Foreign Language Translations and Double Tax Treaties

We’ve blogged about multilingual financial translations and legal translations, and about translation of comparative terms from different legal systems. Double taxation agreements, often times referred to as double taxation treaties, are designed to protect against the risk of an individual or corporation from being taxed twice where the same income is taxable in two countries. Across the world there are over 1,300 double taxation treaties in place, each negotiated between two individual countries.

The need for these agreements arises because many countries tax both the income of their residents as well as any income arising in their borders. This isn’t a problem when all an individual’s income is generated within one country. But, in today’s global society, this is often not the case. Instead, a resident of the U.S. may have income generated in Belgium. In such a case, not only will the U.S. want to tax all the individual’s income, Belgium will want to tax the income generated within its borders. The result: the individual is taxed twice on the Belgian-earned income.

With double taxation treaties, the individual will only pay tax once. Although every tax treaty is different, the majority hold that the country of residence is where taxes will be paid. At the same time, most tax treaties require tax returns to be filed in both countries – which is where things get complicated, especially when multiple languages are used. This is where foreign language translations play an essential role. For example, a U.S. citizen residing and earning foreign income in Belgium will have to file a Belgian tax return and have a foreign language translation of it in French and/or Dutch – along with supporting documentation from the U.S. return. At the same time, he or she will have to file in the U.S., which will require a foreign language translation of the Belgian returns.

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