Article 10 of the double taxation agreement is a crucial provision that deals with the taxation of dividends. For businesses that operate in more than one country, the double taxation agreement ensures that they do not have to pay tax twice on the same income. This article outlines the key features of Article 10 and its implications for businesses.
What is Article 10?
Article 10 of the double taxation agreement concerns the taxation of dividends. It establishes the framework for how dividends are taxed in the country of residence of the recipient. The agreement sets out the maximum withholding tax rate that can be applied to dividends, which is typically 15% but can vary depending on the specific agreement.
Under Article 10, dividends are taxed in the country of residence of the recipient, not the country of the company paying the dividends. This means that if a French company pays dividends to a shareholder who is a resident of the United States, the dividends will be taxed in the US and not in France.
Implications for businesses
The provisions of Article 10 have significant implications for businesses that operate in multiple countries. They allow companies to avoid double taxation, which can result in significant cost savings. For example, if a company pays taxes on its profits in the country where it operates, and then has to pay taxes again on the dividends it pays to its shareholders, this can result in a double tax burden.
The provisions of Article 10 also make it easier for companies to attract foreign investment. For example, if a US company is considering investing in a French company, the provisions of Article 10 would ensure that any dividends received by the US company would be taxed in the US and not in France. This makes the investment more attractive since the US company would not face a double tax burden.
In conclusion, Article 10 of the double taxation agreement is an important provision that ensures businesses do not face a double tax burden on their dividends. By establishing a framework for the taxation of dividends, Article 10 provides greater certainty for businesses operating in multiple countries and makes cross-border investment more attractive. As a professional, it is important to understand the key provisions of Article 10 and its implications for businesses.