Double taxation occurs when a single source of earning is charged twice. An example of double taxation is seen in the case of dividends as they are taxed twice. When the company announces dividends the amount of dividend is paid out of income already taxed. When the dividends are distributed to shareholders the shareholders as a person pays tax on dividend income. This is because the shareholders are treated as a separate entity from the company.
Another example, of double taxation, is observed in international businesses. A multinational company having registered corporate entities in various countries has to pay taxes in their operating countries and when the funds are transferred to their home country these are taxed again.
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