Salary FYI

Tax Treaty

Tax

A bilateral agreement between two countries that establishes rules for taxing cross-border income, aimed at preventing double taxation and tax evasion.

## Tax Treaty

Tax treaties (also called double tax agreements or DTAs) are bilateral agreements that allocate taxing rights between two countries for various types of income.

### What Treaties Cover

- Employment income (which country taxes salary for cross-border workers).
- Dividend and interest withholding rates.
- Capital gains allocation.
- Pension and social security taxation.
- Permanent establishment rules.

### Key Provisions

- **183-day rule**: Employees working in a country for fewer than 183 days may be exempt from tax there.
- **Reduced withholding**: Treaty rates on dividends (often 15%), interest (often 10%), and royalties.
- **Tie-breaker rules**: Determine tax residency when dual residency arises.
- **Mutual agreement procedure**: Resolves disputes between tax authorities.

### Treaty Network

The US has treaties with over 60 countries. The UK has over 130. Germany has about 95. Countries with extensive treaty networks provide more certainty for international workers.