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.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.
References in periodicals archive ?
The Philippines currently has existing double taxation agreements with several countries, including the United States, Switzerland, the United Kingdom and Northern Ireland, United Arab Emirates, Thailand, Australia and Germany.
The Revenue Division is responsible for tax policy, tax administration, avoidance of double taxation agreements with other countries, legal proceedings and litigation in tax matters and administration of Customs and Excise Group and Income Tax Group, according to the Rules of Business of 1973.
The investment and avoidance of double taxation agreements were signed by Obaid bin Humaid Al Tayer, UAE Minister of State for Financial Affairs, and Salvatore Garang Mabiordit, Finance Minister of South Sudan.
The UAE is ranked second worldwide and first in the Arab world in terms of the number of avoidance of double taxation agreements. The number of agreements concluded between 1989 and 2018 reached 210, including 123 agreements to avoid double taxation, as well as 87 agreements to regulate and encourage investment, highlighting the country's efforts in spreading knowledge related to double taxation issues in the region and worldwide.
figure By PATRICK ALUSHULA East Africa Tax and Governance Network says double taxation agreements (DTAs) between Kenya and other countries come with little disclosure and may be exposing the country to tax leakages.The organisation specialising in taxation, governance, public policy and research says the economy may not benefit unless the government comes up with strict transfer pricing rules and make public the details of all DTAs.
Our network of Double Taxation Agreements, for example, supports our ongoing work on tackling financial crime by engaging openly with other jurisdictions about tax matters.
Under this agreement, the Centre will provide tax information to MoF in line with the bilateral agreements signed by the UAE with other countries with respect to the avoidance of double taxation agreements, and the Model Tax Convention on the Transparency and Exchange of Information.
According to the tax department, the agreement with Vietnam brings the total number of double taxation agreements signed by the Kingdom to five, including deals with Singapore, China, Brunei and Thailand.
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 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.
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.