THE US AND GREAT BRITAIN signed a new tax treaty on July 24.  The treaty will help British companies with investments in the United States.

It eliminates US withholding taxes on dividends that are paid by a US subsidiary to its British parent.  This is the first time that the United States has agreed with any country to a 0% withholding rate.  Some commentators expect the treaty to lead to use of the Great Britain as a staging post for investments into the United States.  In order for the 0% rate to apply, the British parent must own at least 80% of the voting shares in its US subsidiary.  In addition, it must jump through several other hoops.  The hoops are easier to get through if the US subsidiary has been owned since September 1998.

The treaty must be ratified by the US Senate and the British Parliament before it takes effect.

Keith Martin