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Double Taxation | Definition | Taxation In Corporation & Personal levels - YouTube
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friends or today we have a topic in
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front of us that is double taxation what
exactly double taxation is all about
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let's try and understand this
see as there's a dialogue box over here
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it shows some information it says that
when we pay when we pay income tax twice
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on the same source of one income or the
assets or the financial transactions
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then the tax principles the taxation
principle is known as the double
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taxation principle which is known as
double taxation
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so this taxation principle you know may
be applied at both you know at the
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corporate level
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as well as you know at the personal level
also again when there is an
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international trade and this Taxation is
applied in two different countries like
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for example you know corporate profits
when earned are taxed as corporate tax
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and then taxed again as the so called
personal income so when it is
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distributed as dividend among the
stockholders and also in case of the
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owner of the organization who is also
the employer of the organization so if
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they get taxed when he receives the
salary so again if he receives the
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dividend from the company being a
shareholder in his to pay the tax and
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the personal taxes but it so discussed
the double taxation in corporation S
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Corp and C Corps to corporations the
principle of Taxation it affects the C
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Corp corporations where the business
profits are taxed both at the corporate
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level and the personal level and double
taxation in corporation must pay income
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tax
at a corporate level or the at the at
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the corporate rate even before
distributing the profit to the
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shareholders but then the profit shared
between the shareholders as the dividend
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is taxed again at the recipients
individual rate thus the corporate
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profits are taxed
twice so the double taxation in the
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corporation is not affected by the
taxation principle and a corporation
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which passes through the earning
directly to the shoulder without going
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by the intermediate step of paying the
dividends forth it is generally accepted
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you know as a negative element
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of the tax system and in order tax
authorities they try and avoid it in the
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possible situation so the taxation
process they put puts the corporation at
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the disadvantage you know when compared to the unincorporated businesses that
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provides the incentive to corporations
to use it at financing instead of you
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know equity financing and then read and
then retain earnings instead of
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distributing among the shareholders
whatever you know if corporate and
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personal tax systems if they are
integrated then their tax code is
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simplified
do I know
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large extent you can see that
now the tax results when the divided
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when that when the dividend is given how
the things are going to get affected see
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the corporate level tax for the S Corp
the taxable income is zero but for C
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Corp it's 2 million for the marginal
tax rate that's the maximum marginal
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it's gone be 28% since
it is zero there will be no tax that
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will be charged but over here on 2
million 28% is gonna be
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5,60 at the individual level
it's gonna be the escort with the
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company who's gonna get to charge so 2 million into 35% which is
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the marginal rate for S Corp and the tax
is gonna be 7,00,000 but over here
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it's gonna be zero and the qualified
dividend tax 15% zero in
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this case
but again 15% will be charged
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to see corp or so have to avoid this kind of double taxation see there are several
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ways you know for how to avoid the
double taxation first you know the
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smaller double taxation in in
corporations most of the major
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shareholders are you know you can say
employees of the form and does you know
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the earnings are distributed among the
shareholders as so called wages fringe
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benefits so for how to avoid the double
taxation see although the employee is
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liable to pay tax on their income the
corporate deducted the wage and the
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benefits paid as an expense of the
company and thus the you know the avoid
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paying corporate taxes on the amount
second in case of the small business
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the entire amount is distributed to the
employees or the owners account and does
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you know nothing is left which can be
subjected to the corporate or tax right
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and it in in situations when income is
left with the business it has done so
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for financing future growth of the
company though the this amounts come
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under the corporate tax this taxes are
usually lower than the rate paid by
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individuals forth there are large
companies you know whose shareholders
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are not are their employees and the
earnings or corporate profits cannot be
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distributed you know as wage or fringe
benefits are often able to avoid double
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taxation
so this employees can be shown as the
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tax consultant and as the payment to the
consultant come under the tax deductible
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business expense and dividend and
another dividend so the shareholders in
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this situation still pay tax on the
compensation six it is also an option to
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add the shareholders to the payroll you
know as a member of the BOD that's a
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board of director of the company so
there are you know there are some tax
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exempt
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you know for the investor such as like
you know our pension funds and charities
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which are no significant their shareholders in the large corporation so this groups
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have the tax-exempt status which helps
them to avoid you know paying taxes on
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their corporate dividends received now
what about the International double
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taxation C international business if you
see they're often they often face the
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issue of the taxation principle now
their income gets taxed in the country
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where it is earned right
and then this income is again tax where
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it is sent back to the business home
country so in many cases the total tax
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it becomes so high making pursuing
international business as an impossible
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and expensive venture so to avoid this
kind of situations you know countries
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all over the world have made 100 of
double taxation treaties you know just
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to avoid the double taxation which is
based on the model given by the OECD
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which is your Organisation for Economic
Cooperation and Development so you know
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mentioned in the double taxation treaty
by the signatory nations you know they
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are where they are the limit of the
taxation of the international business
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to help in trade between the two
countries to avoid double taxation so
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Indian position what is exactly the
India's position on the double taxation
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see India has comprehensive DTAA that is the double taxation avoidance agreement
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with closely with 88 countries and of
which 85 have already been put into
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action so there are provisions in the
Income Tax Act which provides relief to
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the taxpayers and it helps to avoid
double taxation so let us suppose that
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the interest on the NRI bank deposits
attracts let's say 30 percent right so
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TDS in India so since India has
signatory double taxation treaty with 88
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countries so tax deducted maybe 10 to 15% instead of 30% so again many
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foreign institutional investors will
trade in Indian stock market they are
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operating from Singapore to Mauritius
India has a signatory double taxation
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treaty with the Mauritius you know
following which the capital gains from
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the sale of the shares are taxable in
the country of the residence only of the
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shoulder and not in the country of the
residence of the company whose shares
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have been actually been sold so company
residing in Mauritius selling shares of
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the Indian company
they need not pay tax in India and you
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know since there is no capital gains tax
in Mauritius the company avoids paying
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any other altogether so whatever on a
concluding end in the large countries
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like India where the product product is
transferred from one state to another it
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is used to get taxed in various states
and this that they get rid off of this
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problem of the government India hasn't
really introduced a thing called GST but
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that's it for double taxation so that's
it for this particular topic if you have
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