Double Taxation
EXECUTIVE SUMMARY:
Double taxation occurs when a taxpayer is taxed twice for the same asset or income. This happens when taxing jurisdictions overlap and a transaction, asset, or income amount is subject to taxation in both jurisdictions. When an individual must deal with double taxation, he or she may lose a significant portion of income. In some cases, this may cause the double-taxed individual to experience a lowered standard of living. Corporations deal with double taxation too, as a corporation pays taxes on its earnings only to have its shareholders taxed once more. Double tax treaties comprise of agreements between two countries, which, by eliminating international double taxation, promote exchange of goods, persons, services and investment of capital. These are bilateral economic agreements where the countries concerned evaluate the sacrifices and advantages which the treaty brings for each contracting state, including tax forgone and compensating economic advantages.
Double Tax Avoidance Agreements & Taxation
Meaning of Treaty:
In layman’s language, a treaty is a formally concluded agreement between two or more independent nations. The Oxford Companion to Law defines a treaty as “an international agreement, normally in written form, passing under various titles (treaty, convention, protocol, covenant, charter, pact, statute, act, declaration, concordat, exchange of notes, agreed minute, memorandum of agreement) concluded between two or more states, on subject of international law intended to create rights and obligations between them and governed by international law. Examples of treaty include CTBT, Vienna Convention, and Tax Treaty such as DTAA etc.
The Double Tax Avoidance Agreement (DTAA)
The Double Tax Avoidance Agreement (DTAA) is essentially a bilateral agreement entered into between two countries. The basic objective is to promote and foster economic trade and investment between two Countries by avoiding double taxation.
Double taxation occurs when a taxpayer is taxed twice for the same asset or income. This happens when taxing jurisdictions overlap and a transaction, asset, or income amount is subject to taxation in both jurisdictions. When an individual must deal with double taxation, he or she may lose a significant portion of income. In some cases, this may cause the double-taxed individual to experience a lowered standard of living. Corporations deal with double taxation too, as a corporation pays taxes on its earnings only to have its shareholders taxed once more. Double tax treaties comprise of agreements between two countries, which, by eliminating international double taxation, promote exchange of goods, persons, services and investment of capital. These are bilateral economic agreements where the countries concerned evaluate the sacrifices and advantages which the treaty brings for each contracting state, including tax forgone and compensating economic advantages.
Double Tax Avoidance Agreements & Taxation
Meaning of Treaty:
In layman’s language, a treaty is a formally concluded agreement between two or more independent nations. The Oxford Companion to Law defines a treaty as “an international agreement, normally in written form, passing under various titles (treaty, convention, protocol, covenant, charter, pact, statute, act, declaration, concordat, exchange of notes, agreed minute, memorandum of agreement) concluded between two or more states, on subject of international law intended to create rights and obligations between them and governed by international law. Examples of treaty include CTBT, Vienna Convention, and Tax Treaty such as DTAA etc.
The Double Tax Avoidance Agreement (DTAA)
The Double Tax Avoidance Agreement (DTAA) is essentially a bilateral agreement entered into between two countries. The basic objective is to promote and foster economic trade and investment between two Countries by avoiding double taxation.