Double taxation

Double taxation or double taxation refers to the situation in which a control object with the same taxable entity within an identical period at a tax regime ( double taxation at national level ) or at more than one tax regime ( double taxation at the international level ) is subject to a similar tax. In most cases, double taxation results from the fact that the tax regime in the context of the principle of sovereignty at the same time have recourse to the principle of universality and the localization principle (see examples below). Double taxation means a considerable limitation of the general freedom of movement - in particular the free movement of capital and freedom of establishment - and should therefore be ideally avoided.

In contrast to this is the double stress at which a situation repeatedly subject to various taxation. Swiss economic doctrine of the double burden is sometimes referred to as double taxation.

National and international double taxation

National double taxation may result in federal states where state and local governments collect taxes that are similar to existing federal taxes. Relevant are issues of double taxation but especially at international level. They occur regularly, particularly in the area of ​​income and corporation tax by an overlap of national tax assets when the tax laws of two states build both at the residence (unlimited tax liability ) as well as at the place of origin of the income or the situs of an asset ( limited tax liability ) at the same time.

Concept of double taxation

Juridical double taxation

Juridical double taxation (or: juridical double taxation ) refers to the situation in which the same control object is subjected in the same legal tax entity within an identical period at a tax regime or when more than one control regime to a similar tax.

Economic double taxation

Economic double taxation refers to the situation where the object is subjected to the same tax for the same taxable entity within an identical economic period with a tax regime or when more than one control regime to a similar tax. In the case of economic double taxation that is, the legal subject identity ( equality of legal entities ) is extended to the economic subject identity.

Measures for reducing the double taxation

If there is a double taxation, usually measures to be taken for reduction.

  • Unilateral actions: double taxation is avoided or reduced by a tax regime waived unilaterally on tax claims.
  • Bilateral action: double taxation is avoided or reduced by two tax regimes negotiate and conclude agreements. International to be decided by numerous states to the so-called double taxation treaties based on the OECD Model Convention. Within the European Union, Member States, in the case of double taxation even legally obliged to enter into negotiations with each other to ensure the elimination of double taxation in favor of their nationals.
  • Multilateral action: An example of multinational initiatives for reduction of double taxation, for example, the agreement between the Nordic countries Denmark, Finland, Iceland, Norway and Sweden from 1983 (revised in 1996) or the Agreement of UNESCO for the avoidance of double taxation literature copyrights of 1979. For the taxation of the income of NATO soldiers and their families, there are detailed regulations in the NATO Status of Forces Agreement.

Methods for reducing the double taxation

In the context of unilateral, bilateral and multilateral measures described several methods can be applied. This double taxation is not always completely avoided. Very often, they will instead be reduced only to a certain extent.

  • Exemption method
  • Imputation method
  • Deduction method

Situation in Switzerland

In Switzerland, acc. Article 127 paragraph 3 of the Federal Constitution, inter-cantonal double taxation prohibited.

Tax treaty
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