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: Hi, I was wondering if you knew what the 'tie breakers' are for the UK/Ireland Double tax treaty? keep reading
Tax Question: I know that persons who are non-domiciled in the UK and claim tax on a remittance basis are NOT entitled to benefit from Personal Allowance? Are there any exceptions to this? Are nationals of certain countries nevertheless allowed to benefit from the allowance? On inheritance tax, are insurance proceeds received on death themselves subject to inheritance tax? Thanks keep reading
If you're receiving a pension from overseas it's important to be able to establish in which country it is taxed. As a UK resident you are usually taxed on your worldwide income, which would include a pension from overseas. However the terms of double tax treaties can significantly impact on this. This article shows you how to determine in which country your pension will be taxed wherever it is paid. keep reading
Tax Question: Am a UK Tax Resident and am considering investing in a residential property in the Florida, expecting both Income and Capital Gains. If I am still UK resident when I sell the property, is the capital gain fully taxable in the UK or is there any tax treaty relief or other form of relief to reduce the tax charge? keep reading
Recent proposals to amend the tax treatment of non UK domiciliaries bring in big changes to how they are treated for UK tax purposes. In this article we look at how the terms of double tax treaties will impact on these proposals keep reading
Tax Question: Hi, An italian company is undertaking construction work in the UK. They are also register under CIS scheme both as contractor and subcontractor. Question: 1. will the Italian company be subject to Uk corporation tax if the contract is under 12 months? 2. will the Italian company be subject to Uk corporation tax if the 1st contract is 10 months and a 2nd separate contract of 5 months (starting after the 10 month) ? Thanks keep reading
Non UK residents looking to structure investments both in the UK and overseas may look to use a UK limited company as an intermediary for their overseas investments. This article looks at when and how using a UK company could be effective in reducing taxes on investments. keep reading
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