Dual residence and double tax treaties

Dual Residence

Because different jurisdictions have different rules to determine tax residence, it is possible to be considered tax resident in more than one country. 

However, where two countries have entered into a double tax treaty there is usually a set of rules that determine in which country the individual will be considered tax resident by both countries under their respective domestic laws.

Due to the diverse nature of tax treaties, you would need to examine the specific treaty between the two countries in which you are tax resident to determine your position.  Copies of all treaties that the UK holds can be found on HMRC’s website at http://www.hmrc.gov.uk/manuals/dtmanual/DT2140+.htm

Double tax treaties

Double tax treaties are agreements between two jurisdictions that set out which is allowed to charge tax where a person resident in one jurisdiction receives income from the other.  Although most double tax treaties are between countries, the word ‘jurisdiction’ is usually used because some countries, like the USA, have a state system and it is possible for treaties to be signed at state rather than federal level.

A model treaty exists that is generally used as a starting point for countries negotiating a double tax treaty.  Consequently most treaties are structured on a similar basis and include similar clauses.  However, because specific treaties are the results of months of negotiations, every treaty can differ from this model.  It is therefore always necessary to read the particular treaty or treaties that apply to your individual circumstances.

If you are concerned about your tax status in a different country or want to make a claim for double tax relief you could look at:

• Overseas tax authority website (http://www.hmrc.gov.uk/menus/links.htm)
• Double tax treaties –applications and claims page

If you are not UK resident, you are not automatically entitled to a tax free personal allowance. Exceptions to this include residents and/or citizens of EU member states (due to the EU’s anti-discrimination laws), and countries with an appropriate clause within their Double tax treaty with the UK) For guidance on this subject see http://www.hmrc.gov.uk/cnr/allow_nonres.htm

Copies of all treaties that the UK holds can be found on HMRC’s website at http://www.hmrc.gov.uk/manuals/dtmanual/DT2140+.htm