What are tax treaties and how do they help avoid double taxation?

What are tax treaties and how do they help avoid double taxation?

Tax treaties are agreements between two countries to prevent double taxation on the same income. They clarify which country has taxing rights.

Can you give me an example of a tax treaty?

Sure! For instance, the U.S. has tax treaties with many countries, like Canada, which helps determine how income is taxed for residents of both countries.

How do I know if a tax treaty applies to me?

You can check if your country has a tax treaty with the country where you earn income. It's also helpful to consult a tax professional.

What happens if there is no tax treaty?

If there's no tax treaty, you may be subject to double taxation, meaning you could be taxed by both countries on the same income.

Are there any exceptions in tax treaties?

Yes, tax treaties often have exceptions for certain types of income, like dividends or royalties, which may be taxed at different rates.