A Double Taxation Agreement (or ‘Treaty’) is an agreement reached between two countries to improve cross-border tax conditions for individuals and companies. They aim to prevent undue or excessive tax being charged when income is taxable in two separate countries (referred to as ‘states’).
There are many Double Tax Agreements across the globe, and the details of each will vary. Generally, however, the broad purpose remains the same. If an individual or company is classed as a tax resident in two countries at the same time, or is tax resident in one country but has taxable income arising in another, a Double Taxation Agreement enables them to claim tax relief on their income and capital gains, so that they do not have to pay tax twice on these sources.
Double Taxation Treaties for UK income
If you currently reside in the United Kingdom (UK) but are also considered a tax resident in another country, or a non-UK resident with UK income, your UK income may also be subject to tax in the country where you currently reside.
A Double Taxation Agreement, if one exists between this country and the UK, may prevent you having to pay tax twice. There are two main reliefs provided by the Double Taxation Agreement:
- A tax refund which is processed and issued after you have been taxed.
- A tax relief (either partial or full) which is put in place before any tax is paid.
What types of income qualify for Double Taxation relief?
Many different types of income are typically covered by Double Taxation Treaties, including:
- Salary, wages, and self-employed earnings
- Property income and dividends
- Interest from banks
- Most pensions or annuities
- Dividends paid by UK companies
It is very important to remember that each Double Taxation Agreement will have specific terms, and that you must apply the correct part of the relevant tax treaty to your situation to claim relief appropriately.
Which countries does the UK have a Double Taxation Agreement with?
The UK currently has Double Taxation Treaties active with around 130 countries. As of 2022, the UK has one of the largest networks of these treaties of any country.
This is a part of the government’s ongoing efforts to encourage international trade, inward investment, and employee mobility. You can find a full list of existing Double Taxation Agreements with the UK on the UK Government website.
When to seek advice on Double Taxation Agreements
Tax can be complicated – when a person moves overseas, it gets even more complex. An individual who moves overseas and is liable to tax in multiple countries must understand and comply with all of these sets of tax rules.
Mistakes can be costly, so we strongly recommend that you speak to a qualified accountant with experience in cross-border tax issues. The cross-border tax advisory and compliance teams at Shorts will use their deep understanding of international tax legislation to ensure you comply fully with your tax obligations and are not paying any more tax than is required.
We welcome you to get in touch and arrange a consultation today if you require assistance with Double Taxation Agreements, or any other areas of cross-border taxation.
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Brian Gooch
I work extensively in the corporate owner managed business sector, covering transactional taxes, property taxes including Stamp Duty Land Tax and VAT, and all areas of business tax planning. I have considerable experience in maximising tax efficiency by reviewing business structures and planning corporate reorganisations.
View my articlesTags: International Taxes
