Bilateral tax agreement

Bilateral tax agreement,

Definition of Bilateral tax agreement:

  1. An agreement between two jurisdictions (for example, two countries) that addresses conflicts or duplication regarding issues of taxation. Bilateral tax agreements commonly concern the problem of double taxation when an individual or company resides in more than one jurisdiction. They may also involve an exchange of information and mutual assistance in tax collection.

  2. Bilateral tax agreements are often based on conventions and guidelines established by the Organization for Economic Cooperation and Development (OECD), an intergovernmental agency representing 35 countries. The agreements can deal with many issues such as taxation of different categories of income (business profits, royalties, capital gains, employment income, etc.), methods for eliminating double taxation (exemption method, credit method, etc.), and provisions such as mutual exchange of information and assistance in tax collection. As such they are complex and typically require expert navigation from tax professionals, even in the case of basic income tax obligations. Most income tax treaties include a “saving clause” that prevents citizens or residents of one country from using the tax treaty to avoid paying income tax in any country.

  3. A bilateral tax agreement, also called a tax treaty, is an arrangement between two jurisdictions that mitigates the problem of double taxation that can occur when tax laws consider an individual or company to be a resident of more than one jurisdiction. A bilateral tax agreement can improve the relations between two countries, encourage foreign investment and trade, and reduce tax evasion.

Meaning of Bilateral tax agreement & Bilateral tax agreement Definition