Avoidance of double taxation

Avoidance of double taxation – rules applied in order to eliminate double taxation of the same income. Exemption method or credit method are applied in order to avoid international double taxation. International double taxation issues are resolved by international bilateral treaties on avoidance of double taxation on income  and prevention of tax avoidance, as well as European Union directives, such as Council Directive 90/435/EEC on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States and Council Directive 2003/49/EC on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States. Also, in the internal laws states can choose the system for elimination of national double taxation (e.g., classical, alternative, different rates, partial abolition of double taxation or credit system).