Double taxation is when your income is taxed in two places – once in your main taxing country and then in another one. The reason why the law is designed this way is not that you are being unfairly taxed in two different places. But that doesn’t mean you shouldn’t be aware of the double taxation problem and be aware of how to avoid it. Read on for more information. Double taxation is a common issue, and there are many ways to prevent it.
The government cannot survive without taxing money, and if it couldn’t make money, it would go broke. Tax revenue is a function of the amount of money that is taxed and the velocity of the money. Without taxing money, the government could only tax a dollar once, but now it taxes it everywhere! In almost every transaction, you pay taxes on two different states’ governments. Whether you know it or not, it’s not fair.
Under the 1954 Convention, the United States and the Federal Republic of Germany avoided double taxation by requiring their taxing authorities to credit income derived from a permanent establishment within the United States. However, this Convention was amended by the Protocol signed on 17 September 1965. Although it didn’t grant the same tax relief as the 1954 Convention, it still applies to the first assessment period and the first taxable year. If you live outside the US and work in Germany, you might be subject to double taxation.
The burden of the tax is more important in determining whether taxes are fair. It is only fair when the burden of taxation is commensurate with the ability to pay. For example, the marginal tax rate is higher on the higher incomes and no inheritance tax is imposed on billionaires and multi-billionaires. Aside from the burden of taxes on the people who earn more than that, the tax system is unfair. It should be proportionate to their income and their wealth.
The CIS Convention is also important in preventing double taxation of capital. The taxation of gains on movable property is the main mechanism for this. The foreign government taxes the capital represented by movable property while the CIS does not. The Contracting States generally allow this in limited circumstances. During the time the gain is realized, gains on immovable property may be taxed in both countries. Therefore, double taxation of capital is often a problem that can be resolved easily.