Double Taxation

Double taxation refers to situations in which the same financial assets or earnings are subject to taxation at two different levels. For instance, one form of double taxation occurs when income from foreign investments is taxed both by the country in which it is earned and by the country in which the investor resides. To prevent this type of double taxation, many double taxation treaties currently exist between countries that allow income recipients to offset the tax [Page 618]already paid on investment income in another country against their tax liability in their country of residence.

Another example of double taxation can occur with regard to the taxation of corporate earnings. This happens when corporate earnings are taxed at both the corporate level and again at the ...