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Overseas interest income

Interest charged by a UK company to an overseas borrower may be taxed in the borrower’s country by way of withholding tax. It can be complicated to determine exactly where the interest has arisen for tax purposes (commonly referred to as the source of the interest). UK tax treaties generally determine the interest to arise in the country where the payer of the interest is resident (or where it has a permanent establishment if the interest is attributable to the PE). For more complex situations a variety of factors will need to be considered, such as the location of any assets of the debtor (especially those which are security for the loan), the place and method of payment of the interest, the jurisdiction which the contract is governed by and the location of a guarantor (if any).

The amount of withholding tax will depend on the jurisdiction of payment and whether there is a tax treaty with the UK. Where withholding taxes are suffered, credit may be available in the UK for at least some