DEFINITION of 'National Treatment'

A concept of international law that declares if a state provides certain rights and privileges to its own citizens, it also should provide equivalent rights and privileges to foreigners who are currently in the country. This concept of equality can be found in bilateral tax treaties and also in most World Trade Organization agreements.

BREAKING DOWN 'National Treatment'

For example, if country A provides special tax breaks for its fledgling pharmaceutical industry, all pharmaceutical companies that have operations in country A will be entitled to the tax breaks, regardless of whether the company is domestic or foreign.

In some situations, national treatment may not be such a great thing. For instance, suppose that a state has a law that allows it to expropriate property. Under national treatment, a foreign firm would technically still be subject to the expropriation law. However, depending on the country, other laws may exists that could limit national treatment to only the upside benefits.

RELATED TERMS
  1. IRS Publication 901

    A document published by the Internal Revenue Service (IRS) that ...
  2. IRS Publication 597

    A document published by the Internal Revenue Service (IRS) that ...
  3. Privileged Communication

    Interaction between two parties in which the law recognizes a ...
  4. Bilateral Tax Agreement

    An arrangement between two jurisdictions that mitigates the problem ...
  5. Franchise Tax

    A tax levied at the state level against businesses and partnerships ...
  6. Bilateral Trade

    The exchange of goods between two countries. Bilateral trade ...
Related Articles
  1. Taxes

    Understanding Taxation Of Foreign Investments

    Technically, any gains from foreign investments owned by an American citizen are subject to tax by the company's home country as well as the IRS. However, the Foreign Tax Credit enables you to ...
  2. Managing Wealth

    Advantages & Disadvantages Of Dual Citizenship

    When does it make sense to be a citizen of the U.S. and somewhere else? Here are the plusses and negatives of a dual citizenship.
  3. Investing

    How Property Rights Affect Economies

    Property rights are laws governments create that enable investors to control, benefit from, and transfer property.
  4. Taxes

    Get A Tax Credit For Your Foreign Investments

    The foreign tax credit provides a break on investment income made and taxed in a foreign country.
  5. Personal Finance

    State Laws Dictate Division Of Joint Property

    In breakup, divorce or death, community or common law will determine how property is divided.
  6. Insights

    Ever Wanted to Own International Stocks? Here's How

    Tips and strategies for users to trade in different exchanges around the world.
  7. Taxes

    5 Countries With Low Taxes

    These countries manage to keep their overall tax levels in check, and some of them have done well because of it.
  8. Taxes

    Tax-Efficient Strategies For International Clients

    In a globalized world, international clients seek to diversify holdings by accessing U.S. markets. Creative strategies will help optimize tax positioning.
  9. Taxes

    The Impact Of U.S. Corporate Taxation On Investment Decisions And CFC Transfer Pricing

    To avoid taxation, businesses do careful tax planning, taking into consideration more than one country's taxation system.
  10. Insights

    British "Snooper's Charter" Bill Becomes Law

    The bill, which permits increased surveillance by the British state, was passed amid growing opposition.
RELATED FAQS
  1. Can the government tax your capital gains from other countries?

    Learn more about how capital gains earned in foreign countries are treated by the IRS. Discover examples of special tax situations ... Read Answer >>
  2. What are the tax incentives or disincentives to vertical integration?

    Merging companies through vertical integration can provide companies in the United States with a marginally advantageous ... Read Answer >>
  3. How do businesses decide whether to do FDI via green field investments or acquisitions?

    When businesses decide to expand their operations to another country, one of the more important dilemmas they can face is ... Read Answer >>
  4. How do I file taxes for income from foreign sources?

    If you are a U.S. citizen or resident alien, your income (unless exempt), including what's earned outside the U.S., is usually ... Read Answer >>
Trading Center