30 July 2021
The U.S. IRS has published two competent authority arrangements signed with the United Kingdom on 26 July 2021.
The Competent Authority Arrangement Regarding United Kingdom Withdrawal from the EU concerns whether a person resident in the United Kingdom may continue to be considered a "resident of a Member State of the European Community" for the purposes of applying the so-called "derivative benefits test" in paragraph 3 of Article 23 (Limitation on benefits) of the 2001 US-UK Tax Treaty, including the term "equivalent beneficiary," as defined in subparagraph (d) of paragraph 7 of Article 23. The competent authorities agree that, for the purposes of applying paragraph 7(d) of Article 23, a "resident of a Member State of the European Community" continues to include a resident of the United Kingdom. This interpretation reflects the shared understanding of the competent authorities that residents of either Contracting State should be eligible to qualify as equivalent beneficiaries for purposes of applying the derivative benefits test in paragraph 3 of Article 23.
The Competent Authority Arrangement Regarding USMCA concerns the interpretation of the term "North American Free Trade Agreement" referred to in subparagraphs d) of paragraph 7 of Article 23 (Limitation on Benefits) of the 2001 US-UK Tax Treaty considering the signing of the United States-Mexico-Canada Agreement (USMCA). The competent authorities agree that the references to the NAFTA in subparagraph d) of paragraph 7 of Article 23 of the Treaty shall be understood as references to the USMCA upon entry into force of the USMCA.
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