
Double Taxation Avoidance Benefits
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Double Taxation Avoidance: Introduction
- Define the rights of each country to tax various types of income.
- Allocate taxing rights over income between countries.
- Relieve taxpayers from paying tax twice on the same income.
- Promote international trade and investment by reducing the barriers that double taxation creates.
Benefits of Double Taxation Avoidance (DTAA)
Benefit | Description |
Relief from Double Taxation | Avoids being taxed twice on the same income, either through exemption or credit methods. |
Reduced Withholding Tax | Lowers or eliminates the withholding tax on cross-border income like dividends, interest, and royalties. |
Clear Taxation Rules | Provides clarity on which country has the right to tax specific income (e.g., employment, business profits). |
Non-Discrimination | Prevents discrimination against foreign nationals or businesses in the host country. |
Tax Certainty and Planning | Offers certainty on tax liabilities and helps in effective tax planning for individuals and businesses. |
Dispute Resolution (MAP) | Provides a Mutual Agreement Procedure (MAP) to resolve tax disputes between countries. |
Permanent Establishment (PE) | Defines when a business has sufficient presence in another country to be taxed on its profits. |
Cross-Border Investment | Encourages foreign direct investment (FDI) by reducing tax barriers and promoting economic cooperation. |
Information Exchange | Facilitates exchange of information between countries to prevent tax evasion and ensure compliance. |