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What Does Double Taxation Agreement Mean

In both cases, the Commission may provide for the two tax authorities to exchange information on such returns. Thanks to this communication between countries, they also have a better view of individuals and companies trying to avoid or evade taxes. [4] International companies often face double taxation problems. The income can be taxed in the country where it is earned and then taxed again if it is repatriated to the company`s home country. In some cases, the overall tax rate is so high that it makes international business too expensive. 2. Increase tax certainty, reduce the risk of cross-border taxation The term “double taxation” may also refer to the double taxation of certain income or activities. For example, corporate profits can be taxed first if they are earned by the company (corporation tax) and again if the profits are distributed to shareholders in the form of a dividend or other distribution (dividend tax). Iceland has several tax agreements with other countries.

Natural persons having their permanent residence and a total and unlimited tax liability in one of the Contracting States may be entitled, in accordance with the provisions of the respective conventions, to exemption/reduction from taxation of income and assets, without which income would otherwise be subject to double taxation. Each agreement is different, and it is therefore necessary to review the respective agreement to determine where the tax liability of the person concerned actually lies and what taxes the agreement provides. The provisions of tax treaties with other countries may lead to a restriction of Icelandic tax law. The double taxation treaty can be complicated. People with dual residency must ensure that the correct amount of tax is paid, claimed or offset in each country. In some cases, more than two countries are involved…