The UK and Libya have signed the first ever double tax convention between the two countries.
The treaty largely follows the OECD model double taxation convention. Important features include, with one exception, the complete elimination of source-country withholding taxes on dividends, interest and royalty payments, which is a first for a UK tax treaty with an African state
"This double taxation convention will bring benefits to British business in Libya and Libyan investors in the UK – benefits in terms of certainty, clarity and transparency and reducing tax compliance burdens," said a junior minister at the UK foreign office.
According to the UK Foreign and Commonwealth Office, UK imports from Libya consist almost exclusively of petroleum products. Total imports for 2003 were £202.1 million ($303.1 million).
"The treaty reflects the importance that the UK has always given to having tax treaties with its trading partners, and also the growing importance of the Middle East/North Africa region in the world economy," said Philip Marwood from KPMG in Bahrain.
"Certainly investors in the Gulf region and in Egypt have been looking at investment opportunities in Libya for some time, and it is good that UK businesses will be helped to do likewise," he added.
The convention will enter into force once both countries have completed their legislative procedures. In the UK the provisions of the convention for corporate tax purposes will take effect from April 1 2009. In Libya they will take effect from January 1 in the calendar year following the date of entry into force.
