These tax breaks are expected to significantly increase the attractiveness of Guernsey and the Isle of Man as countries from which they can be integrated into the United Kingdom. The Double Tax Treaty Passport Scheme will be made available to leniency lenders to facilitate the process of applying for administrative withholding tax relief. DBAs include the “primary interest test” derived from the BePS contractual measures, which means that benefits under any DBA may be denied if it is determined that the primary purpose or purpose of an agreement or transaction was to guarantee those benefits. This test is generally adopted by Britain and crown dependencies in their contractual networks, in accordance with the majority of other jurisdictions, and aims to counter so-called “contract shopping”. The treaty will enter into force after the exchange of ratification instruments. The contract applies to Guernsey from the first day of the second month following its entry into force for withholding tax and from 1 January of the year following its entry into force for other taxes. The treaty applies to the United Kingdom from the first day of the second month following its entry into force for withholding tax, from 1 April next year after it comes into force with respect to corporation tax and from 6 April following its entry into force with respect to income tax and capital gains tax. The new treaties now all contain a non-discrimination clause (Article 24) and should in principle be considered “complete contracting countries” for the future of British taxpayers. Multinational companies should therefore consider the consequences of this change with respect to double taxation of theft assistance rights, the application of the right to vote to branch exemption, and the impending offshore revenues for intangible real estate law. While some contractual benefits will be available under the new DBA, Crown Dependencies will also help collect taxes for the UK Treasury.
This was a contentious issue over the years, with the Crown Dependencies being some of the few jurisdictions not to include this clause in their DBA or other agreements with the United Kingdom.