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Finance Act 2016 (FA16) introduced a number of changes to ensure that all royalties paid in connection with a trade in the UK will be subject to the deduction of income tax at source unless the UK has explicitly given up its taxing rights under an international agreement. »Ê¹ÚÌåÓýapp changes made in FA16:

• introduced anti-treaty shopping provisions relating to the requirements to deduct income tax at source from royalties,
• amended the definition of a royalty for the purposes of the rules on the deduction of income tax at source,
• specified that a royalty comes from a source in the UK if paid in connection with the trade of a permanent establishment (PE) in the UK,
• changed the Diverted Profits Tax (DPT) rules to ensure an ‘avoided PEâ€� is liable to DPT in the same way as a permanent establishment.

This guidance explains each of these changes in further detail.