What is the principal purpose of a double taxation agreement between two countries?
Correct answer: D. To prevent the same income being taxed twice
- A. To replace domestic tax legislation
- B. To eliminate all taxes on foreign income
- C. To increase customs duties on imports
- D. To prevent the same income being taxed twice
Explanation
A double taxation agreement allocates taxing rights and provides relief when the same income could be taxed in both countries. It does not normally abolish all domestic taxes or replace national tax laws.
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About Taxation
Taxation covers the principles used to assess and collect taxes from individuals, businesses and transactions, with emphasis on income tax and sales tax concepts in Pakistan. Questions involve taxable income, exemptions, deductions, tax liability, withholding, returns, assessment, tax avoidance versus evasion, and the distinction between direct and indirect taxes.
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