Double Taxation
Double Taxation
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Summary of Double Taxation
The condition that arises when a multinational firm is taxed on overseas income in both the source country and the country of the corporation's domicile. This problem arises because nations use varying systems of taxation. Recognizing that double taxation is inimical to trade, many nations have entered into tax treaties under which the signatory states eliminate or modify income taxes on each other's enterprises with the understanding that the income will be taxed in one country alone.
One method used in addressing foreign income is the tax credit method, in which the home country permits the firm to apply against its tax obligations on foreign earnings a credit for all or part of the taxes paid in the country where the income was earned
. In some cases, a nation permits a full tax credit, which is a dollar-for-dollar credit against what was paid abroad; in other instances, the home country permits an ordinary tax credit, which is equal to the tax the company would otherwise have paid had the income been earned in the home country. Under this process, the firm loses the difference between the taxes actually paid abroad and what it would have had to pay to its own government, presuming the foreign tax rate is higher
. In most cases, the United States employs the ordinary tax credit method.
Another solution is the exemption method, in which income taxed abroad is fully exempt from taxation in the home country (the/w// exemption method) or is omitted from home country taxation but is taken into account in determining gross income when progressive methods of taxation are employed (the exemption with progression method).
For provisions of specific U. S. tax treaties, click here.
(Main Author: William J. Miller)
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See Also
Including similar content viewed by others, in case you missed it:
International Trade
Trade Regulation
International Economic Law
Export License
International Trade Law
Foreign Trade
Safeguard
Tariff Policy
Hierarchical Display of Double taxation
Finance > Taxation > Fiscal policy
Finance > Taxation > Tax on income
Law > Rights and freedoms > Anti-discriminatory measure > Economic discrimination
Double taxation
Concept of Double taxation
See the dictionary definition of Double taxation.
Characteristics of Double taxation
Resources
Professional Content and Learning Tools
Lawi offers educational solutions and professional insight, integrating content, tools, and practical technology to promote lifelong learning, personal and professional improvement, and human progress through knowledge. Our collections feature resources and solutions from a wide range of subject areas, from management and finance to law and cybersecurity. This text is only a brief introduction. If you would like us to expand on this content, please let us know in the comments. If you’re finding our platform and newsletters valuable, share it with a colleague or friend, leave a comment and consider subscribing if you haven’t already (thanks!). There are group discounts, gift options, and referral bonuses available.
Translation of Double taxation
Spanish: Doble imposición
French: Double imposition
German: Doppelbesteuerung
Italian: Doppia imposizione
Portuguese: Dupla tributação
Polish: Podwójne opodatkowanie
Thesaurus of Double taxation
Finance > Taxation > Fiscal policy > Double taxation
Finance > Taxation > Tax on income > Double taxation
Law > Rights and freedoms > Anti-discriminatory measure > Economic discrimination > Double taxation
See Also
Including similar content viewed by others, in case you missed it: