What tax implications does double taxation have on international transactions?
January 1, 2022 | 120,00 EUR | answered by Albrecht Schneider
Dear Tax Advisor,
I am Greta Strauss and I run a small business that operates internationally and conducts business both domestically and abroad. Lately, I have noticed that my profits are being taxed in both my country of residence and the country where my business partners are located. This leads to double taxation of my income and has significant implications on the profitability of my company.
I am concerned about how to deal with this double taxation and how it will impact my financial situation. Are there ways to avoid or at least minimize this double taxation? What tax solutions are available for companies operating in international business and facing double taxation?
I would greatly appreciate your expertise and advice on this matter, as I am unsure of how to proceed. Thank you in advance for your help.
Sincerely,
Greta Strauss
Dear Mrs. Strauss,
Thank you for your inquiry regarding double taxation in your internationally operating company. Double taxation occurs when income is taxed in two different countries, leading to an increased tax burden that can affect the profitability of your business. It is important to take measures to avoid or at least minimize this double taxation.
One way to avoid or minimize double taxation is by entering into Double Taxation Agreements (DTAs) between the countries involved. These agreements determine which country has the right to tax certain income and thus avoid double taxation. It is important to review the DTAs between your country of residence and the countries of your business partners and, if necessary, apply for the application of these agreements.
Furthermore, there is also the option to rely on the principles of worldwide income taxation. According to this principle, income is only taxed in the country of residence, regardless of where it is earned. It is important to review the tax regulations in the countries involved and, if necessary, take advantage of this principle.
Another option is to use tax credits to avoid double taxation. If your income is taxed in one country, you can claim a tax credit in your country of residence to offset the taxes already paid.
It is advisable to consult with an experienced tax advisor to find the best solution for your specific situation. A tax expert can help you understand the relevant laws and regulations and develop the best possible tax strategy for your business.
I hope this information is helpful to you and I am available for any further questions.
Best regards,
Albrecht Schneider, Tax Advisor
