There are two types of double taxation: judicial double taxation and economic double taxation. In the first, where the source rule overlaps, the tax is levied by two or more countries, in accordance with their national laws, in respect of the same transaction, generates or is considered to be levied in their respective jurisdictions. In the latter case, when the same transaction, property or capital is taxed in two or more states, but in the hands of another person, double taxation is created. [1] Example of an advantage from the double taxation treaty: assuming that interest on NRA bank deposits attracts a 30% tax deduction at source in India. Since India has signed double taxation treaties with several countries, taxes can only be deducted up to 10-15% instead of 30%. If you plan to make an investment or perform temporary work in a state other than your country of residence, it is advisable to find out if there is a double taxation agreement between the two so as not to have problems reviewing benefits with the Department of Finance of both states. According to a 2013 study by Business Europe, double taxation remains a problem for European MFIs and a barrier to cross-border trade and investment. [9] [10] Problem areas include limiting the deductibility of interest, foreign tax credits, settlement issues, and divergent qualifications or interpretations. Germany and Italy were identified as the Member States where most cases of double taxation occurred. In addition to respecting the rights of foreign workers, these agreements also aim to promote foreign investment, which might otherwise be discouraged if companies were forced to pay locally and in their country of tax residence for taxable activities.

They reduce the tax burden on foreign investors and give investors legal certainty. To avoid these problems, countries around the world have signed hundreds of contracts to avoid double taxation, often based on models from the Organisation for Economic Co-operation and Development (OECD). In these agreements, the signatory states agree to limit their taxation of international transactions in order to promote trade between the two countries and avoid double taxation. Some investments with a flow-through or passe-through structure, such as.B. The chief companies are popular because they avoid the double taxation syndrome. The Protocol amending the India-Mauritius Agreement, signed on 10 May 2016, provides for source-based taxation on capital gains resulting from the sale of shares acquired from 1 April 2017 in a company established in India. . . .