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Categories: General Tax Terms

Double Taxation refers to the taxation of the same income or financial transaction in more than one jurisdiction or by more than one taxing authority. This typically occurs in two main contexts:

  1. Corporate Income Taxation: When a corporation earns profits, it is taxed at the corporate level. If those profits are then distributed to shareholders as dividends, the shareholders must pay personal income tax on those dividends, leading to the same income being taxed twice.

  2. International Taxation: An individual or business may be subject to tax by two different countries on the same income. For instance, if a resident of Country A earns income from Country B, both countries may impose taxes on that income, resulting in double taxation.

To mitigate double taxation, many countries have tax treaties and provisions that allow taxpayers to claim credits or deductions for taxes paid to other jurisdictions.

In summary, double taxation can create a financial burden and is often addressed through various tax strategies and international agreements.

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