People who live or work abroad and who have a dual domicile are taxable in both countries. In order to determine which country has priority in terms of taxation, the DBA will have a series of rules or “tie breaker” tests between the two countries to define where to pay taxes in order to avoid taxes in both countries. Look at the UK government`s aid sheet to find out if the second country has a DBA deal with the UK. The double taxation treaty can be complicated. People with dual domicile must ensure that the appropriate amount of tax is paid, recovered or charged in each country. In some cases, more than two countries are involved. For example, a foreigner may live as an expatriate in the UK and receive income from a third country and should be familiar with DBA law to ensure that only the correct amount of tax has been paid in the relevant country. That`s why we offer a free initial consultation with a qualified accountant who can provide you with answers to your questions and help you understand if a double taxation treaty might apply to you and help you save significant amounts of unnecessary taxes. It is much more common to use the services of a qualified accountant who is experienced in applying for tax relief through double taxation treaties. Fees vary depending on the complexity of a person`s personal circumstances, in almost all cases, tax savings exceed the costs of using an accountant – and they can be sure to pay the right amount of tax with absolute confidence. Determining the position of the person`s “contractual residence” is essential to determine whether it is possible to do so and how to apply a double taxation treaty, given that this is the country of contractual residence that generally assumes the taxing rights. For the purposes of this Article, we consider a person to be resident for tax purposes in the United Kingdom and another country, although there are double taxation treaties between two countries.
Avoiding double taxation Treaties generally provide that individuals and businesses do not have to pay taxes on the same income in more than one country or, in the case of double taxation, a credit is granted in the second country for the tax paid in the first country. If you are considered a tax resident in two or more countries, it is important to understand possible tax breaks through double taxation treaties Governments have understood that this would be unfair and discourage international trade/business. Therefore, they each created their own rules to prevent the same income from being taxed twice. In some cases, the amount of tax paid in one country may be deducted from the tax rate due in another country. These agreements or contracts are called double taxation treaties (ASAs) and should be included in your tax planning system. In the case of wealthy individuals living abroad, a DBA could make the stay in certain countries more advantageous. If the second country has concluded a double taxation agreement with the United Kingdom, the tax would only be levied on income from British activities. .