Withholding Tax: Treaties

HM Treasury written question – answered on 26th February 2018.

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Photo of Steve McCabe Steve McCabe Labour, Birmingham, Selly Oak

To ask Mr Chancellor of the Exchequer, what assessment he has made of the effect of withholding tax for dividends and royalties in tax treaties on levels of investment.

Photo of Mel Stride Mel Stride Financial Secretary to the Treasury and Paymaster General

It is a country’s sovereign right to withhold tax on dividends and royalties that arise in its jurisdiction.

Tax treaties seek to eliminate double taxation that this can create, by either preventing the parties to the treaty from imposing withholding tax, or limiting the rate that may be withheld.

The view of successive governments has been that by eliminating double and excessive taxation, tax treaties promote international trade and investment, supporting economic growth and sustainable tax revenues.

Assessing the direct effect of withholding rates in tax treaties on investment in isolation is not practical, as this depends on a wide range of factors, including existing and planned infrastructure, skilled workforces, and access to markets.

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