What is Double taxation treaty?

Double taxation treaty

DTT

A double taxation treaty is an agreement between two countries that allocates the right to tax the same income so it is not taxed twice. It determines which country taxes first, which must grant relief or exemption, and provides tie-breaker rules when both consider you tax resident.

For someone working remotely for a foreign company, the relevant article is usually the one on employment income: as a rule it is taxed where the work is physically performed, which in remote work is your country of residence, not the company's. That detail is why many companies insist on an EOR or a contractor agreement.

Also called: DTA, tax treaty, double tax agreement

Related terms

Tax residenceTax residence is the country entitled to tax your worldwide income. You do not choose it by declaring it: each jurisdiction determines it through objective tests such as days of presence, where your centre of economic interests lies and where your family lives. You can be tax resident somewhere you barely spend time.
183-day ruleThe 183-day rule holds that staying more than half a calendar year in a country usually makes you tax resident there. It is the best-known test, but neither the only one nor always the decisive one: many countries also treat you as resident if your centre of economic interests sits in their territory.
Permanent establishmentA permanent establishment is a stable presence of a company in a country other than its own that triggers an obligation to pay tax there on the profits attributable to that presence. It can arise without an office: it is enough for an employee to habitually conclude contracts from another country on the company's behalf.