INTM620360 - Offshore Receipts in respect of Intangible Property (ORIP): Exemptions: Certain bodies corporate that are transparent in a full treaty territory

ITTOIA05/Ch2A/S608MB

This exemption removes from charge a corporate body that is formed in a full treaty territory and regarded as tax transparent by the laws of that territory and where they are wholly owned by persons resident in that territory. The exemption is not contingent on a claim, but is only available where the following conditions are met:

• The corporate body must be incorporated in a full treaty territory and tax transparent in that territory;
• The body must not be resident in a non-full treaty territory in the tax year for the exemption to apply;
• The body receives or is entitled to UK-derived amounts; and
• The body must be wholly owned by relevant members who are resident in the same full treaty territory as the body corporate throughout the tax year.

All conditions above must be met for the transparent corporate body to be exempt from a charge that would otherwise arise.

Example 1

Company A is a US resident corporation that owns 100% of a Delaware incorporated limited liability company (LLC1), which in turn owns 100% of another Delaware incorporated limited liability company (LLC2). Both LLC1 and LLC2 are disregarded entities of company A for US federal tax purposes and are not resident in the US for US tax purposes and as such are not residents of a full treaty territory.

LLC1 and LLC2 receive UK-derived amounts that would potentially be chargeable under Chapter 2A, subject to any treaty relief claimed under the US UK double tax arrangements or any exemption under Chapter 2A. In such circumstances, section 608MB exempts both LLC1 and LLC2 from any charge on UK-derived amounts arising to those companies.