Jurisdiction(s):
United Kingdom and Ireland

Key definition

Double tax treaty definition

What does Double tax treaty mean? A double tax treaty (DTT) is a bilateral agreement between two states that determines which country may tax cross‑border income and how double taxation is relieved in practice. Typically modelled on the OECD Model Tax Convention, a DTT sets rules for tax residence and permanent establishment, allocates taxing rights over business profits, employment income, pensions, dividends, interest, royalties and many capital gains, and limits withholding tax rates. Relief is usually provided by exemption or credit, supported by non‑discrimination, exchange of information and a mutual agreement procedure; modern treaties also include anti‑avoidance measures (for example, a principal purpose test,...

Treaty residence in DTTs: ‘liable to tax’, MAP/POEM tie-breakers, and treatment of partnerships, trusts, funds and exempt bodies

Published by a LexisNexis Tax expert

Practice notes

The concept of being ‘resident in a contracting state’ is key in a Double tax treaty (DTT) because:

Double tax treaties apply solely to persons who are resident in one or both contracting states, whether individuals or entities, for the purposes of the treaty.
The concept is also employed throughout numerous treaty provisions to allocate taxing rights between the participating states; for instance, dividend articles often stipulate, under the terms of the relevant article, that a dividend paid by a resident of one contracting state to a resident of the other contracting state is taxable exclusively in the latter jurisdiction.

Accordingly, when advising a taxpayer about their position under a DTT, it is essential first to ascertain where that taxpayer is resident for the purposes of the treaty, which may not align with the residence attributed under domestic legislation, and can therefore materially affect the outcome...

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Web page updated on 22/05/2026

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