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.

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.

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 FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. How is residual value of assets taxed?

    Residual value has several meanings, each with its own potential tax consequences. Tax laws vary between jurisdictions, so ... Read Full Answer >>
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. Retirement

    Top Reasons Not to Roll Over Your 401(k) to an IRA

    Five cases in which keeping your plan in place – or employing another non-IRA strategy – is the better move.
  5. Taxes

    Top Tax Tips to Deduct Investment Management Fees

    Investment expenses can be deducted by those who meet three main criteria. Here's what they are and how they work.
  6. Investing Basics

    Understanding the Capital Gains Tax

    A capital gains tax is imposed on the profits realized when an investor or corporation sells an asset for a higher price than its purchase price.
  7. Retirement

    5 Reasons to Convert a Roth To a Traditional IRA

    Here's a quintet of cases when the traditional IRA trumps the Roth version.
  8. Professionals

    Target-Date vs. Index Funds: Is One Better?

    Target-date and index funds are difficult to compare because they differ in both structure and objective, though investors can compare two specific funds.
  9. Investing

    4 Structured Product Types Wealthy Clients Love

    High-net-worth investors find structured products appealing for a variety of reasons. Here's a look at four types.
  10. Investing Basics

    Top 3 Ways to Manage Lump-Sum Windfalls

    Have you just had a load of money drop into your lap? If so, several enviable options are available to you. Which one is the best choice?

You May Also Like

Hot Definitions
  1. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  2. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  3. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  4. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  5. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  6. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
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!