Double Taxing

AAA

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.

BREAKING DOWN '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.

RELATED TERMS
  1. IRS Publication 542

    A document published by the Internal Revenue Service (IRS) that ...
  2. Tax Shelter

    A legal method of minimizing or decreasing an investor's taxable ...
  3. Regulated Investment Company - ...

    A mutual fund, real estate investment trust (REIT) or unit investment ...
  4. Income Tax

    A tax that governments impose on financial income generated by ...
  5. Marginal Tax Rate

    The amount of tax paid on an additional dollar of income. The ...
  6. Capital Gain

    1. An increase in the value of a capital asset (investment or ...
Related Articles
  1. Taxes

    Tax-Saving Advice For IRA Holders

    Be informed about benefits and deductions that may apply to you and avoid costly mistakes on your return.
  2. Taxes

    Using Tax Lots: A Way To Minimize Taxes

    The method of identifying cost basis can help you to get the most out of reduced tax rates.
  3. Taxes

    Dividend Tax Rates: What Investors Need To Know

    Find out how legislation enacted in 2003 is benefiting both investors and corporations, and when it's scheduled to expire.
  4. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  5. Professionals

    The Rich Get Richer: Global Wealth is Rising

    Global wealth is rising and expected to continue. Advisors should know that the wealthy value fee transparency, performance.
  6. Investing News

    Understanding How Mutual Funds Pay Dividends

    The process by which mutual fund dividends are calculated, distributed and reported is fairly straightforward in most cases. Here's a look.
  7. Investing News

    How 'Honesty' Could Pay off for Jessica Alba

    Is it possible that Jessica Alba is one of the savviest businesswomen on the planet?
  8. Investing Basics

    What's a Holding Company?

    A holding company is a corporation that owns enough voting stock in another company to control its management and policies.
  9. Term

    What is Wealth Management?

    Wealth management combines financial and investment advice, accounting and tax services, and legal and estate planning.
  10. Professionals

    Wealthy Clients are Thirsty for Better Advice

    New research uncovers the ultra-weathy's fast-growing demand for better, in-depth investment advice.
RELATED FAQS
  1. How are non-qualified variable annuities taxed?

    Non-qualified variable annuities are tax-deferred investment vehicles with a unique tax structure. After-tax money is deposited ... Read Full Answer >>
  2. When does the holding period on a stock dividend start?

    The holding period on a stock dividend typically begins the day after it is purchased. Understanding the holding period is ... Read Full Answer >>
  3. In what instances does overhead qualify for certain tax allowances?

    Businesses are just as keen as anyone else to keep their tax burdens low by any means possible. Overhead expenses often qualify ... Read Full Answer >>
  4. When might an abatement be granted by the IRS?

    The Internal Revenue Service (IRS) frequently imposes interest and penalties due to the late filing of a tax return, underpayment ... Read Full Answer >>
  5. What is the importance of calculating tax equivalent bond yield?

    Fixed-income investors measure portfolio returns using yields. Since most bonds do not produce high returns like equity markets, ... Read Full Answer >>
  6. In what situations must taxes be paid on a stock dividend?

    Stock dividends are taxable income unless the stocks paying the dividend are held in a qualified retirement plan, such as ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  2. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  3. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  4. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  5. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
  6. Wedding Warrant

    A warrant that can only be exercised if the host asset, typically a bond or preferred stock, is surrendered. Until the call ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!