double taxation agreement

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An agreement between two countries to avoid double taxation of the same income. Any income earned in one country by assets whose owner is a resident of the other is taxed only once, at the rate of whichever country has higher tax rates. The absence of such agreements would discourage international investment. As most advanced economies have both inward and outward capital movement, double taxation agreements between them can be mutually beneficial.

Subjects: Economics — Accounting.

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