Each country has its own tax laws. Nigeria, for example, applies the principle of residence, while some countries apply the source principle to decide whether a taxpayer should pay taxes in that jurisdiction. Therefore, if a business is tax resident in Nigeria and generates income or profits in the United States, this could lead to double taxation or double non-taxation. Double taxation occurs when a given income or benefit is taxed in two jurisdictions, i.e. income (from the country of origin) or in the state of residence. On the other hand, there is double non-taxation when a taxpayer steals income taxes or income in the source state and in a resident state. These issues can reduce the flow of foreign direct investment and international taxation has created a tax treaty as a remedy. One of the objectives of tax treaties is to avoid double taxation; combating tax evasion and double non-taxation; The transfer of primary tax rights to a country; mutual assistance in the management and enforcement of tax legislation between countries. These objectives ensure that both countries benefit from the resulting increase in trade and investment. In all circumstances, the conclusion of any contract is usually preceded by negotiations between the countries concerned. On the basis of international trade conventions, each country is allowed to adopt laws, rules and regulations that govern its trade relations with other countries so that it can achieve the desired strategic objectives.

An important aspect of these trade laws is the tax legislation that governs how the incomes of individual countries are taxed. Since the laws of one country may differ from those of another country, there may be potential conflicts that may impose the same income in different countries. This requires international conventions or treaties to establish conditions under which residents of different countries where conflicts are minimal can trade with each other and reduce the frequency of double taxation on their income. A tax treaty is a written agreement between two countries that helps reduce the risk of double taxation and double non-taxation. In addition, a tax treaty indicates the income category, the tax treatment where that income would be taxable (at residence, at source or both) and the time of taxation. It also provides for the Mutual Agreement Procedure (MAP) for the resolution of disputes arising from the implementation of the agreement or the distribution of tax duties. Nigeria has tax agreements with fourteen (14) countries. These include Belgium, Canada, China, the Czech Republic, France, Italy, the Netherlands, Pakistan, the Philippines, Romania, Signature, Slovakia, South Africa and the United Kingdom.

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