Double Taxation UK/ Oman

[albacridhe]

Good morning,

Hoping for some advice. I am operating a UK Ltd Company, one project we have is in Oman, which the UK has a DTA with. Due to our physical presence in Oman (over 90 days) we are liable to pay some corporation tax there, albeit at a much lower rate than in the UK. The Oman contract makes up 90% of our income over the last year, so is significant for us.

My questions are;

1. From discussion with our accountants in Oman, due to the DTA between Oman and UK, once we have declared our return in Oman (for income derived there, less any reasonable expenses) that concludes our tax liability for that income and would therefore not pay any tax on that income in the UK. Is this correct or would we still expect to pay UK corporation tax on the remainder of the profits (since the rate in Oman is much lower).

2, Subject to item 1, we pay dividends out in the UK, these are given a 10% tax credit which, as per our understanding, arises from the fact that the company has already paid the tax due - however our concern now is that if no (or very little) UK corp tax is due - will this 10% credit still apply?

3. Are there any experts on the operation of DTA's out there who could assist in ensuring we comply with both Country's regulations, my current accountants in the UK are not as experienced in these matters? (if so pls drop me a line)

Many thanks in advance for your help

[Martin at NixonWilliams]

1. From discussion with our accountants in Oman, due to the DTA between Oman and UK, once we have declared our return in Oman (for income derived there, less any reasonable expenses) that concludes our tax liability for that income and would therefore not pay any tax on that income in the UK. Is this correct or would we still expect to pay UK corporation tax on the remainder of the profits (since the rate in Oman is much lower).

You will still pay corporation tax in the UK if the company is resident in the UK.

2, Subject to item 1, we pay dividends out in the UK, these are given a 10% tax credit which, as per our understanding, arises from the fact that the company has already paid the tax due - however our concern now is that if no (or very little) UK corp tax is due - will this 10% credit still apply?

The 10% tax credit only covers the tax due if you are a basic rate taxpayer. If you are a higher rate taxpayer, additional tax is due.

The tax payable on dividends you receive from the company is not related to the corporation tax in any way.

3. Are there any experts on the operation of DTA's out there who could assist in ensuring we comply with both Country's regulations, my current accountants in the UK are not as experienced in these matters? (if so pls drop me a line)

This sort of thing is not straightforward. I suggest that you appoint an accountant who specialises in international tax matters.

I hope this helps.

Martin

[Jessica@WhiteFieldTax]

3. Are there any experts on the operation of DTA's out there who could assist in ensuring we comply with both Country's regulations, my current accountants in the UK are not as experienced in these matters? (if so pls drop me a line)

Having detailed knowledge of two counties tax requiems is quite specialist. You may find a boutique firm who can do it, but expect to pay a lot more than the normal accounting fees you see touted around on here.

In practice you may have to "case manage" two firms of accountants, one there, and one here, yourself, and find a route through that clears both.

[ASB]

I have generally found HMRC fairly helpful. Especially when I had issues with the UK-Portugal DTA. This gave difficulties against what could be offset in terms of Portuguese withholding taxes. But it all got worked out in the end.

Worst case should be that UK CT is payable on the entire profits, the tax paid in OMAN **should** count towards this.

Trying to get you head around the below may help is ascertaining the questions to ask of HMRC.

http://www.hmrc.gov.uk/taxtreaties/i...n-protocol.pdf
http://www.hmrc.gov.uk/taxtreaties/i...nsolidated.pdf

[BlasterBates]

I agree totally with ASB.

Talk to someone at HMRC, how to sort out the tax. It costs nothing, and their aim is to correctly calculate the tax.

In the end the maximum tax you pay would be tax paid in the UK, and they will credit tax paid in the Oman, unless there are exceptional circumstances.

You can then get a second opinion from an accountant. Always worth getting opinion.

My experience that there are very few accountants indeed who are really expert enough on cross-border tax who will be really sure on how it will be taxed so you might as well go straight to the horses mouth. In addition there are lots of "ifs and buts" best just to get a decision from the tax authorities first and then challenge if you think there's a problem.

[Martin at NixonWilliams]

I agree it is worth talking to HMRC however make sure you speak to somebody technically able to deal with your query (this is becoming harder and harder these days), and obtain a call reference if you are to rely on the advice they give you.

The information on the website is quite helpful as pointed out above, and is more reliable than the person you will end up speaking to over the phone.

[albacridhe]

Hi all thanks for the advice.

Beforehand I had spoken with both Oman and UK accountants on this matter, but neither able to give any specific advice on the operation of the DTA.

Have also spoken with HMRC, seems that the issue of PE is not going to be straightforward - there is a clear disconnect between the Oman authority's views on what constitutes PE and what is in the DTA....

Would love to find someone who has experience of this issue - we cant be alone in this?

[ASB]

Hi all thanks for the advice.

Beforehand I had spoken with both Oman and UK accountants on this matter, but neither able to give any specific advice on the operation of the DTA.

Have also spoken with HMRC, seems that the issue of PE is not going to be straightforward - there is a clear disconnect between the Oman authority's views on what constitutes PE and what is in the DTA....

Would love to find someone who has experience of this issue - we cant be alone in this?

You could perhaps try an expats forum. I'm sure your situation is not unique. It's "just" a matter of finding them....