A tax treaty is a bilateral (bipartisan) agreement between two countries to resolve issues related to the double taxation of each citizen`s passive and active income. Income tax agreements generally determine the amount of tax a country can apply on a taxpayer`s income, capital, estate or wealth. An income tax agreement is also called the Double Tax Agreement (DBA). The analysis differs from many other published estimates of the tax burden by including all taxes paid by Americans: not only federal income taxes, but also corporate taxes and taxes paid at the national and local level. It also involves charging about $250 billion for what Saez and Zucman call «indirect taxes,» such as motor vehicle and business licenses. The United States has tax agreements with several countries that help reduce – or eliminate – the tax paid by residents abroad. These reduced rates and exemptions vary by country and for certain income items. Under the same contracts, U.S. residents or citizens are taxed at a reduced rate or exempt from foreign taxes on certain income items they receive from sources abroad. Tax treaties are considered reciprocal because they apply in both contracting states. In recent years [when?], the evolution of foreign investment by Chinese companies has increased rapidly and has developed quite influentially. As a result, cross-border tax treatment is becoming one of China`s major financial and commercial projects, and cross-border tax problems are growing.
In order to solve these problems, multilateral tax treaties between countries that can legally help businesses on both sides avoid double taxation and find solutions to tax issues are put in place. In order to implement China`s «comprehensive» strategy and to help domestic companies adapt to globalization, China has committed to promoting and signing multilateral tax agreements with other countries in order to achieve common interests. At the end of November 2016, China officially signed 102 double taxation agreements. 98 of them have already come into force. In addition, China has signed an agreement to avoid double taxation with Hong Kong and the Macao Special Administrative Region.