The problem of double taxation is a common phenomenon in the field of business, when the income of an organization or enterprise is taxed in the country where it was received, and then again when repatriated to the state of origin of the business. This phenomenon forces many to abandon doing business, which leads to the withering of entrepreneurship and has a negative impact on the economic and economic activities of the country.
Double taxation is a negative element of the tax system. To avoid this problem, states conclude international agreements on the avoidance of double tax collection from an entrepreneur.
The country has the right to collect tax from a tax resident, which is a recognized person.
An entrepreneur is obliged to know about his tax residence and pay taxes in a timely manner in the country of doing business. It is also necessary to know about the possibility of offsetting already paid fees.
. Some countries charge their tax residents only fees on certain incomes. This allows you to save enough. The entrepreneur will not have to pay all taxes, but only a specific category.
Residents of Belarus are obliged to pay taxes on all possible incomes only on the territory of the Republic of Belarus. At the same time, it does not matter in which country these incomes were received.
The owner can sell his business in one country, and real estate in another. But the tax on each profit will have to be paid on the territory of Belarus.
. A person may meet certain conditions of physical presence on the territory of a particular State or have objective/subjective types of connections. In this case, the State has the right to impose tax duties on such a person.
For what reasons can the government of a country impose taxes on a non-resident:
- If a foreign citizen spends 183 or more days a year in the country (the type of activity does not matter, as well as the reason for a long stay).
- If a non-resident has strong ties with the country: is married, has children.
To be recognized as a tax resident of the Republic of Belarus, it is necessary to spend more than 183 calendar days a year in the country. The deadline includes departures to other countries for personal reasons and business trips.
Nuances of double taxation
With this type of taxation, the taxpayer’s financial assets are laid out at two different levels at once. In practice, it looks like this:
- The entrepreneur received income from foreign investments. He pays tax in the country in which the profit was made and in the country in which he lives.
In countries where there is an agreement on the avoidance of double taxation, entrepreneurs can compensate for the fees already paid from their investments against tax obligations in the territory of the state where they live.
Double taxation is also divided into two types:
- Economic — when the same profit is taxed twice from two different sides.
- Legal — when the profit of one entity is taxed in several countries at once.
Two principles are also used to form the country’s tax system:
- Residency is when all incomes of residents of the country are taxed.
- Territorial — income tax is levied only at the place where a person performs his economic activity.
But it is the existence of two different systems that leads to the problems of double taxation. The agreement on the avoidance of double tax collection avoids this. Being an intergovernmental project, the document regulates issues on taxes, optimization of regimes in different states.
The purpose of the agreement is to define rights between different countries, and not to create new requirements. Such an international agreement helps in determining the tax law of only one country.
The Republic of Belarus also has agreements that help to avoid problems with taxation if the income was received in another country. According to the agreement, Belarus recognizes the priority of international norms over the legal norms of the Republic of Belarus.