OT41560 - Non-Residents Working on the UK Continental Shelf: Double Taxation Agreements - Treaties with an Offshore Activities Article - Example 1

Example 1 - Norway

The UK/Norway Double Taxation Agreement [SI2000\3247] is an example of the third type mentioned at OT41530. OT41540 & OT41550 refer to some of the limits placed by treaties on the additional taxing opportunities provided by CTA09\S1313, ITTOIA05\S874 and ITEPA03\41 and the purpose of an 바카라 사이트淥ffshore Activities Article바카라 사이트� is to remove at least some of those obstacles.

Article 23, the Offshore Activities Article, applies 바카라 사이트渘otwithstanding any other provision바카라 사이트� of the treaty (Para 1) i.e. it overrides other provisions.

바카라 사이트淥ffshore activities바카라 사이트� for the purposes of Article 23 are those activities which are carried on offshore in connection with the exploration or exploitation of the seabed and subsoil and their natural resources situated in 바카라 사이트渢he UK바카라 사이트� (on an 바카라 사이트渆xtended definition바카라 사이트�) [Article 3(1)(a) and (e) and 23(1)].

Article 23(3) provides that a 바카라 사이트渞esident of바카라 사이트� Norway who carries on 바카라 사이트渙ffshore activities바카라 사이트� in 바카라 사이트渢he UK바카라 사이트� (on an 바카라 사이트渆xtended definition바카라 사이트�) is deemed:

  • In the case of an enterprise, to be carrying on business through a UK permanent establishment - even though it has no physical presence of any kind on the UK mainland.
  • In the case of an individual providing services of an independent character, to be performing those services from a fixed base in the UK.

Thus there is no need to identify an actual permanent establishment under Article 5 for taxing rights to apply.

The deeming provisions however do not apply if

  • the activities are covered by the 바카라 사이트�30 day de minimis time rule바카라 사이트�, that is those carried on for 30 days or less in aggregate in any 12 month period [Paragraph 5(a)]. Working periods carried on by related enterprises are aggregated [Paragraph 5(a)(i)] or
  • the profits are derived from the operation of ships or aircraft which at the time of the performance of the relevant activities, are designed primarily for the purpose of transporting supplies or personnel or for towing or anchor handling.

But the deeming provisions would still apply during any period in which a ship or aircraft is contracted to be used mainly for purposes other than to transport supplies or personnel to or between places where offshore activities are being carried on, or for purposes other than towing or anchor handling.

De minimis time rule - example 1

A Norwegian resident offshore contractor carries on a 25 day activity during December 2005 and does not return to the UKCS until 18 months later.

Profits from the 25 days activity would not be taxable in the UK.

De minimis time rule - example 2

The same Norwegian resident offshore contractor returned to the UKCS in 2006 and carried on a 10-day offshore activity in November of that year. Both periods would fall outside the de minimis exemption in the treaty because the aggregate 30 day period within 12 months had been exceeded. As a consequence profits from the 25 days activity as well as the 10 days activity would be taxable in the UK.

A list of treaties containing an Offshore Activities Article can be viewed at OT41530 and three further examples of commonly used treaties are mentioned at OT41570 & OT41580. The actual terms of these Articles may differ significantly one from another and it is necessary to consult the relevant treaty before reaching any conclusions.