On 31st December, when the UK officially leaves the EU, you could be affected. In some cases, there will be the risk of what is called ‘double taxation’. This means that you could be taxed twice.
There is a risk that your income may be taxed twice if two countries have the right to tax your income. This could be the case if you are a cross-border commuter and live in one EU county but work in another. You may also be liable for double taxation if you are posted abroad for a short assignment, are retiring abroad or work abroad temporarily as part of a UK based company or consultancy.
In these situations, while you will always be subject to the tax rules of your country of residence, you may also have to pay taxes in the other country. This is known as Double Taxation. Fortunately, most countries have double tax agreements which will usually spare you from double taxation.
It is important to note that the tax rates in the two countries involved are likely to be different. Generally speaking, if the tax rate in the country where you work is higher, then that will be the final rate of tax you pay.
In order to claim relief from double taxation you need to prove where you are resident. You will also need to prove that you have already paid taxed on your income. The team here at Direct Peak can help you will the proof and documents that you will need to submit.
What Rules Apply If I Am A Retired Person Abroad?
If you are a UK citizen that has retired to another EU country and you spend more than 6 months in a year in that country, the country may consider you a tax-resident. If this is the case, you may have to pay tax to that country on your total worldwide income. This will include any pensions that you receive from other EU countries. It is worth noting that public sector pensions will online be taxed by the country of administration that employed you, usually.
If you are considering retiring abroad, we would recommend you give our accountants in Peterborough a call so we can talk through the options with you.
What Rules Apply If I Am An Employee Working In One EU Country For a Company Based In Another?
If you live in one EU country and work there for a company based in another EU country, under most tax treaties, you are only subject to tax in your country of residence. However, there are different agreement treaties with different EU countries, so it is worth checking with your employer or an accountant to be sure.
What Rules Apply If I Am A Worker Posted Abroad?
If you are a worker posted abroad for a short assignment, then you will remain under your home country’s social security system. A ‘short assignment’ is classed as up to 2 years. However, the income earned during your time abroad may also be taxed in your host country.
When posted abroad by your company, you may not have to pay tax in the country where you work if you stay abroad for less than 6 months in the year and your salary is paid directly by your employer (in your home country) rather than a branch or other company your employer has in the country you are working.
What Can I Do About Double Taxation?
Lots of things are changing all the time with Brexit and this could mean changes for double taxation after Brexit too. We would recommend that you sign up to our double taxation news alerts. These will give you all the latest information and breaking news after 31st December.
If you have any concerns about double taxation after Brexit; please call our team now.
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Double Taxation After Brexit
After Brexit, the issue of double taxation between the UK and other countries remained a concern. Double taxation occurs when two or more countries impose taxes on the same income or assets of a taxpayer. Prior to Brexit, the UK had various tax treaties and agreements in place with other European Union (EU) member states that helped mitigate double taxation.
However, after the UK’s departure from the EU, those tax treaties and agreements no longer applied automatically between the UK and EU member states. This change meant that individuals and businesses operating across borders between the UK and the EU could potentially be subject to double taxation.
To address this issue, the UK government has been working to negotiate and sign new bilateral tax treaties and agreements with individual EU member states. These agreements aim to replicate the benefits and provisions of the previous EU agreements, including measures to prevent or relieve double taxation.
Additionally, the UK has also adopted unilateral measures to mitigate double taxation. For example, the UK introduced the “Double Taxation Relief (EU Exit) Regulations 2019,” which allows individuals and businesses to claim relief from double taxation on income and gains that arise in both the UK and the EU.
It’s worth noting that specific details and provisions may vary depending on the individual tax treaties and agreements that have been negotiated and implemented between the UK and each EU member state. Therefore, it is essential for individuals and businesses to consult with tax advisors or relevant authorities to understand the specific regulations and implications related to double taxation in their particular circumstances.
