From 1 January 2021, the EU Parent Subsidiary Directive and the EU Interest and Royalties Directive no longer apply in the UK. This means that certain payments to UK companies may now become subject to withholding taxes where none previously applied. HMRC has now published updated guidance in this area.

Overall, the key advice is to check the terms of the relevant double taxation agreement between the UK and the EU country if a company is UK resident for tax purposes and it receives interest, royalties or dividend payments from an associated company resident in an EU member state.

The amount of withholding tax required to be deducted depends on the double taxation agreement between the UK and the paying EU country.