Double Tax Treaties

Double tax treaties (also known as double tax agreements) are created between two countries which define the tax rules when it comes to a tax resident of both countries.

Double tax treaties can be complex and often will require professional assistance, but they are created to try to ensure that an individual is able to claim tax relief rather than have to pay tax on the same income in two different jurisdictions.

Each double tax treaty is different, although many follow very similar guidelines - even if the details differ.

For the purpose of this article, we are considering an individual as being tax resident in the UK and an additional country, although double tax treaties can exist between any two countries.

Application of double tax treaties and "treaty residence"

Where an individual is tax resident in the UK and also tax resident in another jurisdiction, i.e. a "dual resident", and the other jurisdiction has a tax treaty with the UK, the treaty divides the taxing rights over an individual’s income and gains between the two countries.

Essential to determining whether it is possible and then how to apply a double tax treaty is establishing the individual’s "treaty residence" position, as it is the country of treaty residence which generally assumes the taxing rights. 

Where you are treaty resident will be determined by applying a series of "tie breaker" tests as outlined in the relevant Double Tax Agreement in place with the UK.

Two typical examples where treaty non-residence are important are as follows:

UK employer, dual resident but treaty resident outside the UK

In this example, an individual works for a UK employer but is a dual resident and spends their time working in the UK and overseas. Given that the individual is working in two or more tax jurisdictions (including the UK) it is very important to determine where they are treaty resident.

In this scenario, the individual may be considered "treaty non-resident" from a UK perspective and therefore the Employment Income Article of the Double Tax Agreement will usually restrict the UK tax liability to UK workdays only. This means that tax on income would only be due to the UK HMRC for the days that the individual actually worked in the UK, and not days worked in other jurisdictions.

This arrangement is typical in scenarios where an expat is employed on a local UK contract, but their family have remained at home somewhere in Europe and they spend three to four days in the UK and the remaining time at the family home outside of the UK.

High net worth investor, dual resident but treaty resident outside the UK

If an individual is considered a treaty non-resident in the UK, under any double tax treaties in place, the individual would only be liable for tax in the UK where the income has come from UK activities. This is important because it means that all non-UK investment income and gains are sheltered from UK tax.

How to claim "treaty residence" under double tax treaties

Despite being relatively common, the application of double tax treaties, and therefore the claim for tax relief can be a complicated affair.

To begin the process, an individual who believes they may be tax resident in two jurisdictions, including the UK, must make a claim for treaty residence via a self-assessment tax return and a through a specific tax treaty relief claim.

It is possible for people to do this themselves, however, there are many rules, requirements and tests which need to be applied correctly to ensure that the correct tax residence statuses can be applied.

Far more common is to request the services of an accountant who is qualified and experienced in claiming tax relief using double tax treaties. Fees will vary depending on the level of complexity of an individual's personal circumstances, in nearly all cases the tax savings far exceed any costs incurred by using an accountant - and they can be sure that they are paying the right amount of tax with total confidence.

Countries with a double tax treaty with the UK

The following table lists the countries that have a double tax treaty with the UK (as of 16 June 2017). There is an up to date list on the UK Government's website on active and historical double tax treaties.

Country with double tax treaty	Date last updated
Albania	01 December 2013
Algeria	05 July 2016
Antigua and Barbuda	06 January 2014
Argentina	21 February 2014
Armenia	27 February 2014
Australia	01 February 2012
Austria	01 January 2007
Azerbaijan	27 February 1990
Bahrain	27 October 1990
Bangladesh	27 February 1961
Barbados	26 August 1998
Belarus	23 December 2007
Belgium	27 April 2007
Belize	27 February 2006
Bolivia	29 March 2005
Bosnia-Herzegovina	25 August 1996
Botswana	03 February 2014
Brazil	21 March 2017
British Virgin Islands	21 April 1999
Brunei	23 March 1995
Bulgaria	13 January 2017
Burma	16 December 2013
Cameroon	14 April 2008
Canada	05 January 2017
Cayman Islands	20 January 2011
Chile	01 July 2005
China	17 December 2013
Colombia	04 November 2016
Croatia	04 April 2008
Cyprus	27 March 2012
Czech Republic	29 October 2007
Denmark	01 March 2011
Egypt	19 October 2007
Estonia	18 January 2017
Ethiopia	08 March 2013
Falkland Islands	05 February 2007
Faroes	03 March 2010
Fiji	19 October 2008
Finland	16 December 2013
France	07 January 2010
Gambia	11 August 2008
Georgia	24 January 2011
Germany	16 March 2017
Ghana	06 October 2006
Greece	15 August 2008
Grenada	28 July 2016
Guernsey	04 January 2017
Guyana	14 February 2007
Hong Kong	23 December 2010
Hungary	05 March 2012
Iceland	12 December 2012
India	08 January 2014
Indonesia	17 August 2007
Iran	19 December 2013
Ireland	25 January 2011
Isle of Man	05 January 2017
Israel	23 February 2011
Italy	06 August 2006
Ivory Coast	16 December 2012
Jamaica	17 December 2013
Japan	16 February 2015
Jersey	05 January 2017
Jordan	05 July 2005
Kazakhstan	06 January 2014
Kenya	27 December 2013
Kiribati	27 December 2013
Kosovo	08 January 2016
Kuwait	01 June 2005
Latvia	22 February 2007
Lebanon	27 December 2013
Lesotho	04 November 2016
Libya	26 April 2010
Liechtenstein	16 January 2013
Lithuania	01 July 2005
Luxembourg	27 December 2013
Macedonia	13 August 2007
Malawi	30 December 2013
Malaysia	13 January 2011
Malta	11 August 2006
Mauritius	20 October 2011
Mexico	07 June 2011
Moldova	06 January 2009
Mongolia	27 March 2009
Montenegro	01 March 1989
Montserrat	27 December 2013
Morocco	20 August 2007
Namibia	30 December 2013
Netherlands	08 February 2017
New Zealand	18 September 2008
Nigeria	05 February 2007
Norway	13 February 2014
Oman	13 June 2016
Pakistan	15 August 2006
Panama	17 December 2013
Papua New Guinea	22 February 2007
Philippines	15 November 2013
Poland	29 December 2006
Portugal	08 April 2013
Qatar	09 August 2011
Romania	30 December 2013
Russia	06 September 2006
Saint Kitts and Nevis	30 December 2013
Saudi Arabia	23 December 2009
Senegal	02 August 2016
Serbia	02 March 2014
Sierra Leone	30 December 2013
Singapore	15 August 2006
Slovak Republic	02 February 2012
Slovenia	26 September 2008
Solomon Islands	30 December 2013
South Africa	01 June 2015
South Korea	06 October 2006
Spain	24 May 2006
Sri Lanka	30 December 2013
Sudan	04 February 2013
Swaziland	02 January 2014
Sweden	17 December 2013
Switzerland	22 July 2016
Taiwan	01 July 2005
Tajikistan	14 January 2016
Thailand	02 January 2014
Trinidad and Tobago	02 January 2014
Tunisia	02 January 2014
Turkey	18 August 2006
Turkmenistan	24 January 2017
Tuvalu	02 January 2014
Uganda	02 March 2007
Ukraine	14 February 2007
United Arab Emirates	18 January 2017
Uruguay	13 December 2016
USA	01 July 2005
USSR	28 March 1999
Uzbekistan	28 February 2007
Venezuela	21 February 2007
Vietnam	22 February 2007
Zaire	02 January 2014
Zambia	02 January 2014
Zimbabwe	02 January 2014

The impact of Brexit on double tax treaties

As every tax treaty is agreed between the two jurisdictions, rather than through the EU or EEC there is not expected to be any impact on any tax treaties that the UK currently has.

Get help understanding possible double tax treaties with a free consultation

As there are many rules and complications which can arise when attempting to apply double tax treaties, it is important to seek professional assistance from a qualified and experienced accountant.

Therefore we offer a free initial consultation with a qualified accountant who will be able to provide you with answers to your questions and help you understand whether a double tax treaty could apply to you and help you save significant amounts of unnecessary tax.

If you decide that you wish to proceed with any tax advice or services on offer, you will be provided with a quote after which you can decide whether you wish to go ahead or not.

To request your free consultation, simply enter your details using the form and we will arrange for an accountant to get in touch with you directly.