UK And Saudi Arabia Sign Tax Agreement

by Robert Lee, Tax-News.com, London

02 November 2007

The first comprehensive double taxation avoidance agreement between the UK and Saudi Arabia was signed on Wednesday by Chancellor of the Exchequer Alistair Darling and Minister of Finance of Saudi Arabia. Dr. Ibrahim A. Al-Assaf.

Welcoming the agreement, the Chancellor commented that: "This treaty is a welcome addition to the UK's tax treaty network; it will strengthen economic ties between our two countries and will be good for British companies doing business in Saudi Arabia."

The treaty generally follows the OECD Model Double Taxation Convention. Important features include the complete elimination of source-country withholding taxes on all interest payments. Dividends may generally be taxed at source up to a maximum rate of 5% and royalties to a maximum of 8%.

The Convention will enter into force once both countries have completed their legislative procedures. In the United Kingdom, the provisions of the Convention will take effect from 1 April (for corporation tax purposes), and from 6 April (for income tax and capital gains tax purposes) in the calendar year following the date of entry into force. In Saudi Arabia, the provisions will take effect from 1 January in the calendar year following the date of entry into force.

Double Taxation Conventions aim to eliminate the double taxation of income or gains arising in one country and paid to residents of the other country. They do this by dividing the taxing rights that each country has under its domestic law over the same income and gains.

The UK has a large network of Double Taxation Conventions covering more than 100 countries.

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