Double Taxation Agreement

All About Double Taxation Avoidance Agreements

Double taxation agreements are made between two states to protect individuals from being taxed twice. As a non-resident working in the UK, for example, your income would not be taxable in two states, if your home country has a double taxation treaty with the UK.

Double Taxation treaties are also designed to:

  • Provide certainty of treatment for cross-border investment and trade
  • Prevent excessive taxation of UK business interest abroad and other forms of discriminations
  • Protect the government’s taxing rights
  • Protect against tax evasion

UK has the biggest network of treaties, with double taxation agreements with around 120 countries, including Antigua, Argentina, Australia, Bahrain, China and Japan. Each country has different agreements

In the case of Argentina, the following rules, as shown in the Digest of Double Taxation Treaties, may apply:

  • Relief may be restricted if the whole amount of income is not remitted to Argentina
  • Full relief may be granted in some circumstances
  • Relief on news (3%), copyright royalties other than TV and films (5%), patents (10%), other royalties (15%)
  • No relief for State Pension
  • May only be applicable to income from third countries

Considering the complexity of the rules between tax treaties, it is best to consult with tax experts to shed light on your particular circumstance.

Guide for Brits

Generally, if you have been abroad for less than 183 days in a tax year, or have spent an average of 91 days per year in Britain over a 4-year period, you will be considered UK resident for tax purposes.

To enjoy double taxation avoidance agreements, you must apply to the foreign office in Britain. Doing so will ensure that your pension is paid in gross, and that you receive relief from British tax on interest, dividends and royalties.

Civil Service pension and other government-sponsored schemes, however, are still subject to taxation regime in Britain even if you live abroad. When filing tax return, make sure to tell local tax authorities not to add tax to local tax returns.

Once you return to live permanently in the UK, you’ll have to notify the bank of your change of residency. In the event that you are about to relocate overseas notify the taxman by completing the form P85 from the Inland Revenue.

Guide for Foreigners

If you are a non-UK resident who wants to claim tax relief or exemption from UK tax, you must complete the required double taxation claim form, which you can obtain online at the HMRC website. A specific claim form is available for certain countries, such as Australia, Canada, France, Germany, Ireland, Japan, New Zealand, Netherlands, South Africa, Spain, Sweden, Switzerland and United States of America.

If the country where you are a resident is not on the list, you can use the standard claim form DT/Individual.

You would also need to acquire a completed form, certified by the tax authority in your home country, and then send it to HMRC. In some cases, the completed form will be sent directly to HMRC.

Under the double taxation agreement, you may file a claim for the following income: pensions and annuities, royalties and interests. The operative word is’may’ since different countries have different inclusions and exclusions on the double taxation agreement.

Claiming tax relief and exemption requires more than just completion of a relevant form. Since there are factors involved that tests your eligibility for double taxation avoidance, it is imperative that you seek professional advice and assistance. Do not hesitate to call on tax experts for help.


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