Double Tax Agreement Between UK and Belgium: Everything You Need to Know
Double tax agreements (DTAs) are bilateral agreements between two countries to avoid double taxation of the same income. A DTA ensures that taxpayers do not pay tax twice, once in their country of residence and again in the country where the income was earned.
The UK and Belgium have a double tax treaty which regulates the tax treatment of income in both countries. If you are a UK resident and earn income from Belgium or you are a Belgian resident and earn income from the UK, this treaty could affect you.
Here’s everything you need to know about the double tax agreement between UK and Belgium.
What is a Double Tax Agreement (DTA)?
A DTA is a treaty between two countries that allocates taxing rights between them. The intention of a DTA is to avoid double taxation of the same income in both countries.
A DTA sets out rules for:
– Determining the tax residency of individuals and companies
– Taxation of different types of income such as dividends, interest, and royalties
– Elimination of double taxation which can occur when income is taxed twice, once in the country of origin and again in the country where it was received.
What Does the Double Tax Agreement between UK and Belgium Cover?
The double tax treaty between UK and Belgium covers taxes on income and on capital gains. It applies to residents of both countries, whether individuals or companies.
The agreement sets out the tax treatment of the following types of income:
– Dividends: Dividends can be taxed in the country of residence and the country where the dividend is paid. However, the treaty limits the tax rate that can be charged on dividends to 10%.
– Interest: The treaty ensures that interest income is only taxed in the country where the recipient is resident, subject to certain conditions.
– Royalties: The treaty limits the tax rate on royalties to 10%.
– Capital gains: The treaty provides rules for the taxation of capital gains on the sale of shares or real estate, depending on where the asset is located.
All other types of income not covered by the treaty are taxed according to the domestic laws of the respective countries.
How Does the Double Tax Agreement Affect UK Residents?
If you are a UK resident earning income from Belgium, the double tax treaty between UK and Belgium can benefit you. The treaty ensures that you do not pay tax twice on the same income.
For example, if you receive dividends from a Belgian company, the dividend may be taxed both in Belgium and in the UK. However, the treaty limits the tax rate on dividends to 10%, which can reduce your overall tax liability.
In addition, the treaty provides relief from double taxation for UK residents by allowing them to claim a credit for taxes paid in Belgium.
How Does the Double Tax Agreement Affect Belgian Residents?
If you are a Belgian resident earning income from the UK, the double tax treaty between UK and Belgium can benefit you in the same way. The treaty ensures that you do not pay tax twice on the same income.
For example, if you receive interest from a UK bank, the interest may be taxed both in the UK and in Belgium. However, the treaty ensures that the interest income is only taxed in the country where the recipient is resident, subject to certain conditions.
In addition, the treaty provides relief from double taxation for Belgian residents by allowing them to claim a credit for taxes paid in the UK.
Conclusion
The double tax agreement between UK and Belgium is an important treaty that regulates the tax treatment of income in both countries. The treaty ensures that taxpayers do not pay tax twice on the same income and provides relief from double taxation.
If you are a UK or Belgian resident earning income from the other country, it is important to understand how the double tax treaty affects your tax liability. Consult a tax professional for advice on how to take advantage of the treaty and minimize your tax liability.
