Double taxation refers to the duplicative imposition of equivalent taxes by two or more jurisdictions on the same declared income or asset transfers.
Sources of Double Taxation:
- Corporate income faces business taxes and shareholders’ personal levies on dividends.
- International activities experience residence and source country filings without treaties.
Mitigation Strategies:
- Tax credit methods offset one country’s taxes using proof of payment to the other.
- Exemption systems allow ignoring remote taxes when declaring locally to avoid excess burden.
Example Scenario:
By strategizing, the FDI venture avoided double taxes on its lucrative cross-border sales through bilateral tax information exchange agreements between investment and consumer markets.
Key Takeaway:
Preventing double taxation promotes equity, compliance and global deals by stimulating commerce between high-tax entities through coordination treaties.