Budget 2021: Withdrawal from the EU Interest and Royalties Directive

The Budget has today confirmed that, following Brexit, the UK will be withdrawing from the EU Interest and Royalties Directive, which had previously meant that there were no withholding taxes levied on such payments between group companies resident in different EU states.

What does this mean?

From 1 June 2021, companies will instead have to rely on the tax treaties between the relevant countries to benefit from any reduced rates of withholding tax. While the UK has tax treaties with most EU members, not all give a 0% withholding tax rate and so this measure is expected to raise £10 million for the Exchequer next year.

What should you do?

International groups now need to ensure that they understand the extent to which these changes will impact on them and consider their inter-group financing arrangements to minimise the impact.

Read our previous update for further details on the EU Interest and Royalties Directive.

If you would like to discuss this issue further, please get in touch with your usual Crowe contact or email Rob Gunn.