What if there is no tax treaty between the two countries?
You fall back on the residence country's own law. Most countries give some credit for foreign tax whether or not a treaty applies, but unilateral relief is the narrower instrument: fewer categories of income qualify, the conditions are tighter, and nothing caps what the source country may withhold. There is also no tie-breaker if both countries treat you as resident, and no government-to-government channel to put the disagreement to. Unilateral relief is the term for it.
Do I report the foreign income before or after the tax withheld from it?
Before. The claim is built on the gross figure. A payment that arrives after withholding has to be restated to its pre-tax equivalent: the gross amount is the income you report, and the tax taken out is the amount you claim. Report the net figure and you understate both halves at once, which quietly shrinks the relief. The tax also has to be one you were obliged to bear and can evidence as borne, rather than one that merely appears on a statement. Grossing up is the step that gets skipped.
Does relief on my federal return fix a state or provincial charge as well?
Not as a matter of course. A treaty binds the two national governments. A state or a province sets its own rules — in the United States, its own residency and sourcing tests — and is not constrained by the treaty in the same way, so a position that works on the federal return is not automatically mirrored below it. The sub-national charge is tested separately, and it is worth testing before the federal return is filed rather than after. State non-resident returns are where the US half of this usually lands.
Do I have to disclose a treaty position if the treaty leaves no tax to pay?
Often yes, and the disclosure is the price of the benefit. Relying on a treaty article to override a domestic rule is a position taken on a return, and where the rules require it that position is stated on the return rather than left implicit — in the United States, on Form 8833. Two things go wrong at this point: the article is relied on without the statement, or the article cited does not do what the filer believes it does. Either turns a legitimate claim into an exposure. Treaty-based positions covers the filing.
Can a foreign tax credit fix double taxation caused by a transfer-pricing adjustment?
No, and that is the usual surprise. A credit relieves one person taxed twice on the same income. An adjustment taxes the same profit in two different hands, so there is no foreign tax on your own income to set against anything, and the credit machinery has nothing to work with. Relief has to come from the other country reducing its own figure by the matching amount, and where it will not do that of its own accord the treaty's government-to-government route is what produces it. Economic double taxation is the name for this shape of the problem.
The foreign tax changed after I had already filed at home — can the relief be corrected?
Usually, by amending the return that carried the claim. A credit follows the foreign tax finally borne on the income, so a reassessment abroad moves the claim at home, in either direction. Each country sets its own window for making that change, which is why the two files are kept open together rather than closed one at a time. Where the double charge survives both returns, the treaty's mutual agreement procedure puts the question to the two authorities, and it stays available even where domestic appeal rights have run. Making that request is its own piece of work.
Is double taxation legal?
Yes. Nothing prevents two countries from taxing the same income under their own domestic law — each is exercising its own jurisdiction. What treaties and credit systems do is relieve the outcome rather than prohibit the charge, and relief is generally something you must claim on a return or a form, not something applied automatically. Miss the claim and the double charge stands. Double taxation explains the mechanism.
Which business structure has double taxation?
The corporation — specifically a US C corporation, where profit is taxed to the company and the dividend again to the shareholder. Sole proprietorships, partnerships and LLCs treated as flow-throughs are taxed once, in the owners' hands. Across borders that tidy answer breaks: an entity treated as a flow-through in one country can be opaque in the other, which produces a mismatch neither system planned for. See LLC against corporation for Canadians.
