What is a double taxation agreement?
Different countries have their own tax laws. If you are resident in one country and have income and gains from another, you may have to pay tax on the same income in both countries. This is known as ‘double taxation’.
For example, an individual who is resident in the UK, but has rental income from a property in another country, may have to pay tax on the rental income in both the UK and that other country.
On this page we look at the following:
The UK has ‘double taxation agreements’ with many countries to try to make sure that people do not pay tax twice on the same income. If there is a double taxation agreement, this may state which country has the right to collect tax on different types of income.
This means that international students to and from the UK may have to take into account two or three sets of tax laws: the tax laws of the UK; the tax laws of the other country; and any double taxation agreement between the UK and the other country.
Double taxation agreements specify which country has taxing rights over an individual, and, if they both have such rights, which one takes priority. The agreements may set down different rules for different types of income. They may also agree to exempt some income or gains from tax or allow a set-off of tax paid in one country against tax due in the other.
It is also possible for there to be more than two countries involved, for example a national of one country may be living in the UK and have foreign income from a second country.
There is a list of the current double taxation agreements on GOV.UK.
Even if there is no double taxation agreement, tax relief may be available by means of a tax credit.
For example, if you pay tax at 15% on your foreign income in the country in which the income arises, then you may still have to pay tax in the UK. If the UK tax rate is 20%, you would only have to pay 5% of tax in the UK, as you would be given relief for the 15% of tax paid overseas.
There is more information on foreign tax credit relief on the HMRC website.
Most double taxation agreements allow the UK to tax UK employment income.
If you come to the UK and have UK employment income that is also taxed in your home country, you should ask the tax authorities in your home country either to stop taxing your employment income, or, depending on the rules, to deduct the UK tax from the tax you are liable to pay in your home country. You should seek advice on your position before taking any action to ensure it is correct.
Certain types of visitors to the UK receive special treatment, such as students, teachers or overseas government officials. There is more information for students in the Do international students pay UK tax? section. Or you could contact HMRC, or visit our getting help page.