Tax Treaty

A tax treaty is an agreement between two countries designed to prevent double taxation of income. It establishes rules for which country has the right to tax specific types of income, like wages or dividends, when a person or business operates in both countries. By clarifying tax obligations, these treaties encourage international trade and investment, making it easier for individuals and companies to work across borders without facing excessive tax burdens. Essentially, tax treaties help ensure that income is taxed fairly, promoting economic cooperation between nations.