Double Taxing

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DEFINITION of 'Double Taxing'

A tax law that causes the same earnings to be subjected to taxation twice. A company's income is taxed initially at the corporate level and then the shareholders and investors are taxed on the distributions they receive from the company. Double taxation is argued by many to be an unfair and inefficient method of taxation in many countries and jurisdictions.

INVESTOPEDIA EXPLAINS 'Double Taxing'

While in most cases double taxation relates to company profits and shareholder gains, it can also be the case for dividends. Double taxation can also occur in situations where a company has subsidiaries operating in different countries, where that country may tax the subsidiary and the parent firm is then taxed on the remaining profits in its domestic country. This can then be followed by the taxation of shareholders on any capital gains they experience from holding the stock.

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