Legal Definitions - duplicate taxation

Duplicate taxation is when a person or business is taxed twice on the same thing or income. This can happen in different ways:

• Double taxation: This is when the same property or income is taxed twice by the same government or different governments. For example, a company may be taxed on its profits and then shareholders may be taxed again on the dividends they receive from those profits.
• Juridical double taxation: This is when two or more countries tax the same person or business on the same thing or income. For example, if a person works in one country but lives in another, they may be taxed by both countries on their income.

Duplicate taxation can be unfair and burdensome for taxpayers. To avoid it, some countries have tax treaties that prevent double taxation for certain types of income.

An example of double taxation is when a company earns $100,000 in profits. The company pays corporate income tax on those profits, let's say 21%, which amounts to $21,000. Then, the company distributes $50,000 of those profits as dividends to its shareholders. The shareholders must pay personal income tax on those dividends, let's say 15%, which amounts to $7,500. In total, the company and its shareholders paid $28,500 in taxes on the same $100,000 of profits.

An example of juridical double taxation is when a person works in one country but lives in another. The person may be taxed on their income by both countries. To avoid this, some countries have tax treaties that allow the person to claim a tax credit in one country for the taxes paid in the other country.