On-line
tool: Step 3 - Small enterprise exemption
We are now at Stage 2 of Step 3. Based on
the
explanation below, is the transaction you
are looking at
with a non-qualifying
territory?
Click the answer:
YES
NO
Guidance:
The
exemption does not apply where the other related
party is a resident of
certain countries (“non-qualifying
territories”).
And where there
is a series of transactions which form a composite
transaction that is
caught by the transfer pricing rules, then the
exemption is disapplied
if any of the parties to any of the component
transactions (even if
that party is entirely independent) is resident in a
“non-qualifying
territory”.
However, the broad effect is that the small-sized
enterprise exemption
is only available for transactions that are:
- wholly within the UK or
- with (or via) countries with which there is a
double
tax agreement (DTA) that contains certain
non-discrimination provisions.
Although many countries do have UK DTAs with the
relevant provision,
there are a number of significant exceptions.
For instance, the
UK has substantively no DTA with Brazil.
Just following the 2004 Budget, the Inland Revenue
published guidance
which specifies which countries are qualifying
territories. Click here
to download.
The legislation includes powers for the Government
to override
these tests, to include or exclude any country they
name.
Guidance on the Inland Revenue website following the
Budget confirms
that the government has no specific plans to use
these powers. It
had been speculated that the exemption would be
denied for low tax rate
countries like Ireland, but it would appear that
this is not the case.
The 'small print'
The
comments on this page and elsewhere on
this website are of a
general nature. It is not
practicable in a general review such as
this
to consider every convolution of the UK
transfer pricing rules or of
any other tax law that may be
relevant. Moreover, these pages
naturally do not take into account the
specific facts relating to any
particular taxpayer. Therefore,
although the guidance in this
website
should give a good indication of the
likely position under the transfer
pricing rules, taxpayers should obtain
professional advice to verify
the position, or carry out their own
analysis.
Neither
TPS nor its affiliates
and employees
make any representation regarding the
completeness or accuracy thereof and they
accept no responsibility for
any loss or damage incurred as a result of
any user acting or
refraining from acting upon anything
contained on these pages or upon
its omission therefrom.
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