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Double Taxation Relief:
Under Double taxation relief agreements, government protects same income from being taxed twice. For eg. If a company has overseas business and earns a capital gain through it, then the local government of their home country allows them to offset any taxes paid to foreign governments as per their regional rules from tax liability calculations in the home country.
However, Double taxation doesn’t mean tax can be reclaimed from tax authorities if paid more to foreign governments! It can only be offset.
Example Calculating Double Taxation Relief:
ABC Firm earns equivalent to $10,000 in Singapore where it is subject to 15% tax. In the US, this $10,000 (or $8,500 after Singapore’s tax) will be subject to an additional 5% tax. So how much will ABC end up having after it pays US tax?
Comment your answer below!
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