What is a double tax agreement?

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

How does a double taxation agreement work?

The DBA 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 earns income in one country 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 are intended to 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 agreements 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 differ from country to country, so it is important to seek expert advice on international transactions to understand the specific effects on tax liability.

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