Double Taxation Agreements

Double Taxation Agreements

The requirement that an entity or individual pay two separate taxes on the same property for the same purpose and during the same time period. Under Subchapter C of the Internal Revenue Code, the federal government imposes double taxation on corporations by taxing both the profits received by the corporation and the earnings distributed to shareholders of the corporation through stock dividends.

Double taxation occurs when the same transaction or income source is subject to two or more taxing authorities. This can occur within a single country, when independent governmental units have the power to tax a single transaction or source of income, or may result when different sovereign states impose separate taxes, in which case it is called international double taxation. The source of the double taxation problem is that the taxing jurisdictions do not follow a common principle of taxation. One taxing jurisdiction might tax income at its source, while others will tax income based on the residence or nationality of the recipient. Indeed, a jurisdiction might use all three of these basic approaches in imposing taxes.

The consequence of double taxation is to tax certain activities at a higher rate than similar activity that is located solely within a taxing jurisdiction. This leads to unnecessary relocation of economic activity in order to lower the incidence of taxation, or other, more objectionable forms of tax avoidance. Businesses especially have had the most trouble with double taxation, but individuals also might find it uneconomic to work abroad if all of their income is subject to taxation by two authorities, regardless of the origin of the income.

The problems that double taxation presents have long been recognized, and with the growing Integration of domestic economies into a world economy, countries have undertaken several measures to reduce the problem of double taxation. An individual country can offer tax credits for foreign taxes paid, or outright exemptions from taxation of foreign-source income.

Treaties have also been negotiated between states to address the double taxation problem. One of the most important of these agreements was the International Tax Convention, which the United States and the United Kingdom concluded in 1946. It has served as a model for several other tax conventions. Under the tax convention between the United States and the United Kingdom, for example, exemptions from taxes, credits for taxes paid, and reduction or equalization of overall tax rates are all utilized to reduce double taxation. Within the United States, many states have worked to prevent the incidence of taxation from reaching uneconomic levels on income that derives from multistate sources.

References in periodicals archive ?
The AFT members are also expected to assess the training conducted by Kookmin Institute of South Korea, and discuss the progress on the completion of double taxation agreements among member-economies.
The HKSAR Government will also continue to actively seek to enter into free trade agreements, investment promotion and protection agreements and comprehensive avoidance of double taxation agreements with other economies to further strengthen Hong Kong's ties with other places.
The survey, Russia Doing Business in Cyprus 2017 -- Measuring Quality and Efficiency, said 83 per cent of interviewed Russian enterprises "commended Cyprus for the friendly tax regime and stability of its tax laws, the wide range of double taxation agreements with other countries, its membership to the European Union, and the exceptional professional and legal services offered in the country".
One of these benefits is that tax payers can utilise Double Taxation Agreements to place themselves under Cyprus' generous tax regime.
HE said: "The double taxation agreements are important for the UAE, allowing national air carriers to be exempt from taxes and government investments from origin-based taxes.
The convention will allow for the prevention of double taxation agreements that exist between the signatory states, in a step where all the amendments enter into force at the same time, which previously used to take decades of negotiations.
The country already has effective double taxation agreements (DTAs) with Indonesia, Malaysia, Singapore, Thailand and Vietnam, BIR Assistant Commissioner Marissa O.
On demand of OCED forum through Finance Bill 2016-17, We seek to substitute sub- section (1) of Section 107 to provide for more instruments and arrangements of international taxation and avoidance of double taxation agreements and to make technical corrections, the minister said in the National Assembly Committee of Finance here in Parliament house.
The two sides stressed the importance of providing the right environment to encourage mutual investment and intra-trade by speeding up the signing of double taxation agreements and the promotion of investment protection between the two countries.
He said the effort to update, maintain and expand the network of double taxation agreements was one of the most important pylons in the government`s policy.
The investor can take advantage of the living facilities in Cyprus, such as obtaining citizenship for those who intend to own property worth a total of 300,000 euro, as well as the possibility of acquiring Cypriot citizenship for investors in state-owned companies or direct investment of five million euro, and the exemption of VAT of most international transactions and double taxation agreements signed with over 50 countries around the world.
The UAE has signed a number of agreements with its strategic partners around the world which have led the UAE to become a leader in the area of double taxation agreements, ranking 24th globally.