EB or not EB? That Is the Question Treasury Must Answer After Brexit
Tax Management International Journal, 49 TMIJ 2 (2/14/20)
15 Pages Posted: 21 Apr 2020
Date Written: February 14, 2020
The United Kingdom's withdrawal from the European Union could have a significant effect on international and U.K. domestic taxation. Brexit will likely impact aspects of the United Kingdom's value added tax and withholding tax regimes, customs and excise taxes, State Aid determinations, and double tax treaties. This article discusses one discrete issue that has not yet been decided by the U.S. Treasury and that could have significant consequences for entities currently claiming the benefit of U.S. tax treaties: whether the United Kingdom’s withdrawal from the European Union means that U.K. shareholders will no longer be considered “equivalent beneficiaries” for purposes of the derivative benefits test in the limitation on benefits provision in U.S. tax treaties.
This article evaluates the arguments for and against extending equivalent beneficiary status to U.K. residents post-Brexit, considers historical analogs that might provide insight on the question, and discusses Treasury's options for extending equivalent beneficiary status in light of the possibility that some approaches could create issues with its treaty partners or the U.S. Senate.
Note: Reproduced with permission from Tax Management International Journal, Vol. 49, No. 02, 02/14/2020. Copyright 2020 by The Bureau of National Affairs, Inc. (800- 372-1033) http://www.bna.com
Keywords: Brexit, tax treaties, limitation on benefits, derivative benefits test, equivalent beneficiaries, competent authority
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