In July 2017, Her Majesty's Revenue and Customs (HMRC) in the UK has announced the update of tax treaties with three jurisdictions. HMRC signed new comprehensive double taxation agreements and Protocols with Isle of Man, Guernsey, and Jersey respectively, but none of the new treaties has entered into force yet.
The new treaty drafted based the 2017 OECD Model Tax Convention (MTC) and reflect the anti-BEPS consideration (base erosion and profit shifting). For example, the new treaty embeds a principal purpose test (PPT) to prevent abuse practice, and it also accepts OECD’s recommendations on anti-fragmentation rules pertaining to determining the existence of permanent establishment (PE) under Art.5. But the development of agency PE is not observed in the treaty. It was signed in London on 2 July 2018 and enter into force once both territories have completed their parliamentary procedures and exchanged written notes to replace the previous tax treaty signed in 1955.
Compared with the OECD MTC (2017), the treaty includes an extra Art.21 on “MISCELLANEOUS RULES APPLICABLE TO CERTAIN OFFSHORE ACTIVITIES”, which cannot be prioritized by any other articles under this treaty agreement. “Offshore activities” refers to “activities which are carried on offshore in a Territory in connection with the exploration or exploitation of the seabed and subsoil and their natural resources situated in that Territory”, and enterprises of one state carrying such activities in the other territory may be deemed “carrying on business in that other Territory through a permanent establishment situated therein”. The treaty inserts a PPT provision for anti-abuse purpose as well. It was signed in London on 2 July 2018 and will enter into force once both territories have completed their parliamentary procedures and exchanged written notes.
Similar to the UK – Guernsey Treaty, the treaty signed with Jersey is based on the OECD MTC (2017) and includes Art.21 on miscellaneous rules applicable to certain offshore activities and a PPT provision. This new treaty was signed in London on 2 July 2018 and will enter into force once both territories have completed their parliamentary procedures and exchanged written notes.
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