The UK’s bilateral double tax treaty with Slovenia has been updated as a result of changes made under the OECD’s multilateral instrument (MLI) for inclusion into bilateral treaties of tax treaty related provisions from the action plan on base erosion and profit shifting (BEPS).
Residence
In Article 4 (1) of the revised UK-Slovenia agreement where a person other than an individual is a resident of both contracting states the competent authorities shall endeavour to determind by mutual agreement the contracting state of which the person is deemed to be a resident for treaty purposes, having regard to the place of effective management, the place where it is incorporated and other relevant factors.
Permanent Establishment
The permanent establishment provisions are amended to clarify that the exceptions in Paragraph (4) of Article 5 of the agreement do not apply to a fixed place of business that is used or maintained by an enterprise if the same enterprise or a closely related enterprise carries on business activities at the same place or at another place in the same Contracting State and that place constitutes a permanent establishment for the enterprise or a closely related enterprise under Article 5; or the overall activity resulting from the combination of the activities of two enterprises is not of a preparatory or auxiliary character, where they are part of a cohesive business operation.
A new paragraph defines a person closely related to an enterprise for the purposes of the permanent establishment article.
Dividends
A revised paragraph clarifies that no relief is available if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the shares or other rights in respect of which the dividend is paid to take advantage of the dividend article of the treaty.
Interest
A revised paragraph of the interest article clarifies that no relief is available if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the debt-claim in respect of which the interest is paid to take advantage of the interest article of the treaty.
Royalties
A revised paragraph in the royalties article clarifies that no relief is available if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the rights in respect of which the royalties are paid to take advantage of the royalties article of the treaty.
Mutual agreement procedure
A provision for binding arbitration has been added to the article on the mutual agreement procedure.
Entry into force of new provisions
The provisions of the MLI have effect with respect to the UK-Slovenia treaty:
- with respect to taxes withheld at source on amounts paid or credited to non¬residents, where the event giving rise to such taxes occurs on or after 1 January 2019;
- in the United Kingdom, from 1 April 2019 for corporation tax and from 6 April 2019 for income tax and capital gains tax; and
- with respect to all other taxes levied by Slovenia, for taxes levied with respect to taxable periods beginning on or after 1 April 2019.
