According to a recent update from HMRC, the income and capital tax treaty between Tajikistan and the United Kingdom entered into force on 16 March 2015. The treaty, signed 1 July 2014, is the first of its kind directly between the two countries, although the 1985 income and capital tax treaty between the UK and the former Soviet Union had applied in respect of Tajikistan but was terminated.
The treaty covers Tajik income tax, tax on profit, and tax on immovable property. It covers UK income tax, corporation tax, and capital gains tax.
If a company is considered resident in both Contracting States, the competent authorities will determine the company's residence for the purpose of the treaty through mutual agreement. If no agreement is reached, the company will not be entitled to the benefits of the treaty aside from those covered in Articles 21 (Elimination of Double Taxation), 22 (Non-Discrimination) and 23 (Mutual Agreement Procedure).
The following capital gains derived by a resident of one Contracting State may be taxed by the other State:
Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.
The beneficial provisions of Articles 10 (Dividends), 11 (Interest), 12 (Royalties) and 20 (Other Income) will not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the shares, debt-claims or other rights in respect of which the dividends, interest, royalties or other income are paid was to take advantage of those Articles by means of that creation or assignment. The limitation is included in each of those Articles.
Both countries generally apply the credit method for the elimination of double taxation. However, the UK will exempt dividends paid by a Tajik company to a company resident in the UK if the conditions for an exemption under UK law are met. Exemption may also apply for profits of a permanent establishment in Tajikistan of a UK company if the conditions for an exemption under UK law are met.
The protocol to the treaty, signed the same date, includes the provision that if any agreement between Tajikistan and an OECD member state (member as of 1 July 2014) provides for an exemption or lower rate of tax on dividends than the rate under paragraph 2 of Article 10 (Dividends) of the Tajikistan-UK treaty, then such exemption or lower rate will automatically apply for dividends governed by that paragraph.
The treaty applies in Tajikistan in respect of withholding taxes from 1 April 2015, and for other taxes from 1 January 2016. In the UK, the treaty applies:
The provisions of Article 24 (Exchange of Information) apply from the date of the treaty's entry into force, 16 March 2015.
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