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Legal Terms – double taxation relief
a variety of strategies intended to either lower or prevent numerous tax charges in situations when the same income (or gain) is subject to taxation in multiple jurisdictions. US residents' income is taxed in the US regardless of where it originates or where they reside. The UK levies taxes on income to residents of the UK wherever it originates and taxes income that originates in the UK to residents worldwide. Similar aggressive strategies to increase tax collection are used in other jurisdictions. As a result, it is typical for one source of income to possibly be liable for many taxes.
There are numerous options for double taxation relief under the UK tax system, including: 1. A treaty between the UK and another jurisdiction provides relief by stating that income of a certain type is exempt from tax in one of the two jurisdictions (authorized by Taxation (International and Other Provisions) Act 2010 s. 6);
2. The treaty grants credit against UK tax for foreign tax paid;
3. In the absence of a treaty or a provision in a treaty, a system of "unilateral relief" permits the taxpayer to claim a credit for the foreign tax paid against the UK tax liability (Taxation (International and Other Provisions) Act 2010 s. 18);
4. Any foreign tax paid that is not otherwise relieved is treated as an expense in calculating the income subject to UK tax (Taxation (International and Other Provisions) Act 2010 s112(1)(a)). This is especially advantageous in cases when the foreign source results in a loss under UK regulations. The capital gains tax has comparable provisions. More than any other country, the UK has double taxation treaties with 131 other nations on income tax and corporation tax. Courts have had challenges in interpreting double taxation relief treaties. According to Article 31 of the 1969 Vienna Convention on the Law of Treaties, a treaty must be interpreted in good faith and its words must be interpreted in the context of its goals. These ideas are fundamentally alien to English law and have given rise to rulings like Sportsman v. IRC [1998] STC (SCD) 289, which determined that a treaty should not be construed to permit a taxpayer to avoid paying taxes in either nation. Section 158 of the Inheritance Tax Act of 1984 establishes double taxation agreements for inheritance taxes. Only eleven nations now have treaties with the UK on estate tax at death.
a variety of strategies intended to either lower or prevent numerous tax charges in situations when the same income (or gain) is subject to taxation in multiple jurisdictions. US residents' income is taxed in the US regardless of where it originates or where they reside. The UK levies taxes on income to residents of the UK wherever it originates and taxes income that originates in the UK to residents worldwide. Similar aggressive strategies to increase tax collection are used in other jurisdictions. As a result, it is typical for one source of income to possibly be liable for many taxes.
There are numerous options for double taxation relief under the UK tax system, including: 1. A treaty between the UK and another jurisdiction provides relief by stating that income of a certain type is exempt from tax in one of the two jurisdictions (authorized by Taxation (International and Other Provisions) Act 2010 s. 6);
2. The treaty grants credit against UK tax for foreign tax paid;
3. In the absence of a treaty or a provision in a treaty, a system of "unilateral relief" permits the taxpayer to claim a credit for the foreign tax paid against the UK tax liability (Taxation (International and Other Provisions) Act 2010 s. 18);
4. Any foreign tax paid that is not otherwise relieved is treated as an expense in calculating the income subject to UK tax (Taxation (International and Other Provisions) Act 2010 s112(1)(a)). This is especially advantageous in cases when the foreign source results in a loss under UK regulations. The capital gains tax has comparable provisions. More than any other country, the UK has double taxation treaties with 131 other nations on income tax and corporation tax. Courts have had challenges in interpreting double taxation relief treaties. According to Article 31 of the 1969 Vienna Convention on the Law of Treaties, a treaty must be interpreted in good faith and its words must be interpreted in the context of its goals. These ideas are fundamentally alien to English law and have given rise to rulings like Sportsman v. IRC [1998] STC (SCD) 289, which determined that a treaty should not be construed to permit a taxpayer to avoid paying taxes in either nation. Section 158 of the Inheritance Tax Act of 1984 establishes double taxation agreements for inheritance taxes. Only eleven nations now have treaties with the UK on estate tax at death.
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