Wikipedia
Double taxation is the levying of tax by two or more jurisdictions on the same declared income (in the case of income taxes), asset (in the case of capital taxes), or financial transaction (in the case of sales taxes). Double liability is mitigated in a number of ways, for example:
- the main taxing jurisdiction may exempt foreign-source income from tax,
- the main taxing jurisdiction may exempt foreign-source income from tax if tax had been paid on it in another jurisdiction, or above some benchmark to not include tax haven jurisdictions,
- the main taxing jurisdiction may tax the foreign-source income but give a credit for foreign jurisdiction taxes paid.
Another approach is for the jurisdictions affected to enter into a tax treaty which sets out rules to avoid double taxation.
The term "double taxation" can also refer to the double taxation of some income or activity. For example, in some jurisdictions, corporate profits are taxed twice, once when earned by the corporation and again when the profits are distributed to shareholders as a dividend or other distribution. The term is not usually used to refer to the taxation of the same income by different levels of government, such as by federal, state and local authorities.
Usage examples of "double taxation".
Principal tenets included a reduction in the basic and capital gains tax rates, elimination of all but a very few itemized deductions for individuals, elimination of double taxation of corporate earnings paid out as dividends, and a large energy tax partially offset by an increase in the standard deduction.