Draft Double Taxation Relief and International Tax Enforcement (Brazil) Order 2023 Draft Double Taxation Relief and International Tax Enforcement (San Marino) Order 2023

James Murray Excerpts

Tuesday 27th June 2023 General Committees

[James Murray (Ealing North) (Lab/Co-op)]

It is a pleasure to serve with you in the Chair, Sir Robert. Double taxation agreements prevent income or gains from being taxed in both the territory in which they arise and the territory in which the recipient is resident. As the Minister set out, such agreements benefit taxpayers by ensuring certainty of treatment, and they include provisions to combat tax avoidance and evasion.

I understand that today’s Brazil order brings into effect a convention and protocol made in 2022 between the UK Government and the Government of Brazil, superseding previous arrangements, while the San Marino order brings into effect a double taxation agreement for the first time. As the Minister said, both double taxation agreements follow the OECD model tax convention on income and capital and include the minimum standards recommended by the OECD/G20 base erosion and profit shifting project, both of which we welcome. The detail of each order sets out the scope and the definitions of, for example, “residents” and “permanent establishment” that will be used to put the arrangements into effect. The orders also set out the rules governing the taxation of different sources of income and gains, including employment income and capital gains, as well as gains that arise from sources such as dividends, royalties and interest.

We will not oppose either order, as we recognise the value of having up-to-date double taxation agreements in place between the UK and other countries, but I will ask the Minister one specific question for the Committee’s interest. Will she explain how the double taxation agreements will operate where an individual is resident but non-domiciled in the UK? I realise that that may be a broad question, so I will give an example. Under the San Marino order, what would be the income tax treatment of someone who is resident in the UK, had income arising in San Marino, but was domiciled for UK tax purposes in San Marino and chose to pay tax on a remittance basis? I realise that that is a fairly specific scenario, but it would be helpful to understand how taxation would be applied in those circumstances, to help us better understand the interaction between double taxation agreements and non-dom tax status. I look forward to the Minister’s response.