The double taxation agreement (DTA) signed by the UK and Tajikistan on 1 July 2014 entered into force on 16 March 2015 and became effective in Tajikistan in relation to taxes on income and capital, other than withholding tax, for tax years beginning on or after 1 January 2016.

In the UK the agreement became effective for income and capital gains tax for years of assessment beginning on or after 6 April 2015 and for corporation tax for financial years beginning on or after 1 April 2015. In relation to withholding tax the agreement has been in effect in both countries from 1 April 2015.

Under the agreement the maximum withholding tax on dividends is 5% if the beneficial owner is a pension scheme or a company holding directly at least 10% of the capital of the paying company. In other cases the withholding tax on dividends is limited to 10%.

The maximum withholding tax on interest is 10%, with exemptions where the beneficial owner is a State or central bank, a bank or a pension scheme (unless the interest is derived from a business carried on by the pension scheme or through an associated enterprise).

The maximum withholding tax rate on royalties under the treaty is 7% of the gross amount. Royalties are defined as payments received as consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, any patent, trade mark, design or model, secret formula or process, or for information (know-how) concerning industrial, commercial or scientific experience. The Protocol to the agreement clarifies that scientific work includes computer software.

The Article in relation to the mutual agreement procedure provides for unresolved issues to be submitted to arbitration at the request of the taxpayer presenting the case if the competent authorities are unable to reach agreement within two years from the presentation of the case to the competent authority of the other contracting state. The decision is to be binding on both contracting states unless a person directly affected by the case does not accept the mutual agreement that implements the arbitration decision.

The Protocol to the agreement provides that if any agreement signed at a later date between Tajikistan and a current OECD member state provides for a lower withholding tax rate on dividends paid from Tajikistan then that lower rate or exemption is to apply under this agreement.