What is double taxation in international tax law?
International juridical double taxation is the imposition of two separate taxes on the same income, profits, or gains. This term is used when the same income is subject to two or more taxes of the same nature.
This same income is therefore taxed in two or more different countries.
This results in an additional tax burden for the taxpayer.
There are two types of double taxation:
- Double taxation at the national level: this can also occur within the same country if two or more tax authorities levy the same tax on the same income;
- Double taxation at the international level: this involves two tax jurisdictions taxing taxpayers on the same income.
Since each country is sovereign, it is free to tax all or part of the income and profits of its tax residents. For example, in France, Article 4A of the French General Tax Code clearly states that French tax residents must declare all of their worldwide income (generated in France and abroad) for income tax purposes. This is why double taxation issues arise.
Are you covered by a bilateral tax treaty?
Tax treaties concern people who carry out international transactions (transactions in at least two countries) and who could therefore be taxed on the same income in two or more different countries.
A double taxation treaty is therefore an agreement concluded between two or more countries to resolve issues related to taxpayers' taxation. It is set out in a document formalizing this bilateral agreement between two countries. It contains all the tax rules applicable to a taxpayer residing in one country who receives income in another country.
Many countries have concluded tax treaties with other countries to prevent double taxation of income and promote international trade and investment. If you are a resident of one of these countries, you may benefit from the provisions of a tax treaty.
However, it is important to check the specific requirements of each treaty before relying on it.
What are the procedures for avoiding double taxation?
One way to avoid double taxation is to take advantage of tax treaties concluded between countries. These treaties often exempt residents of one country from tax on income earned in another country. The most common avoidance procedures involve claiming a foreign tax credit or deducting foreign taxes paid from your total taxable income.
How can you determine whether you are a French tax resident?
The concept of tax residence varies from one country to another and is entirely independent of a person's nationality. This is why the first step is to determine where your tax residence is located in order to establish which tax regime applies.
In our case, we are concerned with French tax residence.
According to
Article 4B of the French General Tax Code (CGI), the following persons are considered to have their tax domicile in France within the meaning of
Article 4A:
- People whose main home or principal place of residence is in France (that is, they reside there for more than six months of the year);
- People who carry out a professional activity in France, whether as employees or not, unless they can demonstrate that this activity is carried out on an ancillary basis;
- People whose center of economic interests is located in France.
- This also includes government employees, local government employees, and public hospital service employees who perform their duties in a country other than France and who are not subject to personal income tax in that country on all of their income.
Whether you are a French national or not, if you meet one of the conditions above, the French tax authorities consider your tax domicile to be in France, and you cannot avoid taxation.
Countries that have concluded double taxation treaties with France
A number of countries have signed tax treaties, or
agreements with France, to prevent double taxation. This means that taxes paid in one country may be offset against taxes owed in another. These agreements are beneficial for businesses and individuals who often have income or assets in several countries.
France has concluded more than 120 tax treaties with countries such as the United Arab Emirates, Luxembourg, South Africa, Denmark, Brazil, the USA, Hong Kong, and others. There are also bilateral agreements for cross-border workers, such as the Franco-German tax treaty. Here is the list of countries with which France has signed international double taxation treaties:
See here.
NB:
: the information provided in this article is general. For a more in-depth analysis of your situation, we recommend consulting a tax lawyer in France.
