Legal encyclopedia. Letter D

DOUBLE TAXATION

- taxation in which the same income is taxed in two or more countries.

As a result of the application of various taxation systems by countries, a situation arises whereby the company's income is taxed both in the source country of income and at the location of the company's legal address.

DN impedes the development of international trade, therefore, states take measures to mitigate or eliminate it. Income obtained in different countries by a company, a person engaged in commercial activities, is usually levied in the country of his permanent residence. In addition, their income may be taxed in other countries in which it engages in ongoing commercial activities.

Many states parties to tax treaties, recognizing that DN does not contribute to the development of trade, determine

A reciprocal procedure for collecting income taxes from resident companies, including in contracts the condition under which the company's revenues are taxed only in one country. Mitigation or elimination is achieved by:

1) by signing bilateral treaties between countries on D.N .;

2) one-sided elimination or mitigation of DN by one country.

Liberation from DN is achieved by the following basic methods:

1) by including, in one country, in the taxable income of a person engaged in commercial activities, income minus taxes paid by him in the other party;

2) agreement between the countries that only one of them taxes the income;

3) the DN credit system, which allows one country to be opened for levied.

It is a tax credit in another country for the tax paid in that country.