In order to conclude an agreement to avoid double taxation and to prevent income tax evasion, double taxation can generally occur when the same income is taxed at both the corporate and personal levels. Companies are separate legal entities from their shareholders, from which companies and individuals pay taxes on their annual income. In the case of international trade, these revenues can be taxed in the country where they are collected and then reintroduced if they are repatriated to the company`s country of origin. Thanks to such double taxation, the international business becomes too luxurious. On the other hand, this can also apply to an individual. A person who earns income must pay taxes in the country where the income is collected, as well as in the country where he or she is a citizen. Thus, responsibility for the payment of income tax on the same income is also assumed in the country of income and in its country of origin. The Double Taxation Prevention Convention (DBAA) is a tax treaty signed between two countries to address income tax eligibility issues and to help taxpayers avoid twice the payment of income tax on the same income, property and financial services transactions in two separate jurisdictions. The DTAA intervenes in cases where a subject is a citizen/resident in one country but has a source of income in another country. Although the terms of all contracts are not entirely identical, they are generally either to avoid double taxation altogether or to apply reduced rates. It therefore appears that the DTAA clearly promotes the free movement of international trade and international investment, while providing benefits to each contracting country.
It increases the transparency of income tax collection in both countries and their rational distribution. 2. This Convention also applies to all identical or substantially similar taxes levied by one of the contracting parties after the date of the signing of this Convention, in addition to the taxes covered in paragraph 1 or in your place. The competent authorities of the contracting states inform each other of any substantial changes to their respective tax laws. This issue was highlighted by the Finance Act 2018 by introducing an amendment to paragraph 56 of the 1984 Income Tax Regulation. It states that if the Board of Directors of Payments under this section is satisfied, on request on this behalf, whether the non-resident is not subject to tax on Bangladeshi territory under a tax agreement or for some other reason, or that he is subject to a reduced rate in Bangladesh, he may issue a certificate certifying that the payment must be made without deduction or, in applicable cases, with a deduction at the reduced rate indicated in the certificate. It also states that the tax deducted under this section is considered to be the minimum tax debt of the beneficiary for income for which the deduction is granted and that it cannot be repaid or decompracated or adjusted against a debt. As a result, banks should receive the recipient`s certificate before authorizing tax benefits under the DBAA, while they transfer the money abroad. This paragraph does not affect the corporation`s taxation on the profits on which the dividends are paid.