Double tax treaties

[Stumbleine]

Can anybody explain to me how this works in practice please?

So say you work for a UK based company and are taxed through PAYE but reside in an EU country that has a double taxation agreement...

If the income tax that would be due in the EU country is higher do you simply pay the difference? And does this involve filing an annual tax return in that country and they would then issue you with a bill?

If anyone has experience of this would be grateful for insights. I realise that all countries will have different procedures, but just the general concept and how it works on a practical level.

Bump

Broadly, no.

You have to look at the DTT specific to your country/the UK. Contained within will be an "article" relating to the taxation of employment income. That will tell you where the income is subject to tax. Ordinarily the income will be subject to tax in the country in which you reside but of course it depends on the specifics. I would expect you'd have to fill in a tax return for your country of residence and work out your own tax liability. I don't know of anywhere that will take the information off you and let you know how much to pay. They expect you to work that out and if you do it wrong they will tell you and maybe penalise you.

Your employer would also need to consider their own tax exposure and whether your presence in your country of residence creates a permanent establishment which could make a portion of their profits taxable in that country.

I can't be more helpful than that without knowing the country in question. You and your employer should take proper advice though, assuming you haven't already.

Agree with @Kinsters.

The format of the employment clauses in most of the EU DTAs is similar though which means that the deciding factor is likely to be the tax status of the employing organisation. There are also different rules for certain occupations - directors and performers etc

Double Tax treaties are a complex area and you are probably better off trying to find a tax accountant who understands the issues to advise you on this

Personally I would ask your employer if they are willing to pay for advice for you as it is a costly business!

Thanks very much for the input. At this point it is just very theoretical thinking...just wanting to gauge how complex it could be and if potentially financially viable for us.

Potentially very complicated. A lot of employers won't let employees work overseas and one of the reasons for that is the tax implications.

I'd be surprised if you found an employer willing to put themselves in that position. They'd be subject to employment laws in the second country, let alone the tax side.