Capital Ethiopia Newspaper

Ethiopia agrees with four nations to eliminate double tax

Foreign business owners from four countries will soon be free from paying double taxes on a single gain. The House of Peoples Representatives ratified a double taxation avoidance agreement between Ethiopia and four other countries; China, India, Egypt and Sudan last Thursday.
Double taxation is the levying of tax by two or more jurisdictions on the same declared income. This double liability is often mitigated by tax treaties signed between two or more countries. 
It is not unusual for a business or individual who is resident in one country to make a taxable gain in another. This person may find that they are obliged by domestic laws to pay tax on that gain locally and pay again in the country in which the gain was made.
Since this is inequitable, many nations make bilateral double taxation agreements with each other. In some cases, this requires that tax be paid in the country of residence and be exempt in the country in which it arises. In the remaining cases, the country where the gain arises deducts taxation at source (“withholding tax”) and the taxpayer receives a compensating foreign tax credit in the country of residence to reflect the fact that tax has already been paid. To do this, the taxpayer must declare itself (in the foreign country) to be a non-resident there. So the second aspect of the agreement is that the two taxation authorities exchange information about such declarations, and so may investigate any anomalies that might indicate tax evasion, according to Wikipedia.
For instance India has comprehensive Double Taxation Avoidance Agreements (DTAA) with 83 countries. This means that there are agreed rates of tax and jurisdiction on specified types of income arising in a country to a tax resident of another country.
Double taxation can also happen within a single country. This typically happens when sub national jurisdictions have taxation powers, and jurisdictions have competing claims.