Can you choose to pay tax twice under a double-taxation agreement?

Question

I'm finding myself in a very unusual situation where I want to opt to claim tax residency in both Portugal and the UK, while there is a double-taxation treaty in place.

I want to stay in the UK for another year (for family reasons), but I need to get a Portuguese tax residency to obtain an NHR (non-habitual residency). The latter scheme is expiring in the next few months.

If the two did not have a double-taxation treaty, I think this would be relatively straightforward and I could just pay taxes in both countries as one normally would. However, under the treaty, I would definitely qualify as a UK resident for the period under question.

What I would like to know is if a double-taxation treaty is a right or an obligation - i.e. can I opt to pay taxes in both countries even though I am not obligated to?

Answer 1

A double tax treaty is not a declaration that you are non-resident in one country or another.

Rather it is an agreement not to charge you tax twice, whatever your residence. Using it should not change your tax residency. You are still tax resident in both countries, you just don't pay tax twice.

Most countries have clear rules about whether you are tax resident or not. If being tax resident confers benefits then it is unlikely that you can just declare yourself tax resident. However you may be able to declare your intention of residing in Portugal long term. But claiming your double tax allowance should not make you non-resident.

Answer 2

You generally have to explicitly claim treaty benefits, so yes - you could just pay the full tax in both places.

You might want to confirm with a Portuguese and a British tax advisor for the specifics of this particular treaty, but I'd be surprised if they told you something else.