Double tax treaties: who taxes what, and when one helps you

Two countries usually both have a claim. The residence country taxes its residents on worldwide income; the source country taxes income that arises there, often by withholding a slice before it leaves. Without a treaty both can take their full share. A treaty, almost always built on the OECD Model Tax Convention, does three things:

Treaties do not lower the tax of either country below what its own law says. They cannot create a tax a country does not have. A treaty with a 0% country simply means that country's side stays at 0%.

Everything starts with who is resident. Under Article 4 a resident is someone liable to tax in a country "by reason of his domicile, residence, place of management" or similar, and not someone taxed there only on local income. When both countries call you resident, the tie breaker picks one, test by test. Try it: answer for your own situation.

Order of the tests from Article 4(2) of the OECD Model 2017. If all four fail, the two tax authorities settle it by mutual agreement. Individual treaties can differ; read the one between your two countries.

For companies, the rule changed in 2017

A company claimed by two countries used to be resident where its place of effective management was. The 2017 Model replaced that with a negotiation: the tax authorities "shall endeavour to determine by mutual agreement" its residence, looking at where it is managed, where it is incorporated and other factors, and without agreement the company gets no treaty relief except as they agree (Article 4(3)). The MLI brings the same rule into older treaties unless a country opted out. Cyprus shows why this matters: from 2026 every Cyprus-incorporated company is resident there "unless a double tax treaty provides otherwise", so a Cyprus company run from a treaty partner can lose its Cyprus residence to that partner. Our Cyprus tax guide walks through it.

A company resident in one treaty country pays tax on its business profit in the other only if it has a permanent establishment there (Article 5). That is:

For a founder, the trap is the third box, and the first. If you live in Germany and sign every contract of your offshore company from your home office, the question is not only which treaty applies. Your home office may be its place of management or a permanent establishment, and German tax follows the profit. Our CFC rules guide sets that next to the separate CFC charge.

The OECD Model sets the caps that most treaties start from. Real treaties vary, so the treaty between your two countries is what counts:

What a company withholds on a dividend to a foreign owner, before any treaty

This is where treaties earn their keep, or don't. If the company's country already withholds nothing, there is nothing to reduce:

Domestic rates on dividends paid to non-residents: Swiss VStG; published tax summaries for the US, Germany, France, Bulgaria and the others; our country tax guides. Panama withholds 5%, 10% or 20% depending on the case; Seychelles, Nevis and Belize only on local-source payments.

Say you live in Germany and own shares in a Swiss company

The places Heirson forms companies in split into three groups. The count is comprehensive income tax treaties, from each tax authority's own list where we could read it. Exchange-of-information agreements are not treaties and are left out.

Counts: UAE MoF (10 November 2026); gov.uk ("around 120"); Swiss EFD ("over 100"); Malta OECD profile (79 in force, 2025); Malaysia, Cyprus, Estonia from published tax summaries; Bulgaria about 70; Georgia mof.ge; Hong Kong IRD (our count, 29 October 2026); Bahrain NBR; Mauritius MRA; Seychelles SRC; St Kitts and Nevis IRD; Panama from a published tax summary; Jersey, Guernsey and Isle of Man government lists (our count); Belize OECD MLI notification; Bermuda OECD profile; Curaçao from a published tax summary; Gibraltar gov.uk.

Where do you live? pick it

Treaty count, the withholding a company there takes on payments to non-residents, the MLI status and whether a company can get the residence certificate that unlocks it all. Filter to the group you need.

Rewriting thousands of bilateral treaties one by one would take decades, so the OECD wrote one treaty that amends them all: the Multilateral Instrument. On the OECD's list of 12 November 2026, 107 jurisdictions appear, 93 of them have ratified and 14 have only signed (MLI signatories and parties; our count). The United States, Bermuda, the BVI, Cayman, the Bahamas, Saint Kitts and Nevis, the Marshall Islands and Gibraltar are not on it.

Its core is the minimum standard against treaty shopping from BEPS Action 6. Most countries met it with the principal purpose test. A benefit is denied if it is "reasonable to conclude" that getting it "was one of the principal purposes" of an arrangement, unless granting it fits the object and purpose of the treaty (MLI Article 7(1), OECD Model Article 29(9)). Covered treaties also gain a preamble saying they are not meant to create non-taxation through avoidance.

Every treaty claim starts with a certificate of residence from the company's country, telling the other country this company is ours for tax. It looks roughly like this:

The certificate is exactly what many offshore companies cannot get. The usual cases:

None of this is a reason to avoid a 0% company. It is a reason to know what it is for. A Cayman or BVI company is a neutral holding vehicle; a company in a treaty country is the tool when money has to come out of high-withholding countries. Our tax haven list sets rates and lists side by side, and the EU tax blacklist record shows which places partners penalise.