Employment Tax

Double taxation agreements and employment taxes

Produced by Tolley in association with Gill Salmons
  • 18 Oct 2021 13:20

The following Employment Tax guidance note Produced by Tolley in association with Gill Salmons provides comprehensive and up to date tax information covering:

  • Double taxation agreements and employment taxes
  • Introduction
  • Treaty Article 4
  • The employment income Article
  • Common mistakes ― day counting rules
  • Common mistakes ― recharging costs of employment
  • Short-term business visitors (STBV) and PAYE
  • Tax equalisation arrangements
  • Exceptions ― when there is no double tax treaty
  • Economic employer
  • More...

Double taxation agreements and employment taxes


In some circumstances, an individual may be liable to tax in two jurisdictions simultaneously where he is employed in one country but spends time working in another. A double tax treaty between countries can be relied upon in many cross-border situations to exempt an income source from taxation in a particular country. However, double tax treaties are not all identical and care should be taken in determining how treaty provisions may apply to individual employees.

This guidance note covers double tax treaties as they apply to employment income, but it does not cover international social security agreements (for which, see the Social security agreements guidance note).

Treaties are generally set out in a standard format with the same article number addressing the same issue in every treaty. In order to ascertain the employment tax position for an individual employed in one country but spending periods working abroad, Article 4 and the ‘income from employment’ Article of the applicable treaty are the most relevant.

Treaty Article 4

The residence Article of a double tax treaty is usually Article 4, which deals with an individual working outside the country in which he is deemed to be resident for the purposes of the treaty provisions (treaty resident). It is possible to be resident under domestic legislation in multiple countries at the same time, and Article 4 helps to establish which of the two countries covered by the Treaty will have the primary taxing rights over certain types of income ― namely, which country is allowed to tax the income first and which country will be obliged to allow either a credit for that overseas tax suffered or an exemption of that income from tax.

Article 4 is important when trying to exempt employment income under a treaty because the wording of the employment Article of the treaty will usually stipulate that the employee concerned must be a resident of one or other of the contracting countries for

Access this article and thousands of others like it
free for 7 days with a trial of TolleyGuidance.

Think Tax.
Think Tolley.

Critical, comprehensive and up-to-date tax information


Popular Articles

Losses on shares set against income

Usually, allowable capital losses can only be set against chargeable gains. If the losses are not fully utilised against gains in the year in which they arise, the excess is carried forward to use against future gains. See the Use of capital losses guidance note for further details.This rule can be

04 Jan 2022 11:11 | Produced by Tolley Read more Read more

Tax equalisation

IntroductionTax equalisation is widely used by multi-national companies or group moving employees from one country to another. It is not a statutory concept but is an arrangement between an employer and employee.The idea behind tax equalisation is that an employee accepting an assignment somewhere

18 Oct 2021 13:25 | Produced by Tolley Read more Read more

Quoted companies ― an overview

What is a quoted company?Reference to a quoted company is usually to a company where the shares in the company are listed on the London Stock Exchange, any other international stock exchange, or on AIM or ICAP Securities and Derivatives Exchange (formerly the PLUS market and now known as ISDX) in

14 Oct 2021 19:09 | Produced by Tolley in association with Andrew Rainford Read more Read more