International double taxation - taxation of one person in relation to the same tax base in at least two states for the same period. This phenomenon negatively affects the development of foreign trade relations, contributes to the difficulty of the movement of capital and prevents the development of integration economic processes. In addition, some business entities, trying to avoid the additional tax burden, are doing so successfully that they are developing special schemes to minimize tax liabilities.
Double taxation should not be confused with the accumulation of tax, which is a multiple taxation of the same source (re-taxation). This may be the case when the object was previously taxed in favor of the state treasury.
Also, the concept under consideration must be distinguished from double economic taxation, which occurs during taxation of profits as an independent payer, as well as taxation of its part from shareholders in the form of dividends. It is economic double taxation that can help minimize tax obligations by transferring distributed profits in the form of dividends to foreign shareholders of your company (in accordance with applicable law, tax is levied both at the location of the source of income and at the location of the resident).
The main reasons for the occurrence of such taxation are conflicts in the current tax laws of the participating countries of legal relations between business entities in commodity operations, operations with income and capital. These conflicts arise from the fiscal orientation of the state, in which the government is fully and independently engaged in the establishment of taxation objects, the circle of its taxpayers, as well as the size and methods of collecting tax deductions. The main criteria in determining the boundaries of tax jurisdiction are:
- residency, which means taxation of all income of a resident, regardless of location of sources (this term can also be found under the name "unlimited tax liability"). Non-residents' incomes are taxable only if they are received from sources in a given country;
- territoriality, which provides for the taxation of all income received in the territory of this country, and from all payers, regardless of their place of residence.
The elimination of double taxation is carried out differently in countries. So, some states build their economic relations with payers on the basis of residency, while others - using the principle of territoriality.
Often, international double taxation is associated with features of the definition of the subject. Especially when several countries accept it simultaneously as a taxpayer. This is possible if the residence rules are valid in one state for a certain period of time, when a given business entity lives in the territory of this particular country, and in another, taxation is carried out upon the fact of finding a permanent residence in its territory.
Both sides should be interested in eliminating such a negative indicator as double taxation. Thus, when a taxpayer imposes taxes and duties in different countries of the same facility, the tax burden increases significantly . State interest should be manifested in creating a favorable tax climate, attracting foreign investment, as well as increasing competitiveness.