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HMRC internal manual

International Manual

From
HM Revenue & Customs
Updated
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Description of double taxation agreements: Government service

The basic principle is that the country paying government employees is given sole taxing rights over their earnings. Many agreements now include political subdivisions of a country, for example Canadian provinces, and local authorities in the provisions of this Article.

Some agreements however, while retaining taxing rights over earnings for the source country, enable the country of which the recipient is a resident also to tax them

  • if the services are performed in that country and
  • the recipient is a national of that country and
  • the recipient is not also a national of the paying country.

Other agreements give sole taxing rights to the country of which the recipient is a resident if the services are performed in that country provided that the recipient is a national of that country or that they did not become a resident of that country for the purpose of performing their services.

This Article usually also covers pensions paid by governments, their political subdivisions or local authorities. The same treatment is usually given to pensions of this kind as is given to earnings. However, there are a number of agreements where government pensions are given no special treatment and are taxed in accordance with the rules in the pensions Article.

The above provisions do not apply if the earnings or pensions are paid in connection with services given to a trade or business carried on by the government, political subdivision or local authority. In that event, the earnings or pensions come within the independent personal services, dependent personal services, artistes and athletes or pensions Articles whichever is appropriate.

Any case of doubt or difficulty should be referred to Business International, Tax Treaty Team for advice.