Hi There my questions is a simple. If a UK company pays interest to Cyprus Company (i.e. Interest income in Cyprus), under the EU Interest royalty directive the WHT is 0%. What are the criteria to take advantage of the this directive? Up to now I have discovered that you need a 25% minimum holding in the company or each company. and a minimum of 2 year holding period.Can you clarify that the above is correct? I am not sure about the 2 year holding period.Thanks
System of Law: England-and-Wales
This the first site, and researching on my own.
Can i get back to you in a moment with a answer. Thanks.
Apologies for a slight delay – I got caught up with another client.
Anyway you are absolutely right in your statement. The exemption on the EU the Interest and Royalties Directive applies if (1) a 25% shareholding in the income payer (2) for a minimum holding period of two years.
I also understand that if at the time the interest or royalty payment is made, the two-year holding period has not yet been satisfied, the withholding tax exemption can still apply if the shares continue to be held for sufficient time to enable the two-year holding period to be satisfied. In these circumstances, however, the withholding tax must be paid and, once the two-year holding period is satisfied, the tax paid can be reclaimed.
I understand there are some proposals to:
- Change the scope of the Directive by extending the list of companies to which it applies;
- Reduce the shareholding requirements to establish that companies are associated, from a 25% direct holding to a 10% direct or indirect holding;
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Chartered Accountant >20 years + Qualified IFA