Double taxation avoidance agreements are of critical importance for individuals and companies engaged in international business or earning income in multiple countries. These agreements aim to prevent the taxation of the same income in more than one country, thereby enhancing the efficiency and fairness of global economic activities. The importance of double taxation avoidance agreements has several dimensions:
Reduction of Tax Burden: Double taxation avoidance agreements reduce the total tax burden on companies and individuals by avoiding the application of tax on the same income in two different countries. This provides for fairer taxation and alleviates the financial burden on taxpayers.
Encouragement of Investment: These agreements encourage foreign investments by reducing the risk of double taxation. Companies and investors can better predict their tax burden in the countries where they invest, facilitating economic decision-making processes.
Reduction of Legal Uncertainty: Double taxation avoidance agreements provide clear rules and procedures regarding taxation. This reduces legal uncertainties related to taxation and makes the process of international business more predictable.
Facilitation of Mutual Tax Compliance: These agreements facilitate cooperation and information exchange between two countries on tax matters. This plays a significant role in preventing tax evasion and expanding the tax base.
Strengthening of Economic Relations: Double taxation avoidance agreements strengthen economic relations between the countries involved and support commercial and investment ties between two countries.
These agreements are vital to maintaining the integrity of the global economy and reducing the complexity of doing business internationally. Additionally, they contribute to enhancing the competitiveness of companies and individuals in the international arena, thereby promoting the expansion of global trade and investment.
