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HMRC internal manual

International Manual

HM Revenue & Customs
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DT applications and claims: Overview of agreements

What to do if you are asked a question about taxation in another country

You might be asked by a resident of another country about their liability to tax in their country of residence. This question will most often arise where, under the terms of a DTA, the UK retains primary taxing rights over some amount of the person’s income. An example of this is a pension that is paid by the UK Government to someone who is resident in a country where the DTA does not provide for relief from UK tax.

You should not offer an opinion about how the income will be taxed in the other country. The reason for this is that the domestic law of the other country will determine how the income is to be taxed there.

Where the DTA provides for the UK to have primary taxing rights over the income that does not mean that the other country will not also want to include the income in any calculation of taxable income. It will often be the case that the tax law of the other country will result in a resident of that country being taxed on their worldwide income. But we cannot know for certain that this is what will happen in any particular case.

You will usually find that where a DTA gives primary (or even sole) taxing rights over income to the UK, the ‘Elimination of Double Taxation’ article in that DTA will also apply in such a way as to provide for credit to be allowed by the country of residence for any tax that is paid in the UK. However, you should not express an opinion about how the law of the other country will apply.

Any advice that you give must be restricted to pointing out that all of the UKs DTAs contain provisions that are intended to eliminate double taxation. That these provisions vary from treaty to treaty and that the person will need to seek professional advice from someone who is qualified to give advice about how the law of the other country applies to them.