Withholding tax

Glossary

Banking

Withholding tax

Depending on the jurisdiction, companies are required to withhold tax on interest payments on most debt facilities. In other words, the company does not pay interest gross but deducts the relevant withholding tax and remits it to the country’s tax authorities. In the UK, interest payments are subject to 20% withholding tax although there are many exemptions, such as for listed Eurobonds (cf.) or debt private placements by UK companies. It is up to the party from whom tax has been deducted to claim tax relief as appropriate.

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