Cinémathèque de Tanger

What Is Meant by Double Tax Treaties

Many countries have tax treaties (also known as double taxation treaties or DTAs) with other countries to avoid or mitigate double taxation. These contracts can cover a range of taxes, including income taxes, inheritance taxes, value-added taxes or other taxes. [1] In addition to bilateral treaties, there are also multilateral treaties. For example, European Union (EU) countries are parties to a multilateral VAT agreement under the auspices of the EU, while a joint mutual assistance treaty between the Council of Europe and the Organisation for Economic Co-operation and Development (OECD) is open to all countries. Tax treaties tend to reduce the taxes of one contracting country for residents of the other contracting country in order to reduce the double taxation of the same income. The United States has tax treaties with several countries that help reduce or eliminate taxes paid by residents of other countries. These reduced rates and tax exemptions vary by country and by specific income items. Under the same conventions, U.S. residents or citizens are taxed at a reduced rate or are exempt from foreign taxes on certain items of income they receive from foreign sources. Tax treaties are considered reciprocal because they apply in both contracting countries. Proponents of double taxation point out that without a dividend tax, wealthy individuals may well live off the dividends they receive by owning large amounts of common shares, but essentially do not pay tax on their personal income. In other words, ownership of shares could become a tax haven. Proponents of dividend taxation also point out that dividend payments are voluntary shares of corporations and that companies as such are not required to “double” their income unless they choose to distribute dividends to shareholders.

For the purposes of this Article, we consider a natural person to be a tax resident of the United Kingdom and another country, although double taxation treaties may exist between two countries. If you are considered a tax resident in two or more countries, it is important to understand the tax breaks possible through double taxation treaties as each double taxation treaty is different, although many follow very similar guidelines – even if the details differ. Since there are many rules and complications that can arise when applying double taxation treaties, it is important to seek professional help from a qualified and experienced accountant. Countries can reduce or avoid double taxation by granting either a tax exemption (ME) for foreign income or a foreign tax credit (FTC) for taxes on foreign income. There are two types of double taxation: double taxation of case law and economic double taxation. In the first case, if the source rule overlaps, the tax is levied by two or more countries in accordance with their national law in respect of the same transaction, the income arises or is considered to arise from their respective jurisdictions. In the latter case, double taxation occurs when the same turnover, income or assets are taxed in two or more states, but in the hands of different persons. [1] 1. Elimination of double taxation, reduction of tax costs for “global” companies.

To avoid these problems, countries around the world have signed hundreds of double taxation avoidance treaties, often based on models from the Organisation for Economic Co-operation and Development (OECD). In these treaties, the signatory states agree to limit their taxation of international trade in order to increase trade between the two countries and avoid double taxation. The following table lists the countries that have concluded a double taxation agreement with the United Kingdom (as of 23 October 2018). On the UK government`s website, you will find an up-to-date list of active and historical double taxation treaties. If a natural person is considered a non-resident agreement under an existing double taxation agreement, they would only be taxable in the UK if the income comes from activities in the UK. This is important because it means that all capital gains and profits outside the UK are protected by UK tax. A double taxation convention (DTA) may require that the tax be levied by the country of residence and exempt in the country where it occurs. In other cases, the resident may pay a withholding tax in the country where the income was born and the taxpayer will receive a foreign tax credit in the country of residence to account for the fact that the tax has already been paid. In the first case, the taxpayer (abroad) would declare himself a non-resident. In both cases, the Commission may provide for the two tax authorities to exchange information on such returns. Thanks to this communication between countries, they also have a better view of individuals and companies trying to avoid or evade taxes. [4] While double taxation treaties provide for relief from double taxation, there are only about 73 in Hungary.

This means that Hungarian citizens who receive income from the approximately 120 countries and territories with which Hungary does not have a contract will be taxed by Hungary, regardless of taxes already paid elsewhere. For example, the double taxation agreement with the United Kingdom provides for a period of 183 days in the German tax year (which corresponds to the calendar year); Thus, a British citizen of 1. Work in Germany until the following May 31 (9 months) and then apply to be exempt from German tax. Since double taxation treaties will protect the income of some countries, a tax treaty is a bilateral (bipartite) agreement concluded by two countries to resolve problems related to the double taxation of passive and active income of each of their respective citizens. Income tax treaties generally determine the amount of tax a country can levy on a taxpayer`s income, capital, estate or assets. A tax treaty is also known as a double taxation agreement (DTA). The concept of double taxation of dividends has given rise to an important debate. While some argue that the taxation of dividends by shareholders is unfair because these funds have already been taxed at the corporate level, others argue that this tax structure is fair. For people residing in the United States, it is important to keep in mind that some individual states in the United States do not comply with the provisions of tax treaties. Double taxation treaties can be complex and often require professional support, but they are created to ensure that a person can claim tax breaks instead of having to pay taxes on the same income in two different jurisdictions. Various factors such as political and social stability, an educated population, sophisticated public health and legal system, but above all corporate taxation make the Netherlands a very attractive country of commercial activity.

The Netherlands levies corporate tax at a rate of 25%. .