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US / UK Tax Treaties and Double Taxation

Many countries allow for a credit against their domestic tax for foreign taxes paid on foreign-sourced income. The domestic law foreign tax credit systems will often reduce the impact of potential double taxation. In order to supplement the terms of their domestic laws, countries often enter into tax treaties with other jurisdictions to clarify the use of foreign tax credits. The United States has an extensive tax treaty network with other countries – not just with the UK.

Complicated and subject to change

Proper use of these double tax treaties can materially reduce a taxpayer’s overall tax exposure. However, because the various tax systems are not mirror images of each other, with different rules on what constitutes income as well as when the income is to be recognized, double taxation is still possible.

Planning ahead for the future

Pensions, for example, may be treated more favorably in one jurisdiction than in another. The United States has also entered into a few Estate Tax treaties that may limit or reduce the combined death taxes imposed on estates with assets in more than one jurisdiction.

What about international business interests or investments?

Business entities and investments can also be treated very differently from country to country, and this is where international tax can become exponentially more complex.

We can help you understand the use of these tax treaties to maximize the use of your foreign tax credits and other treaty options. For a more in-depth overview of our international tax services, we recommend visiting our full Tax Planning & Consultancy Services page.

Contact Sarjul Patel for more information.

Did you Know?

  • Fact Seven

    Thanks to FATCA banks must disclose their American account holders to the IRS or local tax authority.
  • Fact Six

    The IRS is actively looking for non compliant US persons.
  • Fact Five

    It takes an average of 16 hours to do IRS Form 1040.
  • Fact Four

    There are over 500 IRS tax forms.
  • Fact Three

    Since 1916, illegal income has been taxable.
  • Fact Two

    US persons must file tax
    returns no matter where they live and work.
  • Text One

    7 million Americans abroad
    only 500,000 compliant