Structure of a tax treaty

Produced by Tolley

The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Structure of a tax treaty
  • Key definitions
  • How double tax relief is to be given
  • Relief by credit or exemption?
  • Non-discrimination
  • Exchange of information
  • Tiebreaker clauses
  • BEPS multilateral instrument and what this means for individuals
  • Article(s) relevant to your work

Structure of a tax treaty

Where foreign income, gains and profits are concerned, the provisions of double tax treaties are very important. This guidance note outlines what you can expect to find in a treaty, and some of the points you may wish to consider. The focus of this guidance note is how tax treaties might apply to individuals.

The UK has over 100 treaties. You can see the current list on the GOV.UK website. Most use the OECD model treaty as a template, and tend to follow the same format. However, some treaties are very different from the OECD model, and all are individually negotiated, so that the terms can vary considerably.

For HMRC guidance on double tax treaties and double tax relief, see INTM150000 to INTM157030.

Key definitions

There are key terms to look out for in every treaty. The main ones are:

  1. the persons within the scope of the treaty (usually Article 1). Normally the treaty covers persons resident of one state, or dual residents. Also look at the ‘general definitions’ section (usually Article 3) to see what is meant by a ‘person’. Some treaties will exclude partnerships from the definition, for example. The definitions section may also explain what is meant by a ‘national’ of the country, if that is relevant to the operation of the treaty

  2. the taxes covered (usually Article 2). Note that the Article often includes a clause which automatically extends the treaty to cover substantially similar taxes which come into force after the date the treaty was signed

  3. what is meant by residence. Often a person will only be resident, and therefore able to claim under the treaty, if they h

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