A tax agreement or tax treaty usually means a legal provision where the residents of a foreign country can be taxed at a reduced rate and in some cases may also be exempt from taxes on particular sources of income within the country.
This is done in order to avoid double taxation and the foreign resident this way does not have to pay taxes in his motherland and also his current country of residence. These agreements include different types of taxes like income, sales tax, value added tax, inheritance tax and so on.
These agreements may be entered by two countries where they are known as bilateral tax agreements or between more than two countries known as multi-lateral tax agreements. The agreement must contain points like the names of the taxes which are covered in the agreement, the name of the resident and what benefits he is eligible for, the amount of reduction of tax rates and the conditions under which he will be taxed.
[Also Read:Tax Assurance Agreement]
Sample Tax Agreement
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