Why a Double Taxation Agreement Could Save You from a Financial Disaster Abroad

When you’re planning to leave your home country for good, you obsess over the obvious things: the sunshine, the healthcare, the cost of living, maybe even the wine.
But there’s a quieter, deadlier factor lurking in the background—one that can make or break your financial future overseas.

It’s called the Double Taxation Agreement (DTA).
And if you underestimate it, you could find yourself paying tax twice on the same income—once to your old country and once to your new one.

In this article, I’m using Germany as the example because the rules there are particularly complex, unforgiving, and full of traps for the unwary. But don’t think you’re safe if you’re from elsewhere—many other countries have similar tax treaty systems, and the same principles can apply. Always check with a qualified international tax lawyer before you make a move.

I’ve been advising entrepreneurs, retirees, and high-net-worth individuals on international relocation for nearly two decades. I’ve seen the smiles turn to shock when people realise how much a DTA (or the lack of one) can change the numbers. And I’ve seen the disasters when people didn’t plan ahead.

The Mirage of Understanding

Let’s start with the problem:
When most people glance at a Double Taxation Agreement, their eyes glaze over. The text is dense, the language tangled.

If you’re not a tax lawyer or an international accountant, you’re likely to think: They all look the same, and I can’t understand a word—so why bother?

Even worse, many domestic accountants don’t truly understand them either.
Reading a DTA isn’t part of most accountants’ day-to-day training.
And applying them in real-life, messy, cross-border situations? That’s another skill entirely.

But ignoring them is a mistake. Because the real-life consequences of whether you have DTA protection—or not—can be worth hundreds of thousands, even millions, over the years.

When a DTA Saves You: Real-World Scenarios

Let’s get practical. There are situations where a DTA is pure gold.

Example 1: Cyprus and Malta
Both have DTAs with Germany (and many other countries like the UK, Canada, and Australia).
If you live in one of these countries and set up a company there, the DTA acts as a protective shield. It clearly allocates taxing rights between the two countries, so you don’t get whiplashed by two tax authorities claiming the same slice of your pie.

Example 2: UK and Portugal
A Brit moving to Portugal under the Non-Habitual Resident regime benefits from the UK–Portugal DTA, which often allows certain UK pensions to be taxed at a much lower flat rate in Portugal—or sometimes not at all—depending on the pension type.

Example 3: US and Canada
A Canadian retiree in Florida gets protection from the US–Canada tax treaty so they aren’t double-taxed on CPP (Canada Pension Plan) or RRSP withdrawals. The treaty decides which country gets the first taxing right and how credits are applied.

Without a DTA, that protection is gone. And you may be at the mercy of both tax systems at once.

When There’s No DTA: Trouble Ahead

Now, here’s where the landmines lie.

No DTA means no automatic protection.

Common danger zones for Germans (and equivalents for other nationalities):

• Dubai – no DTA with Germany. For a Brit, that’s like moving somewhere with no treaty with the UK—suddenly your home country may still want a piece of your income.

• The U.S. LLC trap for digital nomads – without a DTA, Germany can still tax you even if your company is abroad; the same applies to other countries with aggressive worldwide tax rules.

• Spain under the Beckham Law – the normal DTA gets suspended in certain cases.

• Switzerland under lump-sum taxation – again, the DTA is neutralised for income tax purposes.

The Pensioner’s Wake-Up Call

Let me give you an example that shocks people at my seminars.

Imagine a pensioner with two pensions:

• A small statutory pension.

• A very large company pension from decades as an executive—let’s say several hundred thousand euros a year.

If he moves from Germany to Dubai, both pensions remain taxable in Germany.

If he moves to Greece, which has a DTA, both pensions are taxed at a flat 7% in Greece—massive savings.

If he moves to Italy, the statutory pension is still taxed in Germany, but the company pension is taxed in Italy—again, potentially at just 7%.

For a Brit in the same position, moving to Greece also means that UK state pensions and many company pensions can be taxed exclusively in Greece under the UK–Greece treaty—again slashing the tax bill.

For an American, the US–Greece treaty can prevent certain retirement distributions from being double-taxed, depending on the structure.

The difference? The DTA decides which country gets to tax what. And for a high pension, that difference is life-changing.

Crypto and Capital Gains: The Silent Trap

Pensions aren’t the only thing at stake. Let’s talk crypto.

If you leave Germany for Dubai and sell your cryptocurrency without holding for the one-year tax-free period, Germany can still tax the gains for up to 10 years after you leave.

Move to Switzerland instead, and—if you choose your canton carefully—the DTA can kick in. Germany loses its taxing rights, and in Switzerland, under certain conditions, those same capital gains could be entirely tax-free, no matter the holding period.

The same effect can happen elsewhere:

• A Canadian moving to Singapore benefits from their treaty if capital gains are reclassified under Singaporean rules.

• A Brit selling shares after moving to Portugal can, under the UK–Portugal treaty, often avoid UK capital gains tax entirely.

Working Abroad… While Still Working in Your Old Country

Here’s another one people trip over: working physically in your old country after moving abroad.

Suppose you’re a cosmetic surgeon. You move to Dubai, but you fly back regularly to perform operations in Germany. Without a DTA, Germany withholds tax at source on your fees—sometimes even if you’re only in the country for a single day.

Move to Malta instead, set yourself up as an employee of your Maltese company, and those trips to operate in Germany may not trigger German withholding tax at all—because the DTA says the income belongs to Malta.

The same happens worldwide:

• An Australian consultant in New Zealand relies on the Australia–New Zealand treaty to avoid tax on short-term work trips.

• A US engineer contracted in the UK uses the US–UK treaty to prevent UK PAYE withholding for stays under the treaty threshold.

Why People Ignore This—and Why That’s Dangerous

Many people brush this off because they think:
“No one will find out if I work a bit while visiting home.”

Wrong.
Tax authorities find out in more ways than you think.

• A client in your home country receives an invoice from your foreign company.

• During an audit, the tax office asks them about the work.

• They mention the meetings you had back home.

• Now the tax office knows you were performing work on home soil.

Or you move back after a few years, and suddenly the tax office wants to know exactly how much time you spent there, and what you were doing.

If your home country has no DTA with your new one, these questions can get very expensive.

Digital Nomads: The Perfect Storm

If you’re a digital nomad, you’re in the highest-risk category.

Without a tax treaty, your freelance income or salary can become taxable in the old country just because you did some work there. And if you’re German, you may also face the dreaded erweiterte beschränkte Steuerpflicht—extended limited tax liability—that pulls certain income back into the German net even after you’ve left.

Other countries have similar reach:

• The US taxes citizens no matter where they live, but treaties can still prevent double taxation.

• Australia has rules that can tax residents on worldwide income even after departure, unless treaty protection applies.

Why a DTA Is Almost Always a Positive

Some people think a DTA is bad because it involves information sharing.
That’s a myth.
The core function of a DTA is to avoid double taxation and clarify taxing rights—not to feed extra data to your home country.

If you can choose between a country with a DTA and one without, all else being equal, choose the DTA country.

This doesn’t mean moving to Dubai or another no-DTA jurisdiction is impossible. It just means the planning is harder, the traps more numerous, and the margin for error slimmer.

The Hybrid Strategy: Two Residences

Here’s one of my favourite structures for clients who want both worlds:

• Main residence in a DTA country like Malta or Cyprus.

• Frequent stays in a non-DTA country like Dubai for lifestyle or business reasons.

If your DTA country company is the one doing the work in your old country (and not your Dubai company), you keep the treaty protection.

Yes, it’s more work, and yes, it costs more to maintain two residences. But for the right person, it’s a clean, bulletproof way to enjoy the lifestyle of a tax haven while keeping the legal protection of a treaty.

Planning Beats Regret

I’ve seen too many cases where people uprooted their lives, moved to a “tax-free” paradise, and then watched their old country’s tax office claw back half their income because of one thing: no treaty protection.

The cost of fixing that mistake—if it’s even possible—makes the cost of proper planning look like pocket change.

If you’re an entrepreneur, a professional, an investor, or a retiree with significant income still tied to your old country, the DTA question is not optional.

Let’s Talk About Your Situation

If any of this is making you uneasy—if you’ve been lying awake wondering whether your move abroad will actually save you money—then it’s time to talk.

For almost 20 years, my team and I have been helping clients:

• Move abroad legally and tax-efficiently.

• Escape hidden tax traps that destroy relocation plans.

• Build and protect wealth overseas.

Don’t gamble your financial future on guesswork.

Book a consultation and let’s make sure your move isn’t just a dream—it’s a secure, profitable reality.