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Double taxation is the levying of tax by two or more jurisdictions on the same income, asset or financial transaction. This is a common problem in international business. Income is taxed in the country in which it is received, and then tax is collected again upon repatriation to the country of origin of the business. This makes business unprofitable, entails the death of entrepreneurship and negatively affects the economies of countries. Thus, double taxation is recognized as a negative element of the tax system, and in order to prevent the adverse consequences of the existence of such a tax regime, states enter into international agreements on the avoidance of double taxation.
What is tax residency?
The term «tax resident» means that the country where a person is recognized as such a resident has the right to levy taxes from him. It is important to know your tax residence in order to correctly pay taxes in the required country and to know about the possibility of offsetting the already paid tax. Please note that there are some countries that do not levy all taxes on their tax residents, but only levy taxes on certain categories (for example, territorial) income. If you are a tax resident of Belarus, then you are obliged to pay tax on all your income here, regardless of the state in which this profit is received. You can sell a car in one country, real estate in another and a business in a third - however, these incomes will still need to be taken into account when calculating the tax in the Republic of Belarus.
As a rule, if a person meets certain conditions of “physical presence” in a country or has certain types of connections (objective or subjective), then the government of that country has the right to tax that person. If you spend enough time in the country (for example, 183 days a year or more, regardless of what you do in the country) or if you have enough connections with the country (say, you have a spouse, children and a job in the country), then the chances are high that you will become a tax resident. In some cases, if you live in a country, you will be considered a tax resident. In order to be recognized as a tax resident of Belarus, you must spend more than 183 days in the country in a calendar year. It should be borne in mind that the days of departure to other countries for rest, treatment, business trips are included in this period.
Tax residency certificate
If a foreign company wants to apply the tax benefits provided for by international agreements, it must provide a tax certificate (statement) of tax residence. This document confirms that the organization is a resident of the country (has a permanent location there), with which Belarus has entered into a tax agreement. Confirmation of permanent residence in order to avoid double taxation is carried out by the tax authorities by issuing to payers a certificate of permanent location (certificate of tax residence). The payer can request certificates as many times as he needs them.
The certificate is provided to Belarusian organizations free of charge. To do this, you need to submit an application to the tax authority (at the place of registration).
In order to apply the tax benefits provided for by international agreements, a person must confirm the fact of permanent residence in Belarus during the tax period with an appropriate certificate.
In order to confirm the permanent location of a company or a non-resident individual, it is necessary to submit to the tax authority at the place of registration of the tax agent a document confirming permanent residence in a foreign state with which Belarus has an international agreement. Such confirmation can be provided both before and after tax. In the second case, it is possible to submit an application for a refund or offset of the overpaid tax amount within three years.
Confirmation of an electronic certificate of tax residency
It is possible to provide confirmation to the tax authority in the form of an electronic document. In this case, it is sent as an attachment to the tax return (calculation) for income tax, if the tax agent submits it in electronic form, or to the letter of the tax agent drawn up in the form of an electronic document.
Accordingly, the way in which a tax agent submits a confirmation to a tax authority at the place of registration does not depend on the form in which a tax resident of a foreign state received confirmation of his tax status from a competent authority of a foreign state.
What is double taxation?
Double taxation is a situation in which the same financial assets or income is taxed at two different levels (for example, personal and corporate) or in two different countries. The latter can be the case when income from foreign investment is taxed both by the country in which it is received and by the country in which the investor lives. To prevent this type of double taxation, many countries have developed double tax treaties that allow income recipients to offset tax already paid on investment income in another country against their tax liabilities in their country of residence.
There are two types of double taxation - economic and legal. In the first case, the same income of two different entities is taxed twice. In the second, the income of one entity is taxed in several countries.
At present, all countries of the world use two fundamentally different approaches to form their tax system: the principle of residence and the principle of territoriality. The first principle assumes that taxes are levied on all world income of residents of the country. The second principle they are charged only at the place of economic activity. Due to the simultaneous existence of these principles in different states, the problem of double taxation arises.
Double Taxation Treaties
Double taxation is recognized as a negative element of the tax system. In order to prevent its occurrence, countries conclude agreements. The Agreement on the avoidance of double taxation is an important intergovernmental document on taxation issues that optimize the tax regimes of the contracting states. They, as a rule, are concluded for the development of economic cooperation between states. Double Tax Treaties distribute tax rights between countries. However, they do not create new requirements. Rather, when there are competing tax rules, they define the tax law of only one of the participating countries to prevent double taxation.
A number of agreements on avoidance of double taxation concluded between the Republic of Belarus and foreign states are in force in Belarus, and the priority of the norms of international treaties over the norms of Belarusian law is recognized.
List of countries
The list of countries with which the Republic of Belarus is bound by agreements on avoidance of double taxation: Austria, Azerbaijan, Armenia, Bangladesh, Bahrain, Belgium, Bulgaria, Great Britain, Hungary, Venezuela, Vietnam, Georgia, Denmark (Belarus is bound by an agreement as the legal successor of the former USSR), Egypt, Israel, India, Indonesia, Iran, Ireland, Spain (Belarus is bound by the agreement as the successor of the former USSR), Italy, Kazakhstan, Qatar, Cyprus, China, Democratic People's Republic of Korea, Korea, Kyrgyzstan, Kuwait, Laos, Latvia, Lebanon, Libya (the agreement did not enter into force, as there is no written notification of the completion of the procedures necessary for entry into force), Lithuania, Macedonia, Malaysia (Belarus is bound by the agreement as the successor of the former USSR), Moldova, Mongolia, the Netherlands, the United Arab Emirates , Oman, Pakistan, Poland, Russia, Romania, Saudi Arabia, Serbia, Singapore, Syria, Slovakia, Slovenia, Sudan (no agreement entered into o into force, since there is no written notification of the completion of the procedures necessary for entry into force), the USA (Belarus is bound by an agreement as the successor of the former USSR), Tajikistan, Thailand, Turkmenistan, Turkey, Uzbekistan, Ukraine, Finland, France (Belarus is bound by an agreement as the successor of the former USSR), Germany, Croatia, Czech Republic, Switzerland, Sweden, Sri Lanka, Ecuador, Estonia, Yugoslavia (since June 2006, the succession of international treaties of the Federal Republic of Yugoslavia passed to the Republic of Serbia.), South Africa, Japan (Belarus is bound by an agreement as the successor of the former USSR).
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