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- 5 Marks
Question
Countries A and B are contemplating a Double Taxation Agreement (DTA). The two countries are of the view that the Double Taxation Agreement will create a lot of tax benefits to citizens and other persons in both countries. Others have criticized this move as counter-productive and not worth the time of either country.
Your inputs are being solicited as an ICAG Finalist and a patriotic citizen of Country A to provide the benefits to be put on the website of the Ministry of Finance of Country A to enable people to read, appreciate, and support the agreement.
Required:
Explain FIVE (5) benefits that the two countries stand to gain from this arrangement.
Answer
The benefits of a Double Taxation Agreement (DTA) between Countries A and B include:
- Fiscal Certainty for Investors: It creates fiscal certainty for investors in the affected countries, ensuring they understand the tax obligations in each country.
- Tax Exemptions: It provides for certain income to be exempt from tax in one of the contracting states, thereby avoiding double taxation.
- Promotion of Foreign Investment: The DTA promotes foreign investment by providing clear rules on how income will be taxed in both countries, making investment decisions easier.
- Assistance in Revenue Collection: Countries may obtain help in revenue collection from the contracting state, facilitating the enforcement of tax laws.
- Prevention of International Tax Avoidance: The DTA specifies income to be taxed at lower rates and prevents international tax avoidance and evasion by providing clear rules for taxation.
- Tags: Double Taxation Agreement, International Taxation, Tax Benefits
- Level: Level 3
- Topic: International taxation
- Series: NOV 2019
- Uploader: Theophilus