United Kingdom - Protocol to China income tax treaty signed 

The Protocol [PDF 14 KB], once ratified, would amend the UK-China income tax treaty (signed in 2011 but not yet ratified by China).

In the UK-China income tax treaty, Chinese withholding tax on dividends would be reduced to 5% when dividends are paid to a UK shareholder that owns 25% of the Chinese company directly or indirectly. It is understood that the Chinese authorities reconsidered the inclusion of indirect ownership and commenced further negotiations with the UK government. The resulting Protocol, published on 27 February 2013, amends this requirement so that the UK shareholder must own 25% of the Chinese company directly.

No details are currently available on the date the revised treaty is likely to be ratified although this could be during the first half of 2013 so that the treaty would enter into force and be effective (depending on the actual date of ratification):

• For China tax purposes from 1 January 2014
• For UK tax from April 2013 or 2014

Final patent box measures

In November 2012, HM Revenue & Customs published a draft “statutory instrument” to extend the patent box regime to patents granted by certain EU Member States. The guidance has been finalized.

The patent box rules in Finance Act 2012 treats patents granted by the UK Intellectual Property Office (IPO) and the European Patent Office (EPO) as qualifying IP. The government stated its intention at last year’s budget to extend the patent box to other EU Member States that have similar examination and patentability criteria as the UK. The final statutory instrument is intended to achieve this goal.

Read a March 2013 report [PDF 152 KB] prepared by the KPMG member firm in the United Kingdom: Weekly Tax Briefing (1 March 2013)

The KPMG report also provides summaries of the following items:

• New EU consultations
• Isle of Man disclosure facility
• Air passenger duty (business / private jets)
• Creative industry tax credits
• A review of value added tax (VAT) cases