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Amending Protocol to Israel-UK Tax Treaty to Take Effect in Early January 2020

An amending protocol to the 1962 Israel-UK tax treaty is effective as of January 1, 2020.

 

The protocol includes a long list of significant and fundamental amendments and updates to the treaty, among them:

  • In case of residency in both states (in accordance with domestic law), the two states will enter into a process of mutual agreement and make efforts to reach a solution whereby one place of residency is established. If Israel and the UK do not reach an agreement, it will be impossible to apply for benefits/exemptions/refunds under the provisions of the treaty.
  • Income or profits of entities transparent for tax purposes will be considered income of a resident of one of the states so long as that income is categorized in that state.
  • The withholding tax rate for the payment of dividends was updated to 5% if the beneficial owner is a company that directly holds at least 10% of the company’s capital. In all other cases, a rate of 15% shall apply.
  • The withholding tax rate for interest paid to a a resident bank of the other state was updated to 5% (10% in other situations). In addition, another exemption for government bonds was updated.
  • The withholding tax rate for royalties of any kind was expanded to adopt the provisions of the OECD model tax convention.
  • Some of the tax benefits under the treaty are contingent upon an actual tax charge by the other state, so that cases of double exemption in both states are minimized.
Tags: Tax Treaty