Conduit approach

Tax Glossary Definition

Conduit approach

Conduit Approach – A taxation principle designed to prevent double taxation by recognizing certain entities—such as partnerships, trusts, or limited liability companies—as pass-through structures. Under this method, the entity itself is not taxed; instead, its income is allocated directly to the owners or beneficiaries, who are responsible for paying tax on their respective shares.

Example: In many tax systems, partnership income bypasses taxation at the entity level and is instead taxed in the hands of each partner according to their ownership share.

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