Tax Treaty

  

Categories: Tax, International

If you invest in foreign assets, and are then taxed both at home and abroad, this will, um...make you sad. And governments don’t like sad investor-citizens.

A tax treaty is an agreement between two countries which resolves this potential double-taxation issue. Not only do countries want to make sure foreign investors feel welcome, but also that other types of wealth aren’t double-taxed: income taxes, estate taxes, capital taxes, and wealth taxes.

Tax treaties not only help little investor Joe, but also businesses—the big money movers. They help the countries involved, too, in the same way that free trade (with few tariffs and quotas and such) does.

The OECD, the Organization for Economic Co-operation and Development, developed a tax model for its almost three-dozen wealthy countries, which is referenced by other nations when writing up their tax treaties. In general, the OECD tax treaty model benefits the country with higher capital exports than the one with fewer benefits.

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schoolyard instead of the big-boned third-grader

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we have exports this guy and imports this guy if two countries have a balance

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three future NFL linemen weigh about the same as eleven future tax auditors yeah [Linemen players and tax auditors in a see-saw]

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but that's rarely the case when countries trade among each other

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and if you're on the seesaw you want to be heavy like fat with feet firmly

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planted on the ground where you are exporting or selling to another country [Goods travelling to foreign countries]

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a whole lot more stuff than you're importing what you want is to be

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collecting boatloads of their currency or oil or velcro kilts from Scotland and

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as you capture more and more of their trade or wealth [Wealth sucked into the US]

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the powerful imbalanced one well that'd be you here you get to have more and

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more influence on them and the world they live in is there a way to gain this

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system cheat? well sorta yeah politicians and governments get very nervous when

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the balance of trade is not in their favor and they have the ability to pile [Imports and exports pile on a see-saw]

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a bunch of books on their side of the seesaw to help their skinny accountants

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