How do domestic and international tax systems interact?
Domestic and international tax systems interact in two fundamental ways. On one hand, a domestic tax system affects the taxes that non-resident individuals and companies pay when they operate within the jurisdiction of the domestic tax system. Depending on the jurisdiction, this will involve not only federal taxes, but also state and local taxes. On the other hand, a domestic tax system can, under certain circumstances, also affect the taxes that domestic entities pay when they operate in other countries. This usually occurs through the implementation of treaties and other agreements between countries. In North Carolina, domestic and international tax systems interact mainly through the implementation of federal laws. For instance, the Internal Revenue Code (IRC) applies both to domestic entities and to non-residents when they operate within the United States. The IRC provides the legal framework under which taxes are calculated and, in the case of some international entities, taxes paid in foreign countries can be credited against the taxes they owe to the United States. North Carolina also has specific tax laws that may affect international entities operating within the jurisdiction. For instance, the state has a withholding tax, which applies to non-resident individuals and corporations who are operating in the state, even if they are not subject to the IRC. Furthermore, North Carolina has entered into several international tax treaties, which help to provide certainty in regards to the taxation of certain international transactions.
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