International taxation refers to the global tax rules that apply to transactions between two or more countries (also called States) in the world. It encompasses all tax issues arising under a country’s income tax laws that include some foreign element.
Taxes are not international. There is no separate global tax law that governs cross-border transactions. Moreover, there is no international tax court or administrative body for international tax issues. All taxes are levied under their domestic law by federal, national or local governments.
These tax laws have an impact on cross-border transactions. International taxation governs these domestic tax rules under customary international law and treaties. International taxation also supports other objectives of domestic tax systems.
The principles of international taxation are influenced by tax equity and tax neutrality within the national economic sovereignty of each nation. Tax equity requires that the tax revenues from international economic activities be shared equitably by nations. It also requires that taxpayers involved in cross-border activities be neither discriminated against nor given undue preference in their tax burdens.