# Double Taxation



## Ronnie_Yook (May 9, 2012)

Hello, have any UK Ex-Pat(s) who have tax deducted at source in the UK, received an unusually high payment demand €€€€'s! from the Finanças in Portugal for tax year 2013?


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## canoeman (Mar 3, 2011)

Probably because Portugal Financas unless you have an existing agreement with them to accept proof of UK tax deducted do what their supposed to deduct the tax you owe Portugal on your declared income, which includes Pensions, Annuities, interest etc.

Expats Residents tend to forget that their primary responsibility for declaration, tax and payment is to Portugal not UK.

Dual taxation treaties means you don't pay tax on same income twice, not that you can select the country where you pay you have a couple of choices you either go through the hassle each year of recovering tax paid in UK or declaring to HMRC that your tax source is Portugal not UK.
Lots of UK info here
[ARCHIVED CONTENT] HM Revenue & Customs: Applications and claims by Non-residents under Double Taxation Treaties

This of course does not apply to UK Government Pensions *some* of which can only be taxed at source in UK.

Don't forget Tax due here must be paid by end August otherwise you'll be fined and incur penalties and if you think demand is high then you should check how, where and what your declaring on IRS Modelo3


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## In 2 bikes (Apr 18, 2013)

We have just landed here and I too am taxed in the UK on my Government pension ( not state pension ) which cant be transferred to be taxed in any other EU country, only by HMRC. I do not have any other income.

I know I will have to submit a tax return at the due time to AT here but Im rather hoping the double taxation treaty will be observed properly, i.e. the Portuguese finance types keep their mitts off it. 

Did you submit a return in time?


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## canoeman (Mar 3, 2011)

As a first step you should get a Declaration from your "Pension" provider or HMRC that, that is the case i.e. Pension must be taxed at source, Financas would accept that.

Portuguese Tax year is January to December so you need to organize as far as possible your UK records to reflect this as any Portuguese return covers 2 UK Tax years.

Your first return will be due March/April 2015 for tax year 2014

Even if your UK Pension must be taxed in UK you still get your UK personal allowance but must still report here, whilst your Pension might not be taxed here it's still used to assess your overall tax and in Portugal your treated as a "family" unit not as individuals.

I'd seriously suggest getting advice here for at least 1st year return with an accountant *familiar* with UK pensions and dual tax treaty, few local accountants have sufficient knowledge


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## Ronnie_Yook (May 9, 2012)

canoeman said:


> As a first step you should get a Declaration from your "Pension" provider or HMRC that, that is the case i.e. Pension must be taxed at source, Financas would accept that.
> 
> Portuguese Tax year is January to December so you need to organize as far as possible your UK records to reflect this as any Portuguese return covers 2 UK Tax years.
> 
> ...


Many thanks canoeman...as always excellent info.

We have done all as required by Finanças for the Modelo 3, 2013, including the Annexos H & J. All submitted 'on-line' in March 2014, by a seemingly knowledgeable accountancy firm, including the Annexos H & J.

We have taken on board (pardon the canoe pun) your advice, and helpful www. link (above) to which I have downloaded and will digest.

I shall post further info about our exact problem, with updated info soonest.

Many thanks

Ronnie


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## canoeman (Mar 3, 2011)

I would think that like a few friends who have filed Modelo3, H,J and declared UK tax paid at source that Financas have ignored that tax paid and taxed you on your declared earnings less any allowances you might be entitled too.

If this is case you need to recover tax paid in UK from HMRC which might be less than your tax bill here or take the plunge and complete DT form and be non taxable in UK
Form DT-Individual - Double Taxation Treaty Relief
http://www.hmrc.gov.uk/cnr/dtindividual.pdf

Afraid your local Financas office cannot or rather won't complete Portugal's part of form bottom page 1 has to go to Lisbon, suggest recorded delivery

DSRI (Directo de Servicos de relacoes International)
Av. Eng. Duarte Pacheco 28 - 4 
1099-013 Liboa


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## Ronnie_Yook (May 9, 2012)

canoeman said:


> I would think that like a few friends who have filed Modelo3, H,J and declared UK tax paid at source that Financas have ignored that tax paid and taxed you on your declared earnings less any allowances you might be entitled too.
> 
> If this is case you need to recover tax paid in UK from HMRC which might be less than your tax bill here or take the plunge and complete DT form and be non taxable in UK
> Form DT-Individual - Double Taxation Treaty Relief
> ...


Thanks canoeman,

Our tax circumstances are seemingly quite simple and basic ie:- United Kingdom State Pension (UKSP), and an Occupational Pension, with no other income.

At our request, and re-confirming our taxes are deducted at source in the UK, our accountant contacted the Finanças da Sertã, who originated our 'fatura'. They responded “they could not resolve the matter”, and referred them to the Autoridade Tributária e Aduaneira, Direcção de Serviços de Relações Internacionais (ATADSRI), in Lisboa. To whom, we await their reply.

I take your good point earlier that we should contact HMRC in the UK re 'Double Taxation' etc. We shall explore this. I see in an earlier posting in the ExPatforum, that this should be done 'before' submitting the Modelo 3. Why is it that an agreement on Dual Taxation between our two countries are not easily implemented, instead, we 'the taxpayers' have to jump through burning hoops to claim something which is bi-laterally agreed and simply should NOT be taxed twice!

As most are in holiday mode in July/August, we can see that somehow we will have to pay this demand by 30th August...or be subject to more nightmares and €€€fines!...and hopefully claim it back, so possibly in 5 years time...if we are still alive, then we might get this resolved and reimbursed.

One worrying statement made by our accountant was that “several of their foreign clients were also receiving unusually high tax payment demands for 2013, and they were pursuing them, also, with the ATeA, Finanças etc”.

We await a reply from our accountants, and the ATADSRI.

Ronnie


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## Ronnie_Yook (May 9, 2012)

In 2 bikes said:


> We have just landed here and I too am taxed in the UK on my Government pension ( not state pension ) which cant be transferred to be taxed in any other EU country, only by HMRC. I do not have any other income.
> 
> I know I will have to submit a tax return at the due time to AT here but Im rather hoping the double taxation treaty will be observed properly, i.e. the Portuguese finance types keep their mitts off it.
> 
> Did you submit a return in time?


Yes 'In2Bikes' see below, all submitted 'on-line' & 'on-time' etc.

Good Luck with your Modelo 3 etc....please note you should also submit the relevant 'Annexos' with the Modelo 3, for your UK Gov Pension.

Ronnie


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## In 2 bikes (Apr 18, 2013)

Ronnie_Yook said:


> please note you should also submit the relevant 'Annexos' with the Modelo 3, for your UK Gov Pension.
> 
> Ronnie


Thanks Ronnie and thanks CM


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## canoeman (Mar 3, 2011)

Hi Ronnie, everyone I know in exactly same situation as you has had to complete form DT from HMRC making them non taxable in UK as when referred to the DRSI Lisbon that was their ruling.

Afraid you will have to pay Portugal dues tax unless you want fines and costs, you also will not get a refund from Portugal as that is where as Residents your responsible for IRS returns and tax any refund due will be from UK.

HMRC when they receive DT form completed by you and by DRSI at Lisboa will if you tick the appropriate box calculate UK tax your owed and repay to a nominated bank account, takes months rather than years

Afraid your making a common mistake in thinking that because you've paid tax in UK the Dual Tax treaty absolves you of any tax liability here, it doesn't your primary responsibility is to report here and pay your tax here unless like 2 bikes where his Pension must be UK taxed, yes you won't be taxed *on same money twice providing you reclaim or opt out of UK tax* but that doesn't mean your Portuguese tax bill might not be higher on same return.

The Dual Tax treaty to put it simply gives you certain options in respect of UK, reclaim tax paid on income, interest etc or opt for Non UK Tax status with lots of small print in between.

All of this your accountant should have been aware of and warned you that you would get a tax bill plus Financas are tightening up on procedure and minimum reporting income since tax year 2012, whereas a few years ago they'd have probably turned a blind eye.


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## oronero (Aug 24, 2012)

canoeman said:


> Even if your UK Pension must be taxed in UK you still get your UK personal allowance but must still report here, whilst your Pension might not be taxed here it's still used to assess your overall tax and in Portugal your *treated as a "family" unit* not as individuals.


Does this mean that if you have (a) child(ren) that they also have a tax allowance or do they not have an allowance until they stop being in the education system?

Just curious.


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## canoeman (Mar 3, 2011)

The "family unit" has a tax allowance that is calculated on all members who live in same property or responsibility of "main" family member who makes return and also extra allowances should say one of those members be registered 60% disabled etc.
Each child has a tax allowance 2013 under 3 years old 437,50€ +3 213,75 more than 3 children 237,50€ per child and also a % allowance on education costs


If you look at Modelo3 each "family member" is declared on Subject A's form and then the various Anexo's are completed for each family member as reguired
Portal das Finanças - Descrição Imposto sobre o Rendimento das Pessoas Singulares - IRS

It's the taxation as a family unit that will generally mean a UK retired couple will pay slightly more tax here than UK a) because allowances have reduced dramatically over last 10 years and b) because each person does not have as like UK +65 £10,500 tax allowance, Portugal Financas does though on marriage allow each partner to be taxed individually if opted for at time, but I believe it's a one off decision


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## OrangesYeah (Apr 22, 2014)

The first time we submitted a tax return was in 2008 and we got a shock when Finanças had ignored all the UK tax we'd paid and effectively wanted it again. We contacted them and thankfully they admitted their mistake (possibly because we had submitted copies of our UK tax returns together with the pt one) and we only had to pay a small amount. We have never filled in a dual taxation form.


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## Ronnie_Yook (May 9, 2012)

canoeman, many thanks for your reply, and info.

You described most succinctly what the situation actually is, and provided very useful guidance, and sources of information related to this.

We confirm, that, in visiting the relevant Finanças department offices locally, we had tried to get our position clarified over the last year, particularly in actually taking our original documents, and original letters from ie: The Pension Service (TPS), Her Majesty's Revenue Centre (HMRC), and Occupational Pension, to confirm our receipt of pensions, and, payment of taxes in the UK.

In our visits to the local Finanças, it was 'they' (a group of three officials) who after huddled conversations, stated that as our total incomes were from the UK, and, as we had paid taxes on these in the UK, we did not even have to complete a Modelo 3!

Having gleaned information from the Expatforum and the media, we realised that even if we were not liable for taxes deducted on our incomes, we are, as official residents (Residente Permanente) in Portugal, required by law to submit a Modelo 3. We consulted with a local accountant, and they agreed to help us, as I had already made a computerised spreadsheets of our 'Despesas & Rendimentos' etc it was very easy for them to submit on-line our financial details on the Modelo 3. The actual bill for our accountant was...wait for it...€10!

It is frustrating as retirees, and not in the best of health, that we did our very best to comply with the requirements and laws of this wonderful country, yet if we had taken the advice from their own Finaças officials, we might very well be on the receiving end of a fine of €500 for not submitting a Modelo 3, which, sadly, some of ex-pat neighbours have received this year.

The good news is that, here in the expatforum, we are blessed with people who actually know what to do, and/or provide information to take an ex-pat enquirer further with their aims.

Many thanks to canoeman, and the expatsforum

Ronnie


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## canoeman (Mar 3, 2011)

Hi Ronnie, I did a reply to oranges that seems to have got lost in cyberspace, if your sole source of income is UK State Pensions and occupational pension then the easiest and quickest course is to complete DT form, you will then once Lisbon stamp form and HMRC have processed receive tax refund and in future no UK tax deducted at source yes I'm afraid your tax bill might be slightly higher than UK, I'd suggest opening a accessible rather than a term Savings account in Portugal (that way you don't need to declare interest) and pay an average amount in monthly from your Gross UK Pensions, might even have a bit extra when you pay next years bill 

Local Financas offices afraid do little to help themselves or the country, seem to fall into two camps informed or uninformed my local one is no different and even has to be shown legislation that a EU Resident doesn't need a Fiscal rep, or that the plastic NIF card is supposed to be issued or like you Modelo3 why? income + 293€? point to the information leaflet on display red faces


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## Ronnie_Yook (May 9, 2012)

canoeman said:


> Hi Ronnie, I did a reply to oranges that seems to have got lost in cyberspace, if your sole source of income is UK State Pensions and occupational pension then the easiest and quickest course is to complete DT form, you will then once Lisbon stamp form and HMRC have processed receive tax refund and in future no UK tax deducted at source yes I'm afraid your tax bill might be slightly higher than UK, I'd suggest opening a accessible rather than a term Savings account in Portugal (that way you don't need to declare interest) and pay an average amount in monthly from your Gross UK Pensions, might even have a bit extra when you pay next years bill
> 
> Local Financas offices afraid do little to help themselves or the country, seem to fall into two camps informed or uninformed my local one is no different and even has to be shown legislation that a EU Resident doesn't need a Fiscal rep, or that the plastic NIF card is supposed to be issued or like you Modelo3 why? income + 293€? point to the information leaflet on display red faces


Thanks again canoeman,

yes our thoughts exactly. The DT application form looks like a viable proposition, especially if we're thinking about residing in Portugal for the duration. 

A monthly '€ put-aside' to allow for both previous UK & Portugal taxes, is vital for next years taxes here, especially when we got a 'fatura' to pay for more than €1,000 for 2013's taxes!

Current position (again pardon canoe pun) is we are still awaiting response from the DSRI, Lisboa....should be interesting! Which I shall post on forum.

Well, in this bureaucratically mad _new world order_, it looks like I/we have even more forms to fill in. Oh... and avoid asking the staff at the Finanças for information!

Ronnie


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## izian (Nov 21, 2013)

Given all the responses above from the knowledgeable folk on here, I'm beginning to wonder if I have been given wrong information by a local accountant?
I have a very small, self employed job, which I estimate will bring in around £2,500 per annum. My work is for a UK Estate Agent and solely sterling based. Obviously this is well below the UK tax threshold, and I would prefer to go though the UK tax system to benefit from paying no tax.
The PT accountant I contacted here told me I could continue submitting my UK self assessments as everything was in sterling, and not worry about doing anything here in Portugal. Is this advise wrong? Should I be contacting my local Finanças to inform them of my income?
I also get child benefit and child tax credits, paid into a UK bank and then I transfer them over here - do I need to declare those as income to the PT authorities too?
I've only been over here since Feb this year so it's all a new learning curve for me still.


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## canoeman (Mar 3, 2011)

Should you decide or are forced to go down DT route HMRC will at the very least refund any UK tax paid for the Portuguese Jan to Dec 2013 tax year + up to date of DT form being finalized.
So you shouldn't be that out of pocket it's just finding the lump sum and quicker you go about DT form quicker you'll get refund from HMRC

It takes DSRI about 2 weeks to rubber stamp form and return to you to forward to HMRC

For the duration really has little significance in that should you say move back to UK you just reverse position or anywhere else you just have to abide by that countries Residence/Tax laws.
If leaving country then it's best to work so you leave between Jan & mid June so your not classed as a Tax Resident for that year. 

Also Portuguese accountants or at least the ones that aren't aware of UK/EU/ Portuguese tax law


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## canoeman (Mar 3, 2011)

izian said:


> Given all the responses above from the knowledgeable folk on here, I'm beginning to wonder if I have been given wrong information by a local accountant?
> I have a very small, self employed job, which I estimate will bring in around £2,500 per annum. My work is for a UK Estate Agent and solely sterling based. Obviously this is well below the UK tax threshold, and I would prefer to go though the UK tax system to benefit from paying no tax.
> The PT accountant I contacted here told me I could continue submitting my UK self assessments as everything was in sterling, and not worry about doing anything here in Portugal. Is this advise wrong? Should I be contacting my local Finanças to inform them of my income?
> I also get child benefit and child tax credits, paid into a UK bank and then I transfer them over here - do I need to declare those as income to the PT authorities too?
> I've only been over here since Feb this year so it's all a new learning curve for me still.


The information you've been given by the accountant is wrong at just about every level, as a Resident then you must declare any worldwide income regardless of currency, I would suggest you get some proper meaningful advice before contacting Financas so when you do you do it correctly, I would think that you should be self employed here to cover your employment if your earnings should keep you below Social Security payments.

Child benefits and tax credits you should first check if as a Portuguese Resident you are still entitled to receive, declaring here?? don't know


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## izian (Nov 21, 2013)

Thanks Canoeman,

Should have mentioned that myself and my children are PT residents. My husband is still a UK resident. Not sure if that makes a difference? I am entitled to receive both child tax credits and UK child benefit, not sure about the declaring income in PT bit though.

Jan - Dec 2013 I paid no tax at all as was on maternity leave. 

Maybe I should seek out another PT accountant to help me through all this. Just don't want to do anything 'wrong'.


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## canoeman (Mar 3, 2011)

Your UK earnings put you on the minimum borderline for declaration or non declaration as a Resident as has been posted your primary responsibility for reporting and tax is Portugal.

Your husband as a Non Resident only makes a difference if his earnings originate in Portugal if so then you would have to file joint return and declare his earnings, if earnings *not* Portuguese he or you might be asked to prove that.

The issue is not whether you have or not paid tax in UK or Portugal but whether you earnt an income in UK, Portugal or elsewhere that needed to be declared.

You would need to check if the money you receive as child tax credits and UK child benefit is or is not taxable here

Providing *none of your UK work requires the internet* then you could possibly have any UK NI payments credited to Portugal but that might stop or effect benefits?


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## Ronnie_Yook (May 9, 2012)

*HMRC weblink*

To help with this Double Taxation question, this weblink to HM Revenue & Customs (HMRC) might help:-

Double taxation (UK) Agreements - an introduction

Different countries have their own tax rules and laws. When you have income and capital gains from one country and are resident in another, you may have to pay tax in both countries under their different tax laws. To help avoid being taxed twice - 'double taxation', the UK has negotiated double taxation agreements with many countries.

On this page: HM Revenue & Customs: Double taxation agreements - an introduction


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## canoeman (Mar 3, 2011)

And this is what regardless of it being in the Portuguese/UK agreement (remember it's the Portuguese one that primarily applies as you as Portuguese Resident)

"tax is deducted in the country where you make your income or gain and you declare this tax as already paid on your tax return for the country where you are resident - the tax already paid is known as 'withholding tax'" 

That Financas are now seemingly not allowing unless they've agreed, as I made the point in Maggy's post even if they did allow this "witholding tax" you would still have to pay any extra tax due in Portugal on the same income


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## Ronnie_Yook (May 9, 2012)

canoeman said:


> And this is what regardless of it being in the Portuguese/UK agreement (remember it's the Portuguese one that primarily applies as you as Portuguese Resident)
> 
> "tax is deducted in the country where you make your income or gain and you declare this tax as already paid on your tax return for the country where you are resident - the tax already paid is known as 'withholding tax'"
> 
> That Financas are now seemingly not allowing unless they've agreed, as I made the point in Maggy's post even if they did allow this "witholding tax" you would still have to pay any extra tax due in Portugal on the same income


Thanks canoeman,
Jings...it gets better and better!


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## TonyJ1 (May 20, 2014)

canoeman said:


> I would think that like a few friends who have filed Modelo3, H,J and declared UK tax paid at source that Financas have ignored that tax paid and taxed you on your declared earnings less any allowances you might be entitled too.
> 
> If this is case you need to recover tax paid in UK from HMRC which might be less than your tax bill here or take the plunge and complete DT form and be non taxable in UK
> Form DT-Individual - Double Taxation Treaty Relief
> ...


You can request the Fiscal Residency Certificate on line on the Portuguese Finanças site, and it will become available within a week or so online which you can then print and submit to the UK authorities. 

In the arternative, you can submit the request directly as above to Lisbon, or to submit the same at your local tax office and they will forward it to Lisbon. Make sure you have an extra copy to be stamped by your local office as evidence of submission of forms.


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## TonyJ1 (May 20, 2014)

canoeman said:


> And this is what regardless of it being in the Portuguese/UK agreement (remember it's the Portuguese one that primarily applies as you as Portuguese Resident)
> 
> "tax is deducted in the country where you make your income or gain and you declare this tax as already paid on your tax return for the country where you are resident - the tax already paid is known as 'withholding tax'"
> 
> That Financas are now seemingly not allowing unless they've agreed, as I made the point in Maggy's post even if they did allow this "witholding tax" you would still have to pay any extra tax due in Portugal on the same income


The local revenue is looking for evidence of withholding taxes made. In some cases almost impossible to provide. If you have the appropriate proof (type P60 - UK / Ireland, T5 - Canada, Form 1042 - US), then it will be accepted up to the level of the Double Taxation Agreement.


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## canoeman (Mar 3, 2011)

Not by our local Financas who refused to accept P60's for 4 expats who's cases where then referred to DSRI Lisbon in each case Lisbon ruled that they should complete the UK form DT Tax Individual, the same applied to 2 other people I know who filed online and got exactly the same response when like Ronnie had a big tax bill land on the doormat.

The major issue with UK P60's is they cover parts of 2 Portuguese Tax years and there's no way I'm aware of of getting from HMRC anything other except than a statement saying you've paid UK Tax.

As UK pays our pensions then I have no problem with paying UK tax and would expect too, and pay any extra due to Portugal but unless someone is really prepared to fight Financas over this seemingly flouting of DT treaty I've opted for the easy way saves a tremendous hassle in recovering UK tax paid, HMRC didn't seem to want to know and just advised complete form


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## TonyJ1 (May 20, 2014)

Are you sure the tax returns have been correctly completed - I have seen many (completed by accountants and others) where the numbers have been inserted in the incorrect lines thus bills being incorrect. UK civil pensions are taxable in the UK in terms of the double taxation agreement with the UK. Other pensions are taxable in Portugal and there is no credit in Portugal and any tax withheld has to be recovered from the UK. No obligation on Portuguese authorities except to stamp claims, or issue tax residency certificates. Up to tax payer to claim where tax incorrectly paid / withheld


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## canoeman (Mar 3, 2011)

Yes certain returns completed correctly, I agree *certain* pensions must by law of country paying Pensions be taxed at source, I'd also agree "Other pensions are taxable in Portugal and there is no credit in Portugal and any tax withheld has to be recovered from the UK" but it's not what the Dual Tax treaties state but then Portugal applies "witholding tax" to a UK National Resident earning money in Portugal and will only zero that "witholding tax" if a Portuguese version of DT Form competed, this is becoming more of an issue simply because as little as a year ago Financas seemed to accept credit of "witholding tax" and now increasingly aren't or won't, equally still far too many accountants out there who advise expats to do nothing


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## TonyJ1 (May 20, 2014)

I have not lately looked into the details of the recovery process, but logic dictates that it is up to the tax payer to ensure that the correct tax is paid in the correct country. Only in exceptional circunstances may a taxpayer get the help of his/her tax authority. So, if a taxpayer had too much tax withheld in the UK, he must follow UK rules to recover the overpayment and the reverse also applies. If a taxpayer does nothing, then obviously he will land up paying too much tax. It is a pain - but these are the rules.


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