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# Double Taxation Relief
- URL: https://university.heavnn.io/glossary/double-taxation-relief/
- Published: 2026-10-13T13:30:00.000Z
- Updated: 2026-10-13T13:29:59.000Z
- Description: Double Taxation Relief refers to treaty and domestic tax mechanisms, mainly credits and exemptions, under which a country reduces tax on income already taxed abroad.
- Author: Heavnn
- Tags: #glossary, #Import 2026-10-11 07:56

## What Is Double Taxation Relief?

Double Taxation Relief refers to treaty and domestic tax mechanisms, mainly credits and exemptions, under which a country reduces tax on income already taxed abroad.

*Also known as: Foreign Tax Credit Relief, Relief from Double Taxation.*

## How Double Taxation Relief works

Double Taxation Relief applies when income taxed in a source country is also taxable in the country of residence, and the residence country, under a treaty or its own domestic law, either credits the foreign tax against domestic tax, exempts the foreign income, or allows the foreign tax as a deduction. In the United Kingdom, Foreign Tax Credit Relief is usually claimed on the tax return, depends on any double-taxation agreement with the source country, and is generally available even without one unless the foreign tax does not correspond to UK Income Tax or Capital Gains Tax. United States taxpayers may choose a foreign tax credit, claimed by individuals on Form 1116, or an itemised deduction for qualifying foreign income taxes. Relief is frequently capped at the domestic tax on the same income, and tax withheld abroad above a treaty rate generally has to be reclaimed from the source country rather than credited.

## Double Taxation Relief vs Unilateral Relief

Unlike Unilateral Relief, granted under domestic law without any treaty, Double Taxation Relief also covers treaty-based relief such as reduced source-country rates.

## Example

Illustrative example: A writer resident in Country A receives royalties from Country B, which withholds tax above the treaty cap. The writer reclaims the excess from Country B, then reports the royalties in Country A, which credits the remaining Country B tax up to the Country A tax on the royalties.

## Common misconception

**Myth:** A foreign tax credit always offsets the full amount of tax paid abroad.

**Reality:** Double Taxation Relief by credit is generally capped at the residence country's tax on the same income, subject to local rules.

## Frequently asked questions

### What is double taxation relief?

Double Taxation Relief is the set of credit, exemption and deduction mechanisms under treaties or domestic law which reduce residence-country tax on income already taxed abroad.

### How is double taxation relief claimed?

Double Taxation Relief is generally claimed on the residence country's tax return, such as UK Foreign Tax Credit Relief or the US foreign tax credit on Form 1116.

## Related terms

- [Unilateral Relief](https://university.heavnn.io/glossary/unilateral-relief/) — Domestic relief granted without a treaty
- [Foreign Tax Credit (FTC)](https://university.heavnn.io/glossary/foreign-tax-credit/) — Most common credit-method relief
- [Double Taxation](https://university.heavnn.io/glossary/double-taxation/) — Problem which the relief addresses
- [Tax Sparing](https://university.heavnn.io/glossary/tax-sparing/) — Treaty credit for taxes waived by incentives
- [Double Tax Treaty (DTT)](https://university.heavnn.io/glossary/double-tax-treaty/) — Source of treaty-based relief obligations

## Related guides

- [Tax treaties and international taxation](https://university.heavnn.io/tax-treaties-international-taxation/) — Treaty relief methods in context
- [Digital nomad tax setups guide](https://university.heavnn.io/digital-nomad-tax-setups-guide/) — Relief issues in cross-border nomad setups

## Sources

- [gov.uk: Tax on foreign income, if you're taxed twice](https://www.gov.uk/tax-foreign-income/taxed-twice?ref=university.heavnn.io)
- [IRS: Foreign tax credit](https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit?ref=university.heavnn.io)

*Last verified: 2026-10-08\. This entry is general information, not tax or legal advice; rules vary by country and change over time.*