Double taxation is the imposition of taxes on the same income, asset, or financial transaction by two or more jurisdictions. It can occur in several scenarios, including:

• Corporate and personal level: This happens when income is taxed at both the corporate level and personal level, such as in the case of stock dividends.

• International trade or investment: This occurs when the same income is taxed in two different countries.

• Loans: Double taxation can also happen with loans, such as a 401k loan.

There are two types of double taxation: jurisdictional double taxation and economic double taxation. In the former, tax is imposed by two or more countries as per their domestic laws in respect of the same transaction, income arises or deemed to arise in their respective jurisdictions. In the latter, the same transaction, item of income, or capital is taxed in two or more states but in the hands of different persons.

Double taxation is often seen as a negative element of a tax system, and tax authorities attempt to avoid it whenever possible. To prevent double taxation from occurring to foreign corporations, many countries have signed treaties. Businesses that invest and do business internationally may also experience double taxation, which can be minimized through credits for foreign taxes, territorial taxation, and tax treaties.

C-corporations, or C-corps, are the only business entity that experiences double taxation. Other business entities have different ways of paying taxes that dont involve a second form of payment.