Are there tax treaties between countries?

Yes, there are tax treaties between countries. Tax treaties are agreements between two countries regarding their respective tax systems. The agreements exist to ensure that citizens of both countries are not subject to double taxation by both countries. Tax treaties may be bilateral (between two countries) or multilateral (among several countries). In the United States, tax treaty agreements are referred to as “Income Tax Conventions.” In Virginia, income tax treaties are primarily between the United States and another country. Generally, they provide some degree of relief from double taxation (taxation by two governments). Generally, there are specific rules regarding which country has the right to tax various types of income, such as: dividends, interest, royalties, etc. Income tax treaties also provide guidance on how tax credits should be apportioned between two countries and which country should receive taxpayer information from the other party. In short, tax treaties are agreements between two countries that provide definitions of income, residency, and other relevant information to help prevent double taxation. The treaties also provide guidance on how and when taxpayers must report income earned in another country and how to apportion tax credits between the two countries.

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