INTM164030 - UK residents with foreign income or gains: dividends: EC Directive

From 1 January 1992 until 31 December 2020 the EC Parent and Subsidiary Directive (90/435/EC) barred the imposition of withholding taxes on dividends paid by a company resident in one Member State of the Community to a company resident in another Member State, where the company receiving the dividend held a minimum of 25 per cent of the capital of the company paying the dividend. The term `company’ is defined in the Directive. In the case of the UK it meant a company incorporated under the law of, and subject to tax in, the UK.

The Directive overrode any provision made for withholding tax in the relevant bi-lateral treaty. Note that for states which joined the EU after 1992, the Directive applied from the relevant accession date.

Between 1 January 1992 and 31 December 2020, where, exceptionally, foreign tax was withheld on a dividend received by a UK company from a company resident in another Member State in which the UK company held at least 25 per cent of the capital, no relief was allowable for that tax, whether by way of credit relief or by way of deduction, except in the case of a dividend paid by a Greek company.