Double Taxation Avoidance Agreement with Norway: All You Need to Know
The Double Taxation Avoidance Agreement (DTAA) is a treaty between two countries that aims to prevent the occurrence of double taxation on the same income in both countries. The DTAA is an essential agreement between countries to promote trade and investment, and Norway has signed DTAA with different countries. This article will discuss the Double Taxation Avoidance Agreement with Norway – what it is, how it works, and its benefits.
What is Double Taxation Avoidance Agreement?
As mentioned earlier, a Double Taxation Avoidance Agreement is an agreement between two countries that aims to eliminate double taxation on the same income in both countries. Double taxation happens when a person or a company is taxed twice for the same income in two different countries. To prevent this scenario, countries sign DTAA, which provides rules to avoid double taxation and promotes trade and investment.
How does DTAA work?
DTAA is a treaty between two countries, and it provides rules on how to avoid double taxation. To prevent double taxation, the agreement provides two methods:
1. Exemption Method: In this method, the country where income is earned exempts the income from tax, and the country of the taxpayer`s residence does not tax the income. For example, if a Norwegian resident earns income in Canada, Canada exempts the income from taxation, and Canada does not tax the income.
2. Tax Credit Method: In this method, the country where income is earned taxes the income, and the country of the taxpayer`s residence gives a tax credit for the income tax paid in the other country. For example, if a Norwegian resident earns income in Canada and paid tax on that income in Canada, Norway gives a tax credit for the tax paid in Canada.
Benefits of DTAA for Norway
Norway has signed DTAA with over 90 countries, including the United States, the United Kingdom, India, and China. The benefit for Norway of signing these agreements is to promote trade and investment by reducing the tax burden on Norwegian residents and companies that do business in other countries. DTAA ensures that Norwegian residents and companies are not taxed twice on the same income, making it easier and more profitable for them to do business globally.
Norway`s DTAA with Denmark is particularly beneficial as the two countries have a strong economic and social connection. The DTAA between Norway and Denmark provides relief from double taxation and promotes trade and investment between the two countries.
Conclusion
DTAA is an essential agreement between countries to promote trade and investment. Norway has signed DTAA with over 90 countries, which provides relief from double taxation and encourages Norwegian residents and companies to invest and do business globally. It is essential to understand the rules of DTAA to ensure that you are not double taxed on your income. If you are a Norwegian resident or company doing business abroad, it is recommended that you seek professional advice to ensure that you can take advantage of the benefits of DTAA.
