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Free movement of capital involves lowering, or completely removing, the restrictions and controls on funds moving between EU member states. It shares similarities with other freedoms, especially the freedom to establish and provide services. The aim of liberalisation is to enable integrated, open and efficient European financial markets.

For EU citizens, free movement of capital means the ability to carry out financial transactions in all EU member states, such as opening bank accounts, buying shares in non-domestic companies or purchasing property in another EU country.

For companies, it means being able to invest in other European companies, raise money in another country and distribute dividends, interest and licence payments without taxation at source.

We can provide expert advice on:

  • Reviewing flows of capital in your group and advising if additional tax issues arise after Brexit
  • Reviewing local taxation rules of EU countries where investments are held and identifying any future withholding tax issues
  • Reviewing any double taxation treaties and advising on administrative issues
  • Advising individuals on restrictions of moving capital between the UK and the EU and any tax issues that can potentially arise

Typical questions from our clients:

What are the consequences for the flow of capital when the UK leaves the EU?

Legislation such as the Parent-Subsidiary Directive or the Interest and Royalty Directive are EU provisions that enable payments to be made between EU member states without withholding taxes. Once EU law does not apply to the UK anymore, the local law, together with any double taxation treaties between the UK and individual EU member states, will determine whether any withholding tax applies.

What steps can be taken to lower any potential withholding taxes for flows of capital from EU countries to the UK?

Local advice will be needed to determine whether any withholding tax will apply. If the double tax treaty reduces, or eliminates, the withholding tax cost, then a formal clearance application or certificate of residence may need to be provided to the local tax authority.

Is there anything else I should do now?

If you have any existing loan or licence agreements with EU member states, review the agreement to see what steps need to be taken to comply with withholding tax requirements. It may be necessary to amend the agreement, or to obtain tax authority clearance before any payments are made after 31 December 2020.

The Four Freedoms of the European Union

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Our experts

Partner and Head of International Tax

James Dolan


Heather Self