Form DT-Individual: For Non-Residential Investors to Avoid Double Taxation

Where an individual resident in one country has income from other sources, they may be subject to taxes in both countries. To prevent this double taxation, the UK has signed double taxation agreements with various countries. Additionally, these agreements specify the countries in which certain income are taxed. For example, the double taxation agreement between the UK and Italy clarifies that a person’s pension income is taxed only in the country in which they are resident.

But what if the pension has already been taxed at the source in the UK? Can Italian residents apply for relief at the source and reclaim any overpaid taxes? The short answer is yes. To learn how to make this claim, read the full article.

What is the DT-Individual Form?

The DT-Individual Form enables individuals to claim relief at source on income generated in the UK. Additionally, the form can be used to claim the repayment of UK tax where payments of income have been made with taxes already deducted. Once accepted, the individual will no longer be taxed in the UK on that income until they become a UK tax resident. Additionally, any UK tax overpaid four years prior to the form submission will be repaid to the applicants. The repayable amount is discussed in the latter part of the article.

The form is applicable to residents of countries with which the UK has a double taxation agreement. Therefore, residents of countries that do not have a DTA with the UK, such as Nepal, do not benefit from this relief claim. However, the residents of countries with which the UK has DTA signed will continue benefitting from the relief at source and repayment claim. The following section explains the procedure to make the claim.

Making the Relief Claim - Procedure

The first step in claiming relief at the source or claiming the overpaid tax is to complete the DT-Individual Form. The form includes sections to enter the personal details and details of the residency status of the individual making the claim.

Where to send the DT-Individual Form?

Once the form is filled out, applicants should submit it to the local tax office in the country where they are residents. The local tax office will validate the applicant’s residency status and either forward the form to HMRC or return it to the applicant for submission. In latter cases, the validated form must be sent to HMRC at the following address:

How is the Amount Repayable Calculated?

As previously mentioned, the applicants making the relief claim can either calculate the amount repayable themselves or request the HMRC to do so. Individuals who choose to calculate the repayable amount can do so by deducting the UK tax taken off, with the maximum amount that should have been deducted from the UK.

The maximum amount is different for each income and each country. These can be found in the HMRC DT digest.

Where the DT digest shows ‘full relief’, the total amount of UK tax taken off is repayable. In other cases, the figure determined after the deduction is the amount repayable. The maximum rates and the countries in which the income is taxed may differ in each case. Therefore, caution must be applied when making the claim.

Conclusion

Claiming relief at the source on UK income through the DT-Individual Form is a crucial step for residents of countries with double taxation agreements with the UK. By carefully following the procedure and ensuring accurate information, individuals can avoid double taxation and reclaim any overpaid taxes. Understanding the specific tax treaties and the relevant income sources is essential for successfully navigating this process. With proper attention to detail, taxpayers can efficiently manage their international tax obligations and maximise their financial benefits.