Double taxation - Citizendia

Double taxation is the imposition of two or more taxes on the same income (in the case of income taxes), asset (in the case of capital taxes), or financial transaction (in the case of sales taxes). Public finance is a field of economics concerned with paying for collective or governmental activities and with the administration and design of those activities The field of finance refers to the concepts of Time, Money and Risk and how they are interrelated Payroll tax generally refers to two kinds of taxes: Taxes which Employers are required to withhold from Employees Pay, also known as Withholding A capital gains tax (abbreviated CGT) is a Tax charged on Capital gains the profit realized on the sale of a non-inventory Asset that was purchased Stamp duty is a form of Tax that is levied on documents Historically a physical stamp (a Tax stamp) had to be attached to or impressed upon the document to denote Land value taxation (LVT (or site value taxation) is an Ad valorem tax where only the value of land itself is taxed A sales tax is a Consumption tax charged at the Point of purchase for certain goods and services Value added tax ( VAT) or goods and services tax ( GST) is a consumption Tax levied on value added. A flat tax (short for flat rate tax is a Tax system with a constant tax rate The tax tariff and trade laws of a political region State or Trade bloc determine which forms of consumption and production tend to be encouraged A tax haven is a place where certain Taxes are levied at a low rate or not at all In Economics, tax incidence is the analysis of the effect of a particular Tax on the distribution of economic welfare. In a Tax system and in Economics, the tax rate describes the burden Ratio (usually expressed as a Percentage) at which a business or person is A proportional tax is a Tax imposed so that the Tax rate is fixed as the amount subject to taxation increases A progressive tax is a Tax imposed so that the Tax rate increases as the amount subject to taxation increases A regressive tax is a Tax imposed in such a manner that the Tax rate decreases as the amount subject to taxation increases Tax advantage refers to the economic bonus which applies to certain accounts or Investments that are by Statute, tax-reduced tax-deferred or tax-free Personal income taxes See also Income tax in Australia Only the federal government imposes income taxes on individuals and this is the most significant source of Taxation in the British Virgin Islands is relatively simple by comparative standards photocopies of all of the tax laws of the British Virgin Islands would together amount to about 200 The level of Taxation in Canada is average among Organisation for Economic Co-operation and Development (OECD countries Taxes provide the most important revenue source for the Government of the People's Republic of China. See Government of Colombia for a wider perspective of Colombian government See Government of France for a wider perspective of French government Taxes in Germany —being a Federal Republic —are levied by the federation ( Bund) the States ( Länder) as well as the HK Inland Revenue Ordinance Cap112 is one of Hong Kong's Ordinances Taxes in India are levied by the Central Government and the State Governments This article ls with Taxation in Indonesia or pajak. Definitions "Pajak" in Indonesian for Tax and taxes whereas " Perpajakan The system of Taxation in Ireland is broadly similar to the system of Taxation in the United Kingdom. The Netherlands has a rich history dealing with taxation predating the Romanic period. Taxation in New Zealand is collected at a national level by the Inland Revenue Department (IRD on behalf of the Government of New Zealand. The Income tax in Peru is collected by the Superintendencia Nacional de Administración Tributaria, best known as SUNAT. The Russian Tax Code is the primary tax law for the Russian Federation. Individual income tax in Singapore forms part of two main sources of Income tax, the other being Corporate taxes on companies In Tanzania the Income Tax Act 2004 came into effect in July 2004 Taxation in the United Kingdom may involve payments to a minimum of two different levels of government The central government ( Her Majesty's Revenue and Customs) Taxation in the United States is a complex system which may involve payment to at least four different levels of government and many methods of taxation Value added tax ( VAT) or goods and services tax ( GST) is a consumption Tax levied on value added. Comparison of Tax Rates around the world is a difficult and somewhat subjective enterprise This table lists countries by total 2005 Tax revenues (federal state and local as a percentage of GDP (Gross Domestic Product Economic policy refers to the actions that Governments take in the economic field. Monetary policy is the process by which the Government, Central bank, or monetary authority of a country controls (i the Supply of Money, A central bank, reserve bank, or monetary authority is the entity responsible for the Monetary policy of a country or of a group of member states In Economics, money supply, or money stock, is the total amount of money available in an Economy at a particular point in time The gold standard is a monetary system in which a region's common media of exchange are paper notes that are normally freely convertible into pre-set fixed quantities of Gold Fiscal policy, taking the scope of Budgetary policy, refers to government policy that attempts to influence the direction of the economy through changes in government taxes Government spending or government expenditure is classified by economists into three main types A budget deficit occurs when an Entity (often a Government) spends more Money than it takes in Government debt (also known as public debt or national debt) is Money (or credit) owed by any level of government either Central government Trade is the willing exchange of goods, services, or both Trade is also called Commerce. For other uses of this word see Tariff (disambiguation. A tariff is a tax imposed on goods when they are moved across a political boundary A trade pact is a wide ranging Tax tariff and trade pact that often includes Investment guarantees The field of finance refers to the concepts of Time, Money and Risk and how they are interrelated In Economics, a financial market is a mechanism that allows people to easily buy and sell ( Trade) financial Securities (such as stocks and bonds There are two basic financial market participant categories Investor vs Corporate finance is an area of Finance dealing with the financial decisions Corporations make and the tools and analysis used to make these decisions Personal finance is the application of the principles of Finance to the monetary decisions of an individual or family unit Public finance is a field of economics concerned with paying for collective or governmental activities and with the administration and design of those activities Financial regulations are a form of Regulation or supervision which subjects Financial institutions to certain requirements restrictions and guidelines aiming to A banker or bank is a Financial institution whose primary activity is to act as a payment agent for customers and to borrow and lend money Fractional-reserve banking is the banking practice in which Banks keep only a fraction of the value of their Bank notes and demand deposits in reserve Full-reserve banking is the Banking practice in which the full amount of each depositor's funds are available in reserve at the bank when each depositor Free banking is a theory of Banking in which commercial banks and market forces control the provision of banking services Islamic banking refers to a system of banking or banking activity that is consistent with Islamic law ( Sharia) principles and guided by Islamic economics In Business and Accounting, assets are everything owned by a person or company (all tangible and intangible property that can be converted into cash. Because of the broad term "wealth" Property tax, capital transfer taxes ( Inheritance tax, Estate tax, Gift tax) Endowment tax A financial transaction involves a change in the Status of the finances of two or more businesses or individuals A sales tax is a Consumption tax charged at the Point of purchase for certain goods and services It refers to two distinct situations:

taxation of dividend income without relief or credit for taxes paid by the company paying the dividend on the income from which the dividend is paid. This arises in the so-called "classical" system of corporate taxation, used in the United States. Corporate tax refers to a Tax levied by various jurisdictions on the Profits made by companies or associations. Corporate tax in the United States is imposed both by the federal government and by most state governments
taxation by two or more countries of the same income, asset or transaction, for example income paid by an entity of one country to a resident of a different country. The double liability is often mitigated by tax treaties between countries. Tax treaties exist between many countries on a bilateral basis to prevent Double taxation ( Taxes levied twice on the same Income, Profit,

1 International Double Taxation Agreements
2 U.S. Citizens and Resident Aliens Abroad
3 Double taxation within the United States
4 Notes
5 External links

International Double Taxation Agreements

Main article: Tax treaty

It is not unusual for a business or individual who is resident in one country to make a taxable gain (earnings, profits) in another. Tax treaties exist between many countries on a bilateral basis to prevent Double taxation ( Taxes levied twice on the same Income, Profit, This person may find that he is obliged by domestic laws to pay tax on that gain locally and pay again in the country in which the gain was made. Since this is inequitable, many nations make bilateral Double taxation agreements with each other. In some cases, this requires that tax be paid in the country of residence and be exempt in the country in which it arises. In the remaining cases, the country where the gain arises deducts taxation at source ("withholding tax") and the taxpayer receives a compensating foreign tax credit in the country of residence to reflect the fact that tax has already been paid. Withholding tax is an amount withheld by the party making payment to another (payee and paid to the taxation authorities A foreign tax credit is used to reduce or eliminate Double taxation when the same income is taxed in multiple countries To do this, the taxpayer must declare himself (in the foreign country) to be non-resident there. So the second aspect of the agreement is that the two taxation authorities exchange information about such declarations, and so may investigate any anomalies that might indicate tax evasion.

European Union savings taxation

Main article: European Union withholding tax

In the European Union, member states have concluded a multilateral agreement on information exchange. The so-called European Union withholding tax is a Withholding tax which is deducted from interest earned by European Union residents on their investments made in another The European Union ( EU) is a political and economic union of twenty-seven member states, located primarily in ^[1] This means that they will each report (to their counterparts in each other jurisdiction) a list of those savers who have claimed exemption from local taxation on grounds of not being a resident of the state where the income arises. Withholding tax is an amount withheld by the party making payment to another (payee and paid to the taxation authorities These savers should have declared that foreign income in their own country of residence, so any difference suggests tax evasion. Tax avoidance is the legal utilization of the Tax regime to one's own advantage in order to reduce the amount of tax that is payable by means that are within the law

(For a transition period, some states have a separate arrangement. ^[2] They may offer each non-resident account holder the choice of taxation arrangements: either (a) disclosure of information as above, or (b) deduction of local tax on savings interest at source as is the case for residents).

India Mauritius tax treaty

A large number of Foreign Institutional Investors who trade on the Indian stock markets operate from Mauritius. Mauritius (pronounced məˈrɪʃəs L’île Maurice /il mɔ'ʁis/ Mauritian Creole: Maurice) officially the Republic of Mauritius, République According to the tax treaty between India and Mauritius, Capital Gains arising from the sale of shares is taxable in the country of residence of the shareholder and not in the country of residence of the Company whose shares have been sold. Tax treaties exist between many countries on a bilateral basis to prevent Double taxation ( Taxes levied twice on the same Income, Profit, India, officially the Republic of India (भारत गणराज्य inc-Latn Bhārat Gaṇarājya; see also other Indian languages) is a country Therefore, a company resident in Mauritius selling shares of an Indian company will not pay tax in India. Since there is no Capital gains tax in Mauritius, the gain will escape tax altogether. A capital gains tax (abbreviated CGT) is a Tax charged on Capital gains the profit realized on the sale of a non-inventory Asset that was purchased

German Taxation Avoidance

If a foreign citizen is in Germany for less than a relevant 183 day period (approximately six months) and are tax resident (ie. Legal residence is the principle that each legal person (natural or corporate has a single location of primary residence. , and paying taxes on your salary/benefits) elsewhere, then it may be possible to claim tax relief under a particular Double Tax Treaty. The relevant 183 day period is either 183 days in a calendar year or in any period of 12 months, depending upon the particular treaty involved. The Double Tax Treaty with the UK, for example, looks at a period of 183 days in the German tax year (which is the same as the calendar year).

So, for example, you could work in Germany from 1 September through to the following 30 May, a total of 10 months, whilst being tax resident in Germany and could claim to be exempt from German tax under a Double Tax Treaty. This is assuming that during this period you were tax resident in another country and paying taxes on your salary and benefits there.

In some cases, it would be beneficial, from a tax standpoint, to claim exemption under a Double Tax Treaty, i. e. , if your other country of tax residence levies much lower taxes. In other cases, whilst the tax liability may be broadly similar (e. g. , as with the UK and Germany), claiming exemption under a Double Tax Treaty offers administrative convenience and savings in professional fees (payroll bureau, tax return filing etc). In Germany, if the criteria of a relevant Double Tax Treaty are satisfied then there is no requirement to submit a formal claim for relief; rather, exemption may simply be assumed. The other criteria are that you are paid by a non-German company and that the costs of your employment are borne by a non-German company. You should not, generally, have a problem satisfying these criteria.

If you are receiving a salary for working in Germany and that salary is subject to German tax, i. e. , relief under a Double Tax Treaty is not available or desirable, you (as a company) or your employer is obliged to deduct a German withholding tax and pay this over to the German Revenue authorities on a regular basis. You will need to seek professional advice in Germany as to the calculation, regularity and transmission of these payments and contact details can be provided if required.

U. S. Citizens and Resident Aliens Abroad

The US requires its citizens to file tax returns reporting their earnings wherever they reside. Tax returns in the United States are reports filed with the Internal Revenue Service (IRS or with the state or local Tax collection agency ( California However, there are some measures designed to reduce the international double taxation that results from this requirement. ^[3]

First, an individual who is a bona fide resident of a foreign country or is physically outside the US for an extended time is entitled to an exclusion (exemption) of part or all of his earned income(i. A wage is a compensation workers receive in exchange for their labor. e. personal service income, as distinguished from income from capital or investments. ) That exemption is currently set at $85,700 (2007). ^[3]

Second, the US allows a foreign tax credit by which income taxes paid to foreign countries can be offset against US income tax liability attributable to foreign income. A foreign tax credit is used to reduce or eliminate Double taxation when the same income is taxed in multiple countries This can be a complex issue that often requires the services of a tax advisor. A tax advisor is a financial expert especially trained in Tax law. The foreign tax credit is not allowed for taxes paid on earned income that is excluded under the rules described in the preceding paragraph (i. e. no double dipping). ^[3]

Double taxation within the United States

Double taxation can also happen within a single country. This typically happens when subnational jurisdictions have taxation powers, and jurisdictions have competing claims. In the United States a person may legally have only a single domicile. In Conflict of Laws, domicile (sometimes termed domicil in the U However, when a person dies different states may each claim that the person was domiciled in that state. Intangible personal property may then be taxed by each state making a claim. Intangible property, also known as incorporeal property describes something which a person or Corporation can have ownership of and can transfer ownership of to another person In the absence of specific laws prohibiting multiple taxation, and as long as the total of taxes do not exceed the 100% of the value of the intangible personal property, the courts will allow such multiple taxation.

Notes

^ Council Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the form of interest payments
^ See (17) and (18) of above, for a "temporary" period, Austria, Belgium and Luxembourg may apply a withholding tax to non-resident accounts rather than exchange information. Withholding tax is an amount withheld by the party making payment to another (payee and paid to the taxation authorities
^ ^a ^b ^c IRS Publication 54: Tax Guide for U.S. Citizens and Resident Aliens Abroad

External links

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