[13767]
August 10, 2001
TO: ACCOUNTING/TREASURERS COMMITTEE No. 24-01
INTERNATIONAL COMMITTEE No. 50-01
PENSION COMMITTEE No. 55-01
TAX COMMITTEE No. 23-01
RE: UNITED STATES AND UNITED KINGDOM SIGN NEW INCOME TAX
CONVENTION
The United States and United Kingdom signed a new income tax convention that, upon
ratification by each country, will replace the existing convention which has been in effect since
1980. As described in the attached announcement by Treasury Secretary O’Neill, the newly
signed convention will modernize the tax treatment of cross-border trade and investment
between the United States and the United Kingdom.
Among provisions of interest to US regulated investment companies (RICs) and their
shareholders, the new convention provides (1) for the reciprocal recognition of pension
contributions and (2) a zero rate of withholding tax for dividends received by qualifying
pension funds. As under the existing convention, UK-source dividends paid to a RIC generally
will be subject to withholding at a rate of 15 percent. The new convention also eliminates
several provisions of the existing convention that refer to the recently-repealed UK advance
corporation tax.
The new convention generally will enter into effect in the year following the exchange of
instruments of ratification. The withholding tax provisions will enter into effect on the first day
of the second month following the exchange of instruments of ratification.
Deanna J. Flores
Associate Counsel
Attachments
Attachment no. 1 (in .pdf format)