Agreement To Avoid Taxation

However, the MS method is only used for certain categories or sources of income, such as for example. B international shipping receipts. Iceland has several tax agreements with other countries. Natural persons permanently resident and subject to full and unlimited tax in one of the Contracting States may be entitled, in accordance with the provisions of the respective conventions, to an exemption/reduction from the taxation of income and capital, without which income would otherwise be subject to double taxation. Each agreement is different and it is therefore necessary to review the agreement in question in order to determine where the tax debt of the person concerned really lies and what taxes the agreement provides. The provisions of tax agreements with other countries may result in a restriction of Icelandic tax legislation. There are about 3,000 of these bilateral agreements around the world. The main function is to distribute the right to taxation of companies and people who earn money across borders and to distribute this tax between two states. In contrast, tax evasion exploits the way the law is written.

For example, a tax treaty may be used to obtain a benefit that was not the original intent of the treaty. On the other hand, the tax administration cannot do anything in the short term because the taxpayer has a legal action. In the longer term, you have to change the law. You have to change the tax treaty, which is difficult because you need both parties to approve it. It is not uncommon for a company or individual established in one country to make a taxable profit (income, profits) in another country. It may happen that a person has to tax this income on the spot and in the country where it was obtained. There are four main effects of signing a double taxation convention. Shortly after we started searching hundreds of thousands of anonymously sent files from the island state of Mauritius, we asked ourselves: what are all these “double taxation treaties” or “tax treaties” that we see again and again? It is astonishing to see how many African countries have treaties with Mauritius, given that these agreements pose a risk of tax evasion to these countries. . . .

Tjip de Jong

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