Question

Double taxation and any tax advantages to incorporating

Answer 1

ASNWER:

Double taxation occur when an individual has to pay taxes twice or more for the same asset, income, or financial transaction in different countries. It can occur when income is taxed at both the personal level and corporate level.

Double taxation arises because corporations are categorised as a separate legal entities from their shareholders. As corporations, just like individuals pay taxes on their annual earnings. When corporations pay out dividends to shareholders, such payments of dividend incur income-tax liabilities for the shareholders who receive them, although the earnings had already taxed at the corporate level. Many people incorporate it as fair tax structure because they are separate legal entities. Moreover proponents of keeping the "double taxation" on dividends sees it as moving towards equality because wealthy people could enjoy a good living off the dividends they received from owning huge common stock, yet pay nearly zero taxes on personal income.