Tax
Double Taxation
Also known as: Double Tax, Juridical Double Taxation
Double taxation has two distinct meanings in tax law:
• Juridical double taxation — the same income taxed twice in the hands of the same taxpayer by two different jurisdictions. This is what tax treaties and unilateral relief tools (FEIE, FTC) target. Example: a US citizen working in Germany earning €100,000 — Germany taxes the income at residence rates, the US claims worldwide-taxation on its citizen, and without relief the same income would be taxed twice.
• Economic double taxation — the same income taxed in the hands of two different taxpayers. Example: corporate profits taxed at the company level (corporate income tax), then taxed again when distributed as dividends to shareholders. This is harder to relieve and sits beneath the integration debates in domestic tax policy.
For expats, juridical double taxation is the immediate concern. The US, UK, Germany, France, Spain, Portugal, Italy, and other major countries all tax their tax residents on worldwide income. The relief mechanisms are:
1. Tax-treaty allocation. The treaty either gives one country exclusive taxing rights or allows both countries to tax with a primary/secondary order. Pension income, capital gains on shares, royalties, and dividends are common allocation subjects.
2. Foreign tax credit (FTC). The residence country credits the foreign tax paid against its own tax on the same income. US, UK, Canada, Australia, and most major countries operate this method.
3. Exemption method. The residence country exempts foreign income from its own tax base. Used by Germany, France, Belgium, Netherlands, and others for certain income types and treaty partners. Often provides cleaner outcomes than FTC where source-country rates are low.
4. Foreign earned income exclusion (FEIE, US only). A specific dollar-amount exclusion for earned income — fundamentally an income-exclusion variant of the exemption method.
Unrelieved double taxation can still occur when: (a) the two countries have no tax treaty (e.g., US-Brazil, US-Singapore for individuals), (b) a treaty exists but the income type isn't covered, (c) FTC limitations cap the credit below the foreign tax paid, (d) timing differences between the two countries' fiscal years cause credit-bunching issues. Competent-authority procedures exist for the worst cases but take years to resolve.
Sources
- OECD — Eliminating Double Taxation (Articles 23A and 23B)
- IRS Publication 514 — Foreign Tax Credit for Individuals
Last factual review: 2026-05-08.
Related terms
Tax Treaty
A tax treaty is a bilateral agreement between two countries that allocates taxing rights over cross-border income, prevents double taxation, and provides mechanisms to resolve disputes. Treaties typically follow the OECD or UN Model Convention. The US has tax treaties with about 70 countries; the UK with about 130. Treaty benefits often require formal claim on a tax return (e.g., IRS Form 8833 for treaty-based positions on a US return).
Foreign Tax Credit (FTC)
The Foreign Tax Credit lets US citizens and resident aliens reduce their US tax liability dollar-for-dollar by income taxes already paid to foreign governments on the same income. Claimed on IRS Form 1116, it prevents double taxation on income above the FEIE ceiling and on passive income that FEIE doesn't cover. The credit is per-category, capped at the US tax otherwise due on the foreign-source income, with 10-year carryforward and 1-year carryback for unused credits.
FEIE (Foreign Earned Income Exclusion)
FEIE lets US citizens and resident aliens exclude up to $132,900 (2026) of foreign-earned income from US federal income tax — but not from Social Security/self-employment tax. To qualify, the taxpayer must meet either the Bona Fide Residence Test (full-year tax residence in a foreign country) or the Physical Presence Test (330 full days abroad in any 12-month period). Claimed on IRS Form 2555 attached to Form 1040.
Tax Residency
Tax residency determines which country has primary right to tax your worldwide income. Each country sets its own tests — typically based on physical presence (often 183+ days/year), domicile, primary economic interests, or family ties. Holding a residence permit does not automatically establish tax residency, and tax residency does not require a residence permit. Dual tax residency is resolved by tax-treaty tie-breaker rules.
Deeper guides
UK Pension Abroad: Frozen Pensions, State Pension, and Tax Rules for British Expats
Complete guide to taking your UK pension abroad. Frozen pension countries, State Pension uprating rules, QROPS transfers, double taxation agreements for Spain/Portugal/France/Thailand, and the S1 healthcare trick.
Digital Nomad Tax Guide 2026: FEIE, FTC, and Country-Specific Strategies
Double taxation, tax treaties, FEIE, Foreign Tax Credits, and country-specific tax regimes — the complete 2026 tax guide for digital nomads.
The Slowmad Tax Trap: How Splitting Time Between Countries Creates Tax Nightmares
The 183-day rule is not universal. France's permanent home test, Germany's habitual abode, Portugal's rolling 12-month period, and the US weighted formula can all trigger tax residency with fewer days than you think. Safe patterns vs risky patterns, the Estonia-Georgia structure, and why a $3K-5K/year tax advisor is cheaper than $10K-50K+ in back taxes.