Double Taxation

Double Taxation means:
an effect of federal tax law whereby a corporation's earnings are taxed at the corporate level, then taxed again as dividends of shareholders.

Example of Double Taxation:

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A corporation earns $25,000 of net income. The corporation pays a $3,750 (15%) corporate income tax, then distributes $21,250 in dividends to its shareholders, who pay a $7,650 (36%) tax on this dividend income. Thus the corporation's earnings are subject to double taxation. See: Tax treaty.

DOMESTIC and INTERNATIONAL DOUBLE TAXATION

Domestic double taxation arises when comparable taxes are imposed within a federal state by sovereign tax jurisdictions of equal rank. International double taxation arises when comparable taxes are imposed in two or more states on the same taxpayer in respect of the same taxable income or capital, e.g. where income is taxable in the source country and in the country of residence of the recipient of such income.

ECONOMIC and JURIDICAL DOUBLE TAXATION

Double taxation is juridical when the same person is taxed twice on the same income by more than one state. Double taxation is economic if more than one person is taxed on the same item.

See the entries Income Tax and State Income Tax in the American Encyclopedia of Law.

See Dividend in the American Legal Encyclopedia and Dividend in the World Legal Encyclopedia.