Double taxation and tax treaties: how to avoid paying tax twice

When does double taxation happen?

Every country taxes on two grounds: who lives there, and what income comes from its territory. When someone lives in one country and earns income from another, both countries may claim tax on the same income.

Common examples among expats:

• An expat living in Europe who owns a rented flat in their home country.
• An employee who works for some months in a second country for their company.
• Someone who moved in the middle of the year and is treated as resident by both countries.

An employee's salary in the Gulf is usually not exposed to double taxation, because the Gulf states do not tax salaries. The problem appears when you have other income, or when you move to a country that taxes its residents on income from anywhere. To work out where you are resident, read the guide to tax residency and the 183-day rule.

What does a double tax treaty do?

Most treaties are based on the OECD Model Tax Convention. They do three things:

• Settle residency if both countries treat you as resident, using set tie-breaker rules.
• Split the right to tax for each type of income: salaries, rent, dividends, interest and pensions.
• Require the country of residence to remove the double tax on income that the source country is allowed to tax.

The salary rule in the Model (Article 15): a salary is taxed only in the country of residence, unless the work is done in the other country, in which case that country may tax it. The right to tax stays with the country of residence alone if three conditions are all met: the employee spends no more than 183 days in the country of work in any 12-month period, the employer is not resident there, and the pay is not borne by a permanent establishment the employer has there.

Rent is usually taxed in the country where the property is, and the country of residence then removes the double tax.

To find out whether your home country and the country where you work have a treaty in force, use the double tax treaty checker.

Credit or exemption? A worked example

The country of residence removes double taxation in one of two ways:

The credit method (foreign tax credit): the country of residence works out its tax on all your income, then deducts the tax you paid abroad, up to the amount of its own tax on that income.

An example with made-up figures: foreign rental income of 10,000. You paid 1,500 tax on it abroad, and your country of residence's tax on that income is 2,000.

• You deduct 1,500 and pay the difference: 500.
• If the foreign tax were 2,500, the credit would stop at 2,000. You pay nothing more, but the extra 500 is not refunded to you.

This is how Germany does it in its own law (Section 34c of the Income Tax Act): foreign tax paid is deducted from the German tax on the same income, up to the matching German tax.

The exemption method: the country of residence does not tax the foreign income at all. But it may take it into account to set the rate on the rest of your income, which is called exemption with progression. If your local income is 40,000 and your foreign income is 10,000, the rate is worked out as if your income were 50,000, then applied to the 40,000 only.

Which method applies is set by the treaty between the two countries, and it can differ by type of income.

Three real-life cases

An Egyptian working in Saudi Arabia: Saudi Arabia does not tax employees' salaries. Egypt does not tax a salary paid by a foreign employer for work done abroad, because Article 9 of the Egyptian Income Tax Law taxes pay for work abroad only if it is paid from a source in Egypt. So the salary is taxed in neither country. If they have income in Egypt, such as rent from a flat, that income comes from Egypt. The two countries have a double tax treaty signed on 8 April 2016 and published in the Egyptian Official Gazette in 2017. Compare take-home pay in Egypt or Saudi Arabia.

A Moroccan working in France: the two countries have a treaty signed in 1970. Its Article 18 makes a salary taxable in the country where the work is done. So if they live and work in France, France taxes their salary. The exception is for short assignments: if they stay no more than 183 days in the tax year, the employer is not resident in France, and the pay is not borne by an establishment the employer has there, the right to tax stays with Morocco. Note that this treaty counts the 183 days by tax year, not over any 12 months as in the Model. See Morocco or France.

A Syrian living in Germany: Germany and Syria have a treaty signed on 17 February 2010 and applied since 1 January 2011, according to the German Finance Ministry's list of treaties in force. A salary for work in Germany is taxed in Germany. If they have income in Syria and paid tax on it there, Germany removes the double tax under the treaty. See Syria or Germany and the Germany calculator.

How to get a tax residency certificate in the UAE and Saudi Arabia

A tax residency certificate is the document that proves to another country that you are tax resident where you work. In practice you need it to use a treaty.

UAE: the Federal Tax Authority (FTA) issues it through its online portal. The published fees for individuals: 50 dirhams to apply, 500 dirhams to issue if you have a corporate tax registration number, 1,000 dirhams if you do not, and 250 dirhams for each hard copy. It is granted under the residency criteria in Cabinet Decision No. 85 of 2022.

Saudi Arabia: ZATCA offers an online service called Tax Residency Certificate for Individuals, which is free according to the service page. You need your passport, proof of residence, and a letter from your employer confirming your employment.

Check the fees and requirements on the service page before you apply, as they can change.

Practical steps before you pay twice

• Work out where you are tax resident in the year in question.
• Work out the source of each income: where the work was done, where the property is, and who paid.
• Check whether the two countries have a treaty, on the website of the finance ministry or tax authority in either country.
• Read the article for your type of income, then the article on removing double taxation.
• Keep receipts for foreign tax paid, because your country of residence will not deduct it without proof.
• Apply for a tax residency certificate early.

This guide explains the general principles. Treaty texts differ, and applying them to your case needs a licensed tax adviser.

Sources

1. OECD: Model Tax Convention on Income and on Capital 2017 (Articles 4, 15, 23 A and 23 B)
2. Germany: Income Tax Act, Section 34c (foreign tax credit)
3. German Federal Ministry of Finance: status of double taxation agreements on 1 January 2026
4. French tax administration: France-Morocco tax treaty (Article 18)
5. Egyptian Tax Authority: bilateral agreements
6. Egyptian Tax Authority: text of the Egypt-Saudi Arabia treaty
7. Egyptian Tax Authority: Income Tax Law No. 91 of 2005
8. Federal Tax Authority: Tax Residency Certificate issuance
9. ZATCA: Tax Residency Certificate for Individuals

This guide is general information, not tax advice. Rules change; check with the authority or a qualified adviser before you act. How we work.