Memec plc, was a partner in a German silent partnership (stille Gesellschaft). The partnership had no separate legal personality, but was a contractual arrangement under which Plc had the right to receive a share of the profits of the business carried on by the other partner, in return for a capital payment. The other partner, Memec GmbH, was a German company, wholly owned by Plc. It alone carried on the business of the silent partnership. It alone owned the assets of the business, and the income from those assets as it accrued. It had wholly owned subsidiaries, which were also German companies. The subsidiaries paid dividends to GmbH, and that income formed the principal source of the profits of the partnership, which were shared between the partners in accordance with their agreement. The question was whether Plc could claim credit under the double taxation agreement for German taxes paid by the subsidiaries of GmbH on their trading profits.
Held: Double taxation relief was not available where money earned by German Company on German trading was transferred to English company in silent partnership, since it was not a payment of dividends. The court emphasised the need to identify the source of the UK company’s income, and whether its partnership (governed by foreign law) with a foreign subsidiary, which received the dividends in question and then made payments to the UK company in accordance with the partnership agreement, was ‘transparent’, in the sense that the payment of the dividends to the foreign subsidiary, and its payment to the UK company of the sums due under the partnership agreement, were equivalent to the payment of the dividends directly to the UK company itself.
Peter Gibson, Henry LJJ, Sir Peter Staughton
Times 01-Jul-1998, [1998] EWCA Civ 941, [1998] STC 754, (1998) 1 ITL Rep 3, (1998) 71 TC 77, [1998] BTC 251
Bailii
Income and Corporation Taxes Act 1988 Part XVIII
England and Wales
Citing:
Appeal from – Memec Plc v Inland Revenue Commissioners ChD 7-Nov-1996
Double taxation relief was not available for a distribution by a German company to its UK partner.
An international treaty should be construed in a manner which is ‘international, not exclusively English’. . .
Cited by:
Cited – Anson v Revenue and Customs SC 1-Jul-2015
Interpretation of Double Taxation Agreements
This appeal is concerned with the interpretation and application of a double taxation agreement between the United Kingdom and the United States of America. A had been a member of an LLP in Delaware, and he was resident within the UK, but not . .
Lists of cited by and citing cases may be incomplete.
Corporation Tax
Leading Case
Updated: 01 November 2021; Ref: scu.144420
