Under domestic law, income tax is to be deducted at the basic rate (20% in 2017-18) source on yearly interest60 arising in the UK, inter alia, where it is paid by any person to another person whose ‘usual place of abode is outside the UK’.61 The relationship between the treaty rules and domestic law relating to interest, and particularly its relationship to distributions is complex and the treatment of any payment, is dependent on the interaction of the whole of the interest and dividend articles with the domestic law. Treaty developments have, to some extent, followed developments in domestic law.

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