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Introduction to Foreign Tax and Double Taxation for UK Athletes

Navigating the intricate world of tax, especially when it comes to foreign tax and the associated treaties, can be daunting for the untrained. That’s why I, Holly Calvert, teamed up with Craig Broomhead from Navigation Wealth Management, a trusted expert in the field, to craft this blog. Our aim? To provide guidance for those who find themselves lost in the maze of foreign tax regulations and treaties.

Sitting down together, we navigated the online form. Craig kindly consulted with other seasoned professionals to ensure accuracy and clarity. What became apparent was the complexity of this field, especially for those who don’t work with it daily.

So, let’s dive in and demystify foreign tax and double taxation, ensuring you navigate these waters smoothly and avoid unnecessary tax burdens when operating across borders.

What is Foreign Tax for UK Athletes?

Foreign tax refers to any tax imposed by a foreign government on income, profits, transactions, or assets earned or held outside of that country’s borders. When individuals or businesses generate income or conduct business activities in a foreign country, they may be subject to taxation by that country’s government. This taxation is on top of the tax you already pay in the UK hence why it is classed as double taxation.

Foreign taxes can take various forms, including income tax, capital gains tax, withholding tax on dividends or interest payments, value-added tax (VAT), and other types of levies. The specific rules and rates governing foreign taxation vary from one country to another and may depend on factors such as the type of income earned, the residency status of the taxpayer, and any applicable tax treaties between the taxpayer’s home country and the foreign country in which they are earning income or conducting business.

How can I avoid paying Foreign Double Taxation as a UK Athlete?

To avoid paying Foreign Double Tax on earnings/winnings abroad (outside the UK), you can fill in and apply for a Tax Residency Certificate. This can be done online via the GOV.UK website.

A tax residency certificate is an official document issued by a country’s tax authorities to confirm an individual or entity’s tax residency status in that country for a particular period. Tax residency refers to the determination of which jurisdiction an individual or entity is considered liable to pay taxes to based on their presence or connections within that jurisdiction.

Tax residency certificates UK

These tax residency certificates are typically issued upon request and may be required for various purposes, such as:

Claiming tax treaty benefits: Many countries have tax treaties with other nations to prevent double taxation and provide certain tax benefits to residents of those countries. A tax residency certificate may be required to claim these benefits, such as reduced withholding tax rates on certain types of income.

Avoiding or reducing withholding tax: In some cases, non-residents earning income in a particular country may be subject to withholding tax on that income. However, if they can prove their tax residency status in that country, they may be eligible for exemptions or reduced withholding tax rates.

Compliance with foreign tax laws: Certain countries may require individuals or entities to provide evidence of their tax residency status for compliance purposes, such as opening bank accounts, applying for certain licences or permits, or conducting business activities in that country.

Section 1 – How to Apply

To start your online application, head to the link on the GOV.UK website. Once there, scroll down to “How to Apply”. If you’re an Athlete, there’s probably a chance that you are an “Individual or Sole Trader”. If this is the case, hit “Email a Form”; this will take you straight to the Online Form without having to sign into your Government Gateway.

Enter your email address, telephone number, security details, and don’t forget to also enter your Unique Taxpayer Reference Number (UTR). Then, provide the number of days you have spent outside the UK for the period of which you are requesting the Certificate, followed by your nationality and current address.

Under “Additional Details”, provide your Employer or Private Pension Provider; if you are unsure or unable to access these details, just enter NONE. Leave the Agent’s details section blank if you are navigating this solo.

Section 2 – Details of request for Certificate of Residency

Start this section by stating why you require a Tax Residency Certificate, for example, “Professional Golfer competing abroad, wanting to avoid double taxation”.

Enter the period for which you require the certificate. For example, if you need it to cover the entirety of the golf season, enter “April to November” or the relevant period for your sport.

Specify the countries whose tax office requires the certificate, based on where you could potentially be competing during your season.

In the section asking for future income, provide an approximate idea of your potential earnings for events you anticipate participating in.

For the Article of the DTA (Double Taxation Agreement), find the relevant Taxation Treaty on the GOV.UK website and enter the country and article number, ensuring to cover each country you may compete in.

Confirm that you are the “Beneficial Owner” of the Income, that “Yes”  the income will be Subject to Tax in the UK but not subject to Foreign Tax. Enter the circumstances under which you require the certificate, and that the income is paid to you as an “Individual / Sole Trader”.

Finally, enter any other UK-based income you receive and then hit SUBMIT.

Summary

By following these steps, you can streamline the process of obtaining a Tax Residency Certificate and ensure compliance with foreign tax laws, allowing you to focus on your athletic endeavours without unnecessary tax burdens. However, it’s important to note that this guidance is meant to assist you in navigating the process. 

If you encounter complexities or uncertainties, it’s advisable to seek direct consultation with an expert, so if you’re struggling feel free to reach out to Craig for further advice contact him via here.


 

Frequently Asked Questions (FAQ’s) about Foreign Tax and Double Taxation for UK Athletes

What is foreign tax and how does it affect UK athletes competing abroad?

Foreign tax refers to taxes imposed by foreign governments on income earned within their jurisdictions. For UK athletes competing abroad, it means facing potential taxation on their earnings in the country where the competition takes place, in addition to any UK tax liabilities.

Can UK athletes avoid paying double taxation on earnings abroad?

Yes, UK athletes can avoid double taxation through the use of Tax Residency Certificates, which prove their tax status in the UK and allow them to claim benefits under tax treaties between the UK and the countries where they compete.

How do I apply for a Tax Residency Certificate as a UK athlete?

Athletes can apply for a Tax Residency Certificate online via the GOV.UK website. The process involves filling out an application form with personal details, income information, and the specific countries where tax treaty benefits are being claimed.

What are tax treaties and how do they benefit UK athletes?

Tax treaties are agreements between two countries to avoid double taxation for individuals and businesses operating in both countries. For UK athletes, these treaties can reduce or eliminate foreign tax liabilities on their earnings abroad.

What information do I need to provide when applying for a Tax Residency Certificate?

When applying for a Tax Residency Certificate, athletes need to provide their Unique Taxpayer Reference Number (UTR), details of their time spent outside the UK, nationality, current address, and information about their earnings and the countries where they are competing.

Are there specific countries where UK athletes can benefit more from tax treaties?

The benefits of tax treaties vary depending on the specific agreements between the UK and other countries. Athletes should check the details of the tax treaty with each country they compete in to understand the specific benefits available.

What should I do if I face challenges navigating foreign tax laws as a UK athlete?

If you encounter difficulties or uncertainties with foreign tax laws, it’s advisable to seek advice from tax professionals who specialise in international athlete taxation. They can provide guidance tailored to your specific situation and help ensure compliance with foreign tax regulations.

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