International double taxation-taxation of one person against the same database net not less than two States for the same period. This phenomenon rather negatively affects the development of foreign trade relations, contributes to the difficulty of movement of capital and hinders the development of economic integration processes. In addition, some entities, seeking to avoid the additional tax burden, they do it so successfully that develop special schemes to minimize tax obligations.
Double taxation should not be confused with the accumulation of the tax, which is the imposition of multiple taxes on one and the same source (re-imposition). This can be the case when the object had previously been taxed in favor of the state Treasury.
Also consider the concept must be distinguished from economic double taxation, which occurs during the taxable profit as a self-payer, and the taxation parts of it with shareholders in form of dividends. It is the economic double taxation can contribute to minimization of tax obligations by transferring distributable profits as dividends to foreign shareholders of the company (in accordance with the current law – tax withholding made as to the location of the source of income, and the whereabouts of the resident).
The Main reasons for such taxation are conflicts in the existing tax legislation of the countries-participants of legal relations between economic entities on the commodity, income and capital. These conflicts arise from the fiscal direction of the state in which the power to fully and independently involved in establishing the object of taxation, circle of taxpayers, as well as the size and methods of levying of tax deductions. The main criteria in defining the boundaries of the taxing jurisdiction are:
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- the residency, meaning the taxation of all income of a resident regardless of the location of the sources (this term can be found also under the name “unlimited tax liability"). Income of non-residents are taxable only if they are derived from sources of that country;
- territoriality, which provides for taxation of all income earned in this country, and from all payers, regardless of their domicile.
The Elimination of double taxation is implemented in the countries in different ways. For example, some States conduct their economic relations with payers on the basis of residency, other – using the principle of territoriality.
Often, international double taxation is due to the peculiarities of definition of the subject. Especially when as a taxpayer it is taken simultaneously in several countries. This is possible when action in one state's rules of residency for a period of time when the business entity resides in the territory of this country, and in the other – taxation is made upon the finding of permanent residence in its territory.
The elimination of such negative index of how double taxation should be interested in both sides. Thus, the taxpayer in the taxation and taxes in different countries of the same object increases significantly the tax burden. The state's interest should be manifested in creating a favorable tax climate, attracting foreign investments and enhancing competitiveness.
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