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Frequently Asked Questions
Do I need to pay tax on foreign income?
One key question for individuals moving to the UK is their UK tax obligation and how to manage foreign income. The answer is not always as simple as yes or no when it comes to foreign earnings, as it depends on various factors such as the individual's UK residency status, domicile status, amount of foreign income, remittance of foreign income, and other considerations.
What is UK tax residency?
The UK uses a residency-based tax system, meaning that individuals are generally subject to UK tax on their worldwide income if they are considered UK tax residents. Factors such as the number of days spent in the UK and potential ties are taken into account when determining residency status. As a UK tax resident, you are generally taxable on your worldwide UK income and gains. As a UK tax non-resident, you are generally taxable on your UK sourced income and gains.
What is domicile and why is it important?
Non-domiciled individuals in the UK can benefit from a special tax regime regarding foreign income and gains. The UK tax domicile concept relates to an individual's permanent home, country of origin and many other factors. Non-domiciled individuals, if they meet certain conditions, can choose to be taxed on the remittance basis for their foreign income and gains rather than on a worldwide basis. Under the remittance basis, non-doms are only taxed on foreign income and gains that are brought (remitted) into the UK. This means that if they keep their foreign income and gains offshore and do not bring them into the UK, they are not subject to UK tax on those amounts. However, if they do remit foreign income or gains to the UK, they may be subject to UK tax on those amounts. It's important to note that non-domiciled status and the remittance basis are not automatic and complex structures need to be in place as well as a claim must be included on their tax returns. There are also specific rules and conditions that apply, and non-doms may need to pay an annual remittance basis charge if they have been resident in the UK for a certain number of years.
What if I am taxed in multiple countries on the same income?
To address the problem dual taxation on income, the United Kingdom has established double tax treaties (DTTs) with over 130 countries worldwide. These treaties serve as bilateral agreements between the UK and other nations to provide clarity and prevent double taxation. Under these double tax treaties, provisions are outlined to allocate taxing rights between the UK and the treaty partner. Generally, the treaty will determine which country has the primary right to tax specific types of income, such as dividends, interest, income and capital gains. In cases where both countries have the right to tax the same income, mechanisms are in place to provide relief from double taxation. These double tax treaties play a key role providing certainty and clarity on tax matters for individuals and businesses operating internationally by eliminating the risk of double taxation.
What are my tax obligations?
Determining whether you have a tax filing obligation in the UK depends on various factors, including your residency status, sources of income, and the amount of income earned both overseas and the UK.
My company is expanding international and I am not sure on the tax obligations?
Expanding internationally can introduce various tax obligations and considerations, depending on factors such as the countries involved, business activities, and legal structures. It's key to assess your specific situation and provide guidance on international tax compliance, including issues like permanent establishment, foreign tax credits, and tax treaties. Additionally, we can help implement tax-efficient structures and strategies to optimise your international operations while ensuring compliance with relevant tax laws and regulations.
