A tax treaty:

Question

A tax treaty:

Quizplus · Accepted Answer

A tax treaty is an agreement between two countries that specifies which items of income will be taxed by the authorities of the country where the income is earned. It helps to avoid double taxation and provides guidelines for determining tax residency, withholding rates, and other tax-related issues between the two countries. Option A is incorrect as it refers to a foreign tax credit, which is a mechanism that allows taxpayers to reduce their home country's taxes by the amount of taxes paid to the foreign government. Option B is incorrect as it contradicts the purpose of a tax treaty and may result in double taxation. Option D is incorrect as it is not generally true for all tax treaties and depends on the specific provisions of each treaty.

A Tax Treaty