Tax treaty
Many countries have agreed with other countries in treaties to mitigate the effects of double taxation (Double Tax Avoidance Agreement). Tax treaties may cover income taxes, inheritance taxes, value added taxes, or other taxes. Besides bilateral treaties, also multilateral treaties are in place: Countries of the European Union (EU) have also entered into a multilateral agreement with respect to value added taxes under auspices of the EU, while a joint treaty on mutual administrative assistance of the Council of Europe and the OECD exists open to all nations. Tax treaties tend to reduce taxes of one treaty country for residents of the other treaty country in order to reduce double taxation of the same income. The provisions and goals vary highly; very few tax treaties are alike. Most treaties:
define which taxes are covered and who is a resident and eligible for benefits,
reduce the amounts of tax withheld from interest, dividends, and royalties paid by a resident of one country to residents of the other country,