# UK Hong Kong double tax treaty question



## DanW123 (Jun 13, 2016)

Hi everyone, I have a question about double tax treaty tax liability. I'm going a bit crazy reading and re-reading HMRC's website and the relevant documents, so any help would be really appreciated.

I live and work in Hong Kong for a Hong Kong employer. Most years I spend some time in the UK, but because of the coronavirus, I'm thinking about staying long enough to potentially make me a UK tax resident via the statutory residence test. I understand that this means I would be a dual tax resident (both UK and HK), and would normally mean that I am liable for UK taxes on my worldwide income. However, there is a tax treaty between the UK and HK, with a tie-breaker clause which (by my reading) would put me as a HK resident for treaty purposes. The agreement also has an employment clause which *seems* pretty clearly to say that I am not liable for any UK tax on my HK earnings: it says that "salaries, wages and other similar remuneration derived by a resident of a Contracting Party in respect of an employment shall be taxable only in that Party..." 

My question is, does this mean that I am not liable for any UK taxes on my HK earnings? My worry is that I've seen a lot of documents suggesting that double tax agreement relief comes in the form of a *credit* for taxes paid in the other jurisdiction, rather than an exemption. And since the difference in tax rates between the UK and HK is quite significant, this would make quite a bit of difference.

I can't post a link to the relevant tax treaty (I don't have enough posts apparently) but it's on HMRC's website: the residence clause is Article 4, and the employment clause is Article 14.

Thanks a lot in advance!


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## Moulard (Feb 3, 2017)

I am not familiar with the treaty in question, but as a general rule, it is best to think of the tax treaties not as a treaty to prevent dual taxation of an individual, but rather the a dividing of the spoils between the two countries, each trying to ensure they get what they see as their fair share.

But yes, your interpretation - a credit for taxes paid, as opposed to an exemption from tax, sounds right. 

What tends to often happen when a person is resident in one country but has income sourced from the other is that they effectively end up paying the higher of the two income tax rates.


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## Nononymous (Jul 12, 2011)

You can also take a marginally dishonest approach. Staying past 183 days does not, presumably, trigger some alarm that informs HMRC of your existence as a UK tax resident, nor would it magically provide information about your HK income. Whether you remain in the UK for five, six or seven months, this does not make you a long-term resident, so don't act like one. If you plan to return to HK within the year, stay out of the UK tax system. 

As a US citizen, presumably you have some sort of status that would allow you to remain in the UK for more than six months? If not, the question is moot.


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