Glossary / Tax and structure

Double tax treaty

A double tax treaty is an agreement between two countries setting out which of them may tax a given kind of income and at what rate, so that the same income is not fully taxed twice.

Treaties typically reduce withholding on dividends and interest, allocate taxing rights over employment and property income, and define residency where both countries would otherwise claim it.

Property income is the usual exception: it is nearly always taxable where the property is.

Where people get it wrong

Expecting a treaty to eliminate tax. It allocates and reduces. Rental income from a UK property stays UK taxable whatever your residency.

The framework behind it Dubai versus London sets out the rule, the arithmetic and where it breaks.

Read the framework

Related terms

Withholding tax Withholding tax is tax deducted at source by the country where income arises before it reaches the recipient, and for fund investors it is deducted from dividends before they ever appear in the fund's return. Tax residency Tax residency is the status that determines which country taxes your worldwide income, decided by each country's own statutory tests rather than by your nationality or your visa. Situs Situs is the legal location of an asset for tax purposes, which for shares is generally the country of the issuing company and for funds the country of domicile, regardless of where the owner lives or where the asset is held.

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