What is the hypothetical tax on my payslip and where does it go?
Nowhere. It is not remitted to any authority and will not appear on any assessment. It is an internal deduction your employer makes, standing in for the home-country tax you would have paid had you not gone on assignment. The employer then pays the real home and host tax on the assignment income. So the line reduces what reaches your account, exactly as a tax would, but the money stays with your employer to fund the actual liabilities as they fall due.
How is hypothetical tax calculated and can I check it?
It is built like a home-country return that never gets filed: your assignment-period compensation, adjusted for whatever the policy puts in scope, run through home-country rates and the reliefs you would have been entitled to, with your filing status and dependants taken into account. You can check it, and what you should ask for is the assumptions rather than the result. Most disputes come from scope — which allowances were included, whether personal income was assumed — and not from the arithmetic.
Why is my hypothetical tax different from a colleague's on the same salary?
Because it is modelled on your home-country position, not on the job. Filing status, dependants, a spouse's income where the home system takes account of it, home-country reliefs and the region you left can each move the figure while the salary stays identical. That is the calculation working as intended: it asks what you would have paid, and two people on the same pay rarely pay the same tax at home. Ask for both sets of assumptions if you want to see why.
Does hypothetical tax change when the assignment ends mid-year?
Yes, and the part-year is where errors concentrate. The deduction should cover the assignment period only, on the compensation attributable to it, with pay before and after treated under normal payroll. Where the switch date is not agreed, the same weeks get charged twice or not at all, and the year-end settlement inherits the error. Fix the date, then fix the compensation elements that straddle it — bonus, equity, allowances — before the final period is run.
Will I get the hypothetical tax back at the end of the year?
Not as a refund, but it is trued up. At settlement the employer compares what it deducted from you against what the policy says you should have borne for the year, once both countries' real liabilities are known. If it over-deducted you are paid the difference; if it under-deducted you owe it. So the deduction is provisional in the way ordinary withholding is provisional, except that it settles with your employer rather than with a tax authority.
Does hypothetical tax appear anywhere on my tax return?
No. Your return reports the compensation you received and the tax actually paid to that country, and neither figure is the hypothetical deduction. This confuses anyone reconciling a pay record to an assessment, because the pay record has been reduced by a charge no authority has recorded. Keep the employer's settlement statement alongside the two returns. That statement is the only document which connects the deduction on the pay record to the tax actually paid in each country.
How does the treaty tie-breaker work when both countries say I am resident?
As a sequence, stopping at the first test that gives an answer: where you have a permanent home available; if in both or neither, where your centre of vital interests is; then habitual abode; then nationality; and if all of those tie, the two tax authorities decide by agreement. It is evidential rather than elective — you do not choose your treaty residence, you demonstrate it, which makes the record of homes, family and time the substance of the claim. See tie-breaking dual residency.
What is double tax relief and how is it given?
Three mechanisms, and which one you get depends on your residence country's law and the treaty. Exemption leaves the foreign income out of the residence-country base. Credit taxes it and then subtracts the foreign tax, capped at the residence-country tax on that income. Deduction merely reduces taxable income by the foreign tax, and is usually the weakest. Canada and the United States lead with credit; several treaties give exemption for specific income types. See claiming the credit.
