Double taxation, economic and juridical

Double taxation refers to situations where the same income or financial transaction is subjected to tax more than once. It can occur in two main forms—economic and juridical double taxation—depending on how and where the taxation arises. Economic Double Taxation This type of double taxation arises when the same income is taxed multiple times in the hands of different taxpayers, typically at different stages of the income cycle, such as production, distribution, or profit allocation.

Example: A company’s profits may be taxed at the corporate level, and when those profits are distributed as dividends, shareholders are taxed again on the same income they receive. Juridical Double Taxation Juridical double taxation occurs when the same taxpayer is taxed on the same income by more than one jurisdiction, usually because of overlapping tax residency or source-based taxation rules.

Example: An individual earning income in two countries may face tax in both jurisdictions if each nation’s tax law treats the income as taxable under its own rules.