Relying on double tax agreements (DTA) as the basis for dealing with your tax problems is a tricky business. Although they have a place as one of a few effective tax management tools, they need to be used carefully, and as usual, the devil is in the details.
Last week we looked at some of the steps governments have been taking in an attempt to increase their tax revenues. Readers raised some interesting points, but it was clear that some expats believed they were "safe" and exempt from tax in their home country or elsewhere through a DTA. They further believed they were exempt from tax in Thailand, which is often far from the case.
One of the hot topics we have seen emerge over the past year involves qualified recognised overseas pension schemes (QROPS), following the introduction of new rules by Her Majesty's Revenue and Customs (HMRC) in April, 2012. The most significant of those rules is that pension income must be taxed in the jurisdiction of the QROPS in the same way for residents and non-residents. This led to almost all the schemes domiciled in Guernsey being disqualified. The reality is that HMRC has adopted a view that originating contributions were tax-exempt when paid into such schemes, and thus the resulting income should be taxable no matter where it is generated.
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