Using Double Tax Treaties to avoid UK Tax
Double tax treaties are agreements between different countries that apply to determine which country shall tax certain forms of income and gains. The provisions though are much wider than this, and they can also be used to determine an individuals or company's tax residence.
The need for double tax treaties arises because many countries tax both the income of their residents as well as any income arising in their borders. So a resident in one country (France) may be taxed by France on his worldwide income. However if some of his income arose in the UK, the UK may also want to tax the income arising within the UK. This could lead to the same income (ie the UK income) being taxed twice. This is where double tax treaties come into play, and they could provide for either an exemption from tax in one of the country's or a tax credit to offset against the other country's tax liability.
This section includes articles that cover the use of double tax treaties.
Join up today to read unique tax planning articles and obtain online tax guidance on using double tax treaties
Articles on Double Tax Treaties
Double tax treaties aren't only relevant for individuals they also apply to companies. One of the most important aspects of a double tax treaty is the tie breaker provision. This applies in the context of an individual where he or she is resident both in the UK and overseas and it then provides for various rules that determine which of the two countries they will be classed as resident in. keep reading
Tax Question: Hi, I am a non UK resident/ordinary resident who will shortly be taking a non governmental pension, remitted to my country of residence, Malta where under the double taxation agreement it will be taxed. Does the UK inland revenue require that the pension be transferred to Malta immediately or could it be delayed (and for how long) in an offshore bank? NB the accounting years of Malta/UK are not coincident keep reading
Tax Question: Hi, The double tax treaty between France and UK make sure that a UK non dom under tax remittance basis ends up paying taxes on interests earned in France (but no CGT in either country). What is the situation on the US-UK double tax treaty? no tax on interests and no CGT in either country? Thanks keep reading
This Practitioner report includes a step by step look at the relevant form you'll need to complete to claim double tax relief on UK pensions. This will then allow you to receive the pensions free of UK income tax, or at the reduced rate as laid down in the relevant double tax treaty. keep reading
Tax Question: Hello, My question is regarding dual residency in the Isle of Man and UK, I am planning to spend just over half the year in IOM! If by the tax treaty I would be resident in both, how would each jurisdiction treat me and would I have to be absent from the UK for more than 183 days? keep reading
Where you're resident in the UK and overseas under the terms of a relevant double tax treaty you'll need to look at the treaty 'residence' article to determine in which country you are treaty resident. In this article we take a detailed look at treaty residence and at the operation of the tie breaker rules keep reading
Tax Question: I am a dual Australian / UK citizen. I receive an Australian Government Pension I maintain a home in Australia but plan to retire to the UK to spend the greater part of each year there. This may involve renting [or buying]a home in the UK. In these circumstances would I be liable for UK tax on my Australian Pension [noting I am liable for Aus tax on a 'taxable' component of that pension, albeit almost zero]. If I am NOT liable for UK tax on this basis would the position change if I did not contimnue to own or rent a home in Australia? I already understand that if I did pay UK tax I would benefit from a 10% reduction. keep reading
Tax Question: Hello Can you advise on the tax position of a Brit who has spent the last 6 years in the US as a US tax payer and earning no UK income who has now started to earn in the UK again. I am aware of the Treaty between the UK and US but hope you can elaborate and explain the basic principle in order that I can advise on the best way to proceed. Thank you keep reading
Tax Question: I'm UK resident non dom registered with HMRC as self-employed. I have two agreements with an italian company. The first one to be in the board of directors of that company, the second to provide sales services. The director fee for the first agreemente would be taxed in Italy (as UK-Italy tax agreement art.16) at 30% and paid to a UK bank account. The sales services shouldn't be taxed in Italy (as UK-Italy Tax agreement art.14) due they are not provided from Italy in any case; they will be paid on a Netherland bank account. Please consider I will require the remittance base, so in my opinion: A) - I can declare in my self-assessment the income received for the director fee in my UK account and deduct the tax suffered in Italy for this service (30%). Due to the fact the italian tax is higher than the UK income tax then I could receive around 50,000 GBP without incur in further tax in UK due the 30% tax deduction I already paid in Italy. B) - I shouldn't pay taxes in Italy on the second agreement (sales services) due it is provided when I'm not in Italy and due to the fact the proceed will be accrued in my netherland bank account and due I will activate the remittance base in UK I haven't to pay a UK tax on it. Could you please confirm: 1. My point A is right. Please consider also I'm shareholder of the italian company so there is a connection with the company but the UK-Italy tax treaty should prevail in this case. 2. My point B is right. Please consider I will provide the sales services through a phone platform I have in Netherland to avoid the service could be considered provided from UK from HMRC keep reading
Tax Question: I have been working freelance for an International communication Company for number of years. The contract was UK based but I have also worked from time to time for them in several other European countries. I was requested to go to Norway on a short-term assignment that subsequently extended to just over two years. Throughout my working time in Norway I continued to pay all the relevant taxes in the UK as I returned home to my UK residence every weekend. Recently I received an email request, via my UK agent, from the Norwegian tax authorities asking about my tax affairs whilst in the country. On investigation, I discovered that the Norwegian arm of the International communication Company should have informed the Norwegian Tax authorities that I had started working in Norway. Had this been done I would have then been aware of the tax implications and would have stopped working in Norway, as it would not have been worthwhile financially to continue. I emailed back, via my UK agent, explaining that I had a UK contract, was paid in sterling by a British based company and had fulfilled all my tax obligations in the UK. Today I received another email from the Norwegians requesting UK bank account transaction details, company tax records, copies of tax assessments, contract details etc. etc. covering the last three years. The information they require is quite invasive and would take a fair time to get together. I realise now I have been quite naïve in approach to tax here. I believe I am under the 270 days in three years rule in Norway. The company I had the contract with has abandoned me and I feel they have some responsibility for the position I am in. I have an email address of the person in Norway and considering contacting them to come to some sort of deal on the tax I should pay without the entire long drawn out processes and paperwork involved. If I cannot come to an agreement with the Norwegians do you have a view on how persistent they will be in pursuing me across borders and how much support HMRC would be in such matters given that as far as they are concerned I fully paid up? keep reading
On 26 March 2015 the UK and Bulgaria signed a new tax treaty. In this article we look at the key terms of the new treaty keep reading
If you're a non dom claiming the remittance basis this could effect your entitlement to relief under a double tax treaty. In this article we look at the tax treatment of non doms and double tax treaties keep reading
Tax Question: Dear Sirs, My question is in relation to claiming the UK Personal Allowance. Would you please clarify if residents from any of the following jurisdictions are able to claim the annual allowance. 1. China 2. Dubai 3. Qatar 4. Hong Kong. My understanding is that only residents from China can claim the allowance, but would appreciate your confirmation/correction on this. Thank you keep reading
Tax Question: Dual resident receiving overseas salary from foreign company. DTR exists with UK. Need to disclose in Tax Return? keep reading
Tax Question: Can you please explain how to avoid US Withholding Tax? I called the IRS and they were useless and unhelpful. I have a online business, and some USA clients (I'm a PT). I have IBCs in various tax havens. Basically need to know which jurisdictions I should allow US clients to buy from me through; so that I don't have to report to any countries at all incl. USA filings and zero tax/withholding reporting. I also receive royalties from Amazon to a UK bank account but am also subject to tax withholding on that too which really puts a dent in my royalty payments. Can you advise how I can prevent withholding tax in all instances? Thank you. keep reading
We've looked in a previous article at how the UK taxman treats offshore companies providing goods or services in the UK. Now we're going to look at one particular aspect of this, namely how having a UK agent to act on your behalf can impact on any UK tax liability. This article is a Platinum/Practitioner Members article keep reading