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.
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Articles on Double Tax Treaties
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
As teleworking is becoming more and more popular we thought we'd look at how a tax treaty would impact on someone working on the tax position for someone operating remotely. keep reading
This is something we're asked about regularly, so we've put what you need to know in this article. Avoiding CGT is a popular tax planning objective and this makes any opportunity to avoid it very appealing. This article looks at a couple of CGT articles from tax treaties and examines how these impact on the UK and overseas tax treatment. keep reading
Tax Question: We have a uk registered ltd company client.The only director and shareholder is german,he lives in germany ,the company owns a german property ,the only income for the company is rent received from a german tennant.our client assures us that the company trading results are declared and taxed in germany,(if it is profitable).We currently propose to file the accounts at companies house.Should we make any returns to HMR&C ? keep reading
The general rule is that if you have a UK employment the earnings from that employment are subject to UK income tax. This applies irrespective of your residence status. However, this is not the full story, as the terms of a UK double tax treaty will impact on this. In many cases these treaties can be used to exempt any UK salary from UK income tax. In this article we take a detailed look at the use of double tax treaties to avoid UK income tax on UK employment income keep reading
Double tax treaties offer some tremendous opportunities for tax planning. In particular establishing treaty residence overseas can effectively completely eliminate UK corporation tax. In this article we look at establishing treaty residence overseas and how Facebook has created tax planning opportunities from its transfer of operations to Irelandkeep reading
Tax Question: Hello,I am English, UK non-resident living in Poland but have UK generated income through rent, interest and dividends. I understand that I have to pay tax on this UK generated income in the UK and via my UK accountant have been paying this through self assessment. My accountant completes the assessment without taking into account the DTA with Poland ie exactly the same as if I were UK resident on all UK generated income. My accountant says anything relating to the DTA should be handled in Poland. 1. Is it correct that all UK derived income should be declared in the UK? 2. Should my UK return be completed with no reference to the DTA? 3. If so how should I then be dealing with my tax affairs in Poland if I have no Polish derived income? 4. Are there any benefits I can derive from a DTA? Thanks keep reading