Double taxation can be economic, which refers to the taxing of shareholder dividends after taxation as corporate earnings. This type of situation means that the benefit realized by a company is subject to double taxation.
Double taxation can also be legal, which means that two countries would consider that a single person is a tax resident. Therefore, taxes on income are imposed by one country, after the same income has already been taxed by another country. However, many countries have signed treaties to prevent this form of double taxation from occurring to foreign corporations. International conventions aim to determine which country the individual must pay and create mechanisms for the elimination of double taxation.
See also: Income
[Last updated in January of 2022 by the Wex Definitions Team]