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Double Taxation Problems
What is double taxation?
is where two separate jurisdictions levy
on the same declared income, assets or financial
. In other words, it could occur with
, capital tax or
. Certain countries have tax
to mitigate the effects of double taxation. In the U.S., the term double taxation usually refers to a situation where tax is levied on a corporation’s profits as well as on the shareholders’ income when they receive a part of this profit. Listed below are a few questions answered by the Experts on double taxation problems.
If a person was to start their own business and wanted to avoid double taxation and protect their assets, would an S-Corporation or a Limited Liability Company (LLC) be better for the person?
In most cases, both an S-Corporation and an LLC would provide asset protection to the owner as long as they followed the proper procedures and adhered to the guidelines. Double taxation generally happens when the corporation is taxed and then the employees of the corporation are taxed as well through their paychecks. To choose what is best for the business, it would be better to speak with an attorney and a CPA in the state where the business is going to be registered to ensure that all guidelines are met to avoid double taxation.
If a person wanted to start a company, would they want to start it in the State of Massachusetts so that it would be cheaper to avoid double taxation? And how would filing for an LLC versus a corporation affect this?
In most cases, filing for an LLC in the State of Massachusetts would cost around $500 and filing for a corporation would cost around $275. If you are
to file for a corporation, it may be better to file as an S-Corp so that the business may get pass-through taxation and avoid double taxation. However, filing for an LLC is a less complicated process due to the absence of shareholders. If you have many shareholders, you may need the assistance of an attorney. For more information on this, visit
What is the difference between an S-Corp and a C-Corp?
An S-Corp is generally considered a pass-through entity where all the income passes through the shareholders so the company doesn’t pay taxes. Double taxation does not usually occur here because the only taxes that are paid are the
of the shareholders. A C-Corp, on the other hand, is generally taxed as a separate entity and files a
return. Here, the shareholders have to pay taxes on their personal income as well as on after-tax profits given to them by the corporation in the form of
—leading to double taxation.
What is the difference between an LLC and a corporation?
A corporation and an LLC are both considered limited liability entities as well as flow-through entities. In the case of a corporation, you could choose to be treated as an S-Corp to avoid double taxation. However, an S-Corp is more limited in terms of the kinds of shareholders that they have, so you may consider an LLC because they have more flexibility if you need to add shareholders later on.
In business, there are several
and regulations that govern double taxation. While you may have come across some of the problems related to double taxation above, there could be others that pertain to your own unique situation. If you need more clarity on this topic, put your questions to an Expert for quick insights and information to deal with your own case.
Recent Double Taxation Questions
I want to know if severance payments paid in the UK are
Hi i want to know if severance payments paid in the UK are taxable here. I am a Green Card holder.
Under the UK-US treaty an advisor told me that the UK treats the tax as 'other', not income as such (even though it came to me in the current year it was 'earned' over 19 years.) It would therefore NOT be taxable in the UK.
Would the US count it as 'income' - especially as i earned most of it (17 out of the 19 yeras of service with the company were in the UK)?
My client is a US citizen residing in Canada. He has T-4
My client is a US citizen residing in Canada. He has T-4 Canadian income that is subject to CPP tax and US self-employment income. Does he have to pay SS tax on both his T-4 income and his US self-employment income?
Tax question related to expats returning home to NZ to
Tax question related to expats returning home to NZ to retire. Our Background. In August 2016 my husband and I are returning back to NZ to retire. We will have been overseas for just over 26 years after leaving NZ in Jan 1989. Currently we live in the
UAE working in Dubai. During our period overseas we have bought 2 investment properties that have been continually rented and in which we have never lived in. Consequently, we have a NZ bank accountant for transactions and savings. Each year our accountant
puts in a IRD tax return as we pay NZ tax on profit. We regularly visit NZ to see family and friends and check up on our properties. We have never stayed any longer than a month in any particular year during out 26 years overseas. Question 1 Does the 183 day
tax rule still apply to us since we already pay tax and have IRD numbers? Question 2 Will we have to pay any tax on our Dubai income even if there is a double tax agreement between NZ and the UAE? (DTA) Question 3 If the 183 rule does apply to us (effective
from Feb 2017 in our case) what tax would be paying as from the point of entry into NZ we won't be working but hopefully enjoying retirement. i.e. will we just continue paying tax on our NZ investments or 6 months of our previous year's work in Dubai. Thank
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