You move abroad, you keep some income flowing from your home country (rent, dividends, a pension, royalties), and the dreaded question hits: am I going to pay tax twice on the same euro, dollar or pound? In most cases, the answer is governed by a bilateral tax treaty between your country of residence and the country where the income arises. This guide explains how treaties work, what the OECD model says, and how to read one in practice, with examples from the major expat-source countries.

Disclaimer: This guide is for informational purposes. Tax treaties are complex legal texts that must be interpreted by a qualified professional. Always consult a tax expert before making any decision.

What is a bilateral tax treaty?

A bilateral tax treaty (also called a Double Tax Agreement, DTA, or convention) is an international agreement signed between two states to share taxing rights when a taxpayer has connections to both jurisdictions, by residence, by the source of their income, or by their assets.

Without a treaty, both countries apply their own sovereign rules. The source country (where the income is generated) typically wants to tax. The residence country also taxes worldwide income of its residents. The result, in the absence of relief, is double taxation, which discourages cross-border investment and labor mobility.

Treaties resolve this by saying, for each category of income:

  • Which state has the primary right to tax (source or residence)
  • Whether the other state must exempt the income or grant a credit
  • What reduced rates apply to common cross-border flows like dividends and interest
  • How to break ties when both countries claim a person as a resident

There are about 3,000 bilateral tax treaties worldwide, the largest network of which belongs to countries like the United Kingdom (130+), France (120+), the United States (60+), and most OECD members.

The OECD model: the international reference

Almost every modern treaty is based on the OECD Model Tax Convention on Income and on Capital, periodically updated and accompanied by extensive Commentaries that courts and tax authorities use to interpret treaty wording. The UN Model Tax Convention offers an alternative more favorable to source countries (often used for treaties with developing countries).

Both models share a common architecture. The most important articles to know:

  • Article 4: Residence (and the famous tie-breaker rules)
  • Article 6: Income from immovable property (real estate)
  • Article 7: Business profits
  • Article 10: Dividends
  • Article 11: Interest
  • Article 12: Royalties
  • Article 13: Capital gains
  • Article 15: Income from employment (salaries)
  • Article 17: Artists and sportspersons
  • Article 18: Pensions
  • Article 19: Government service
  • Article 21: Other income
  • Article 23: Methods of elimination of double taxation
  • Article 25: Mutual Agreement Procedure (MAP)

If you can read these articles in the treaty between your country of residence and the country where your income arises, you can answer 90% of practical questions yourself.

The 3 methods to eliminate double taxation

Tax treaties use one of three methods, sometimes combined.

Method 1: Exemption

Only one country taxes; the other completely exempts the income.

A common variant is exemption with progression: the residence country exempts the foreign income from tax but still includes it when calculating the effective rate applied to other domestic income. This is widely used by France, Germany and many continental European countries.

Method 2: Tax credit

Both countries tax the income, but the residence country grants a credit equal to the tax paid abroad (capped at the amount that would have been due under domestic rules). This is the standard method for the United States, United Kingdom and Canada.

The US uses the Foreign Tax Credit, claimed via Form 1116. The UK provides Foreign Tax Credit Relief detailed by HMRC. Canada operates a similar mechanism via line 40500 of the T1 return.

Method 3: Reduced withholding rate

For dividends, interest, and royalties, treaties typically cap the withholding tax that the source country can apply, well below the standard domestic rate. For example, US domestic withholding on dividends paid to non-residents is 30%; under the US-UK treaty, it drops to 15% (or 5% for substantial corporate shareholders).

Tie-breaker rules: when both countries claim you

A common scenario for expats: you move mid-year, or you split time between two countries, and both jurisdictions consider you a tax resident under their domestic law. This is where Article 4 of the treaty comes in. The OECD tie-breaker rules apply tests in order, stopping at the first one that gives a clear answer:

  1. Permanent home: where do you have a dwelling available to you on a long-term basis?
  2. Centre of vital interests: where are your personal and economic ties strongest?
  3. Habitual abode: in which country do you spend more time?
  4. Nationality: of which country are you a national?
  5. Mutual agreement between the two competent authorities

These rules are decisive for many expat cases and prevent both countries from claiming primary taxing rights.

How major income types are treated

Employment income (salaries)

The general rule: salary is taxed where the work is physically performed. If you live in Lisbon and work remotely for a French employer, your salary is generally taxable in Portugal, not France, provided you are present in France less than 183 days and your employer has no permanent establishment there.

Beware: this is the OECD rule, but treaties differ. The US-Canada treaty has detailed rules for cross-border commuters. The UK Statutory Residence Test interacts with treaties in complex ways.

Pensions

Treaties generally distinguish:

  • Private pensions: usually taxable only in the country of residence
  • Public pensions (civil service): generally taxable only in the country that pays them
  • Social security pensions: vary by treaty

The US is a major exception: under the saving clause in US treaties, the US retains the right to tax its citizens and green card holders on worldwide pension income, even when treaty rules would assign that right elsewhere.

Dividends

Treaties cap the source country’s withholding tax. Indicative rates from major treaties:

TreatyStandard rateReduced rate (qualified holdings)
US-UK15%5% (>10% holding) or 0% (>80%)
US-Canada15%5% (>10% holding)
UK-Australia15%5% (>10%) or 0% (>80%)
France-Germany15%5% (>10%)
US-Germany15%5% (>10%) or 0% (>80%)
Canada-Australia15%5% (>10%)

To benefit, you usually need to file a treaty claim form with the payer (W-8BEN for US, similar in other countries).

Interest

Often subject to reduced or zero withholding under treaties. The US-UK and US-EU treaties typically reduce US withholding on interest to 0% for portfolio interest paid to qualified residents.

Royalties

Vary widely. Some treaties (Ireland-US, UK-US) eliminate withholding entirely; others cap it at 5-15%.

Real estate income

Almost universally taxed in the country where the property is located, regardless of the treaty. The residence country either exempts it or grants a credit. Capital gains on real estate follow the same rule.

Capital gains on shares

The default OECD rule: gains are taxable only in the country of residence of the seller, unless the company is a “real estate-rich” entity (in which case the country where the underlying real estate sits taxes the gain).

Examples for major expat-source countries

US expats: the saving clause changes everything

The United States is unique. Every US tax treaty contains a saving clause that allows the US to tax its citizens and green card holders as if the treaty did not exist, with limited exceptions. In practice, this means:

  • A US citizen living in Portugal still files a US return on worldwide income
  • The treaty is used mostly to claim the Foreign Tax Credit and reduce US withholding for non-citizen US-source income
  • Specific carve-outs (Article 1, paragraph 5 in most US treaties) protect a few items like government pensions

Combined with FATCA and FBAR reporting, US expats face a uniquely heavy compliance burden, see the IRS treaty pages.

UK expats: residence-based, treaty-friendly

UK residents are taxed on worldwide income (subject to the now-reformed remittance basis for non-doms post-2025). UK treaties follow the OECD model closely. Detailed guidance is available from HMRC’s tax treaties pages.

A common case: a UK retiree moving to Spain. The UK-Spain treaty assigns taxation of UK private pensions to Spain, while UK government pensions remain taxable in the UK. The retiree files a Spanish return and uses HMRC’s Form FD9 to stop UK withholding.

Canadian expats: residence ties matter

Canada also follows the OECD model. Canadian residents are taxed on worldwide income; non-residents only on Canadian-source income. The CRA tax treaty list is extensive, with notable treaties with the US, UK, France and Australia.

Canada-US is the most important and one of the most complex treaties in the world, with detailed provisions on commuters, retirement plans (RRSP/IRA recognition), social security, and tie-breakers.

Australian expats: focus on residence and source

Australia uses the residence vs source distinction strictly. The ATO tax treaty page lists 45+ treaties. Australian tax residents are taxed on worldwide income; non-residents are taxed only on Australian-source income, often at flat non-resident rates.

A common pattern: an Australian moving to the UK uses the Australia-UK treaty to avoid double taxation on Australian rental income (Australia taxes the rent, UK gives credit) and on UK employment income (UK taxes the salary, Australia exempts since the Australian is no longer Australian resident).

EU expats moving within the EU

Within the EU, treaties follow the OECD model but are reinforced by EU Directives:

  • Parent-Subsidiary Directive: 0% withholding on intra-group dividends
  • Interest and Royalties Directive: 0% withholding on intra-group interest and royalties
  • DAC6 / DAC7: information exchange between EU tax authorities

This makes intra-EU expatriation administratively lighter than cross-Atlantic moves.

French expats: a 120+ treaty network

France has one of the largest treaty networks. The official list is published by the French tax administration. French treaties typically use the exemption-with-progression method for most income types.

Notable countries without a French treaty: Georgia, Paraguay (Panama treaty signed but not yet in force as of 2026). For French residents in those countries, France retains its full domestic taxing rights on French-source income.

Practical cases

Case 1: UK consultant working from Spain

Sarah is a British consultant who moves to Barcelona in January 2026. Her clients are mostly UK companies; she invoices through a UK limited company.

Applicable treaty: UK-Spain (signed 2013)

  • Consulting fees billed to UK clients: treated as business profits (Article 7). Taxable in Spain only, since Sarah has no permanent establishment in the UK. She bills via her UK Ltd, but if she manages it from Spain it may also become Spanish tax resident (place of effective management).
  • Apartment in Manchester rented out: real estate income, taxable in the UK (Article 6). She files a UK SA105 form. Spain taxes it too but credits the UK tax (Article 22).

Case 2: US retiree in Portugal

Robert, a US citizen, retires to Lisbon at age 65. He receives USD 3,000 monthly Social Security, USD 2,500 from a 401(k) distribution, and USD 1,000 in dividends from a US brokerage account.

Applicable treaty: US-Portugal (signed 1994)

  • Social Security: Article 20 of the treaty makes US Social Security taxable only in the country of residence (Portugal). The saving clause does not override this for Social Security. Portugal taxes it under its NHR/IFICI rules.
  • 401(k): pension income; under the treaty, taxable in residence country (Portugal). But the US saving clause applies, so the US also taxes Robert as a citizen, with Portugal granting a credit.
  • Dividends: 15% US withholding under the treaty (down from 30%). Portugal taxes them and credits the 15% withheld.

Robert files both a US 1040 and a Portuguese IRS return, using the Foreign Tax Credit on the US side.

Case 3: Canadian executive in Singapore

Marie, a Canadian, takes an expat assignment in Singapore. She severs Canadian residential ties and becomes Singapore tax resident.

Applicable treaty: Canada-Singapore (signed 1976, modified)

  • Singapore salary: taxable only in Singapore (where work is performed), at low Singapore rates. Canada does not tax it because Marie is non-resident.
  • RRSP: Canada continues to tax distributions; treaty assigns primary right to Canada under pension rules. Singapore exempts.
  • Canadian rental property: taxable in Canada (Article 6), with Singapore exempting under its territorial system.

Useful resources

Country pages and resources

Each country page on our site includes a section on the relevant tax treaties and their practical implications:

For a strategic overview by destination, see our expat taxation hub.

Summary

Bilateral tax treaties are the backbone of international tax planning for expats. They define, article by article, which country can tax which income and at what rate, and they prevent the financial nightmare of paying twice.

Key takeaways:

  1. A treaty does not eliminate taxation; it allocates it between two countries
  2. Three methods exist: exemption, credit, reduced rate, often combined
  3. Real estate income is always taxed where the property is located
  4. The OECD tie-breaker rules in Article 4 resolve dual residence cases
  5. The US is unique because of the saving clause: citizens are taxed by the US regardless of residence
  6. Government pensions usually stay taxable in the paying country; private pensions often shift to the residence country
  7. Always check the actual text of the treaty between your two countries; templates differ in important details

Before settling abroad, systematically check whether a treaty exists, what its content says for your income types, and what compliance obligations it creates in both countries.