Avoiding Double Taxation, in Plain English

The phrase “double taxation” causes more low-grade dread among expats than almost anything else, and most of that dread is misplaced. The systems that prevent it are old, well-established and generally work.

What is true, and what people get wrong, is that the relief is not automatic. It is claimed. If you do not file, you do not claim, and the machinery that was supposed to protect you never engages. Most double-taxation horror stories are, on inspection, non-filing stories.

Here is how it actually works.

Why the problem exists at all

Two rules collide.

Countries tax their residents on worldwide income - everything you earn, anywhere. And countries tax income sourced within their borders regardless of who earns it. So if you live in country A and earn rent from a flat in country B, A wants to tax it because you live there and B wants to tax it because the flat is there.

Both claims are legitimate on their own terms. Something has to arbitrate, and that something is either a treaty or a domestic relief rule.

If you are not yet clear on which country you are resident in - and in a year when you move, that is a genuine question rather than an obvious one - start with tax residency explained, because everything below depends on knowing the answer.

The two mechanisms

Tax treaties

There are thousands of bilateral treaties in force, most following a broadly similar model. A treaty does three useful things.

It assigns taxing rights by category of income. Employment income is generally taxable where the work is physically performed, with an exception for short assignments. Immovable property is taxable where the property sits. Business profits are taxable where there is a permanent establishment. Dividends, interest and royalties are usually taxable in both, with the source country limited to a capped withholding rate. Pensions vary considerably between treaties - government pensions are often treated differently from private ones.

It breaks ties on residence where both countries would otherwise claim you, through the sequence of permanent home, centre of vital interests, habitual abode and nationality.

And it specifies the relief method the residence country must apply.

Credit and exemption

Relief comes in two flavours.

Under the credit method, your country of residence taxes your worldwide income and then subtracts the foreign tax you already paid on the same income, normally limited to what it would have charged itself. The practical result: you pay the higher of the two countries’ effective rates, not the sum of them. If the foreign country charged more than your residence country would have, the excess is usually not refunded - it may be carried forward, depending on the system.

Under the exemption method, the residence country simply leaves the foreign income out of the calculation, sometimes with a twist called exemption with progression, where the exempt income is still counted for the purpose of deciding which rate band your other income falls into.

Credit is the more common approach. Which applies to you depends on the treaty and on your residence country’s rules.

Where there is no treaty

Most countries offer some unilateral relief for foreign tax paid even without a treaty, but it tends to be narrower - fewer categories covered, tighter limits, no tie-breaker to settle residence. If your two countries have no treaty, this is a reason to take advice early rather than to improvise.

What this looks like in practice

Employed locally, no foreign income. The simple case. You are resident in the new country, your employer withholds tax there, and the treaty rarely needs to do anything. Your home country may still want a final return for the year you left. What you should understand here is not the treaty but your payslip, and understanding your first payslip covers the deductions.

Employed by a foreign company while living abroad. Common on remote-work routes. Employment income is generally taxable where you physically work, so the new country usually has the primary claim even though the payer is elsewhere. Your employer may not be withholding correctly for that country, which means you may owe tax directly and need to arrange payments yourself. This is the situation where people build up an unpleasant surprise across a full year without noticing - and it is the specific catch I flag in digital nomad visas in 2026.

Rental income from property at home. The property’s country taxes it, essentially always. Your residence country also includes it and gives credit for what you paid. You will usually be filing in both places, in perpetuity. Expenses deductible in one country are not necessarily deductible in the other, which is why the numbers rarely match neatly.

Investments and dividends. Withholding tax is often deducted at source at a rate higher than the treaty allows, and reclaiming the difference requires a specific procedure - frequently a residence certificate from your tax authority given to the payer or broker in advance. It is administratively annoying and worth doing where the sums justify it.

Pensions. Genuinely treaty-specific. Do not assume the treatment of a private pension matches that of a state or government one; they are commonly handled under different articles with different outcomes.

The habits that keep this simple

File in both countries where required, even when you expect to owe nothing. This is the single most important sentence in this post. Relief is claimed on a return. A non-filed return claims nothing, and from the authority’s side it looks like unreported income rather than exempt income.

Keep proof of foreign tax paid. Assessment notices, withholding certificates, payslips showing deductions. A credit claim without evidence gets disallowed, and reconstructing it from another country’s system years later is painful.

Note that tax years may not align. If one country runs January to December and the other April to April, matching income and credits across them takes care, and mechanical year-to-year comparison will mislead you.

Get a certificate of tax residence when you need one. Many reduced withholding rates and treaty benefits require you to prove residence to the other country’s authority or to a payer, and the certificate is issued by your own tax office on request.

Do not confuse tax with social security. They are separate systems with separate rules, and the treaty governing one does not govern the other. Social contributions are coordinated by different agreements - within the EU by regulation, elsewhere by bilateral social security agreements - and it is entirely possible to be taxed in one country and paying social contributions in another. If you are self-employed this matters a lot, and registering as freelance or self-employed goes into it.

When to stop reading and hire someone

I am a great believer in understanding your own situation, and there is a point past which reading is a false economy. Get professional advice - from someone who handles cross-border cases in both jurisdictions, not a generalist - if any of these apply.

You have income in more than two countries. You hold share options, restricted stock or a business interest that crosses borders. You are moving mid-year with substantial income on both sides of the move. You own property abroad and are unclear how it is being treated. You have a pension you are drawing or about to draw across borders. There is no treaty between your countries. Or you have already got behind on filings and need to regularise.

The last one deserves emphasis: voluntary disclosure regimes exist in most countries and treat people who come forward far better than people who are found. If you are behind, the cost of dealing with it now is almost always smaller than the cost of dealing with it later.

The reassuring part

For most expats this is not the ordeal it sounds like. You are resident in one country, you file there, you declare whatever foreign income you have, you claim credit for foreign tax already paid, and it comes out roughly where you would expect. The complexity concentrates in the year you move and in situations involving property, investments or multiple income sources.

Which country taxes what in your specific pairing is a treaty question, and treaty texts are public - your tax authority publishes the list. For the country’s own rules, rates and special regimes for new arrivals, the tax sections of the country guides are the place to look, and for how it all fits into the wider financial picture, managing money as an expat.

And for the very specific question of how someone with your combination of countries handled their first year, the money and banking forum is worth a search before you pay anyone by the hour.