Double taxation agreement: Tax relief for international income.

What is a double taxation agreement?

A double taxation agreement (DTA) is a bilateral agreement between two countries that is intended to avoid companies or individuals being taxed for the same source of income in both countries.

How does a double taxation agreement work?

The DTA determines which country has the right to tax various types of income, such as income from dividends, interest, licenses or real estate. If a person or company in one country earns income that is taxable in the other country under the terms of the DTA, the income in the first country is exempted from taxation or a tax credit is granted to avoid double taxation.

Why are double taxation agreements important?

DBAs should promote international cooperation and facilitate investments between countries. They are also an important tool to combat tax evasion, as they promote the exchange of information between countries on tax matters.

Number of double taxation treaties worldwide

There are currently over 3000 DBAs worldwide, most of which were developed by the OECD and the United Nations. The exact regulations of a DBA may vary from country to country, so it is important to seek expert advice on international transactions to understand the specific effects on tax liability.