As part of the UK Autumn Budget on 22 November 2017, Chancellor Philip Hammond announced proposals for a new withholding tax on UK sourced royalties.
The rules are targeted at royalties which are earned from sales to UK customers and paid to connected companies resident in “low or no tax” jurisdictions.
The announcement was linked with a position paper on taxation of the digital economy. It is proposed that the withholding tax will apply from April 2019 even where the companies involved are not resident in the UK or do not have a permanent establishment in the UK. On 1 December 2017, the UK Government launched a consultation on the design of the rules.
In this article, Harriet Porter and Mat Scott look at the proposed new withholding tax including its implications for companies operating in the digital economy.
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