasury, and Gordon Brown, the Chancellor of the Exchequer.

● Key Provisions

The United States-United Kingdom Income Tax Treaty provides for the reduction or elimination of double taxation on income and capital gains earned by residents of one country in the other country. The treaty also provides for the exchange of information between the Internal Revenue Service (IRS) of the United States and Her Majesty's Revenue and Customs (HMRC) of the United Kingdom, as provided for in the Treaty on Mutual Legal Assistance in Criminal Matters between the United States and the United Kingdom. The treaty also includes provisions for the resolution of disputes between the two countries, including the use of arbitration as provided for in the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The treaty is administered by the Internal Revenue Service (IRS) of the United States and Her Majesty's Revenue and Customs (HMRC) of the United Kingdom, in accordance with the Internal Revenue Code of the United States and the Income and Corporation Taxes Act 1988 of the United Kingdom.

● Taxation of Specific Income

The United States-United Kingdom Income Tax Treaty provides for the taxation of specific types of income, including dividends, interest, and royalties. The treaty provides that dividends paid by a company resident in one country to a resident of the other country shall be taxable only in the country of residence of the recipient, as provided for in the OECD Model Tax Convention on Income and on Capital. The treaty also provides that interest paid by a resident of one country to a resident of the other country shall be taxable only in the country of residence of the recipient, unless the interest is paid in respect of a loan or credit guaranteed by the Export-Import Bank of the United States or the Export Credits Guarantee Department of the United Kingdom. The treaty also includes provisions for the taxation of royalties, including copyright royalties and patent royalties, as provided for in the Berne Convention for the Protection of Literary and Artistic Works and the Paris Convention for the Protection of Industrial Property.

● Relief from Double Taxation

The United States-United Kingdom Income Tax Treaty provides for relief from double taxation on income and capital gains earned by residents of one country in the other country. The treaty provides that a resident of one country shall be entitled to a credit against the tax imposed by the other country on income derived from sources within that country, as provided for in the Internal Revenue Code of the United States and the Income and Corporation Taxes Act 1988 of the United Kingdom. The treaty also provides for the elimination of double taxation on capital gains earned by residents of one country in the other country, unless the capital gains are derived from the sale of real property situated in the other country, as provided for in the OECD Model Tax Convention on Income and on Capital. The treaty is administered by the Internal Revenue Service (IRS) of the United States and Her Majesty's Revenue and Customs (HMRC) of the United Kingdom, in accordance with the Internal Revenue Code of the United States and the Income and Corporation Taxes Act 1988 of the United Kingdom.

● Protocol and Amendments

The United States-United Kingdom Income Tax Treaty has been amended several times, including by the London protocol of July 31, 1964, and the Washington, D.C. protocol of March 31, 2001. The treaty has also been supplemented by a number of memoranda of understanding and exchange of notes between the United States and the United Kingdom, including the Memorandum of Understanding on the Exchange of Information in Tax Matters signed on April 18, 2002, by Paul O'Neill, the United States Secretary of the Treasury, and Gordon Brown, the Chancellor of the Exchequer. The treaty is an important part of the tax law of both countries, including the Internal Revenue Code of the United States and the Income and Corporation Taxes Act 1988 of the United Kingdom, and is administered by the Internal Revenue Service (IRS) of the United States and Her Majesty's Revenue and Customs (HMRC) of the United Kingdom. Category:Tax treaties