Double Taxation Frequently Asked Questions
What is double taxation?
Double taxation is defined as “the imposition of comparable taxes in two (or more) countries on the same taxpayer in respect of the same subject matter and for identical periods.”
How does a company find out they will be double taxed?
A company receives a letter from a tax authority in a country where they do business that essentially rejects that company’s assertions about company practices and/or structure and finds that the company liable for the same tax in two jurisdictions. Each country has their own rules for determining taxation and sometimes those rules may lead to double taxation. Sometimes there are income tax treaties that deal with this issue but sometimes no treaty may exist. THEVOZ can represent our clients before the taxing authorities to resolve the double taxation dispute or we may suggest alternative structures to minimize exposure to double taxation.
Is there a way to negotiate a double taxation dispute without going to court?
The Mutual Agreement Procedure (MAP), is a provision included in many international tax treaties to resolve double taxation disputes. An international arbitration framework has become increasingly essential as a result of the increase in labor and business mobility. With mobility comes more opportunity for disputes and disagreements between taxing jurisdictions. Moreover, some of these disputes involve issues that are novel and unique and may not been previously resolved or even discussed in the context of a resolution procedure.
The Organization of Economic Development and Cooperation BEPS Action 14 Minimum Standard, adopted in 2015, was meant to improve the resolution of tax related disputes. The result of the adoption of the Minimum Standard, there was a marked increase in the number of cases dealt with by competent authorities.
Has global business changed tax law and enforcement?
With mobility, arbitration, and an increasingly globalized business environment, the role of an international tax attorney is to have a global understanding of tax laws, including new arbitration processes, that may impact clients. The days when tax attorneys could be experts in just their own country’s tax laws are rapidly fading away. As dispute resolution frameworks become increasingly important to global business, the historical reliance on local definitions for company structuring and myriad tax issues will become more and more irrelevant.