Why was tax deducted before the payment reached me?
Because the obligation sits on the payer rather than on you. Withholding tax is collected at the moment of payment, on the strength of the documentation the payer holds at that moment. The payer is not assessing your overall tax position and is in no position to do so. It is applying a rate to a payment and remitting what it takes. That is why the rate is a paperwork question before it is a tax question: whatever your correct treaty position may be, the deduction follows the file as it stood on the day.
Is withholding tax the final tax or can I claim some back?
It depends on the type of income and on the country. For some payments the deduction is intended to be the final tax, and no return is required or even possible. For others there is an elective route. A non-resident receiving certain Canadian-source pension and similar income can file a return under section 217 and be taxed on that income more as a resident would be, which can refund part of the tax withheld where the resulting liability is lower. Whether it helps has to be worked out on your own figures before the election is made.
Who is liable if the payer withholds too little?
The payer. This is what makes withholding different from an ordinary reporting obligation: a payer that fails to withhold is liable for the tax itself, not merely for a penalty on a late remittance, and will usually then be seeking that amount back from the recipient. Interest runs as well. The consequence in practice is that payers are conservative by habit, and that the documentation supporting a reduced rate belongs on the payer's file before the payment is released rather than at the year end.
Can I get the withholding reduced before the payment is made?
Often yes, and it is considerably easier than recovering tax afterwards. Several regimes provide an advance route: an application to the tax authority, before or early in the year, for authority to deduct at a lower rate on a stream of payments, supported by figures showing the tax that will actually become due. Form NR5 is the Canadian example for certain periodic payments to non-residents. The application has its own timing, so it has to be started ahead of the payment year rather than during it.
Why did the payer use the domestic rate instead of the treaty rate?
Almost always because the file did not support the treaty rate on the day of payment. A declaration of residence or entitlement that was missing, expired, incomplete or in the wrong form leaves the payer with one defensible option, and that is the domestic rate. The payer is not making a judgement about the treaty; it is applying the evidence in front of it. The remedy has two halves: fix the documentation for the payments still to come, and claim the difference from the source country on the ones already made.
Can I claim foreign withholding as a credit in my own country?
Usually, but only up to the amount the other country was entitled to take. A credit is relief against double taxation, not a reimbursement of whatever happened to be deducted. Where a payer deducted at the domestic rate and the treaty permitted less, the excess is generally not creditable, because your own country will say the other one had no right to it. That excess has to be recovered from the source country instead, which is a separate claim, in a different system, with its own time limit.
How do I get a refund of TCS collected on a foreign remittance?
You claim it on your Indian return for that year. The collected amount is credited against your total tax, and if it exceeds the tax due the balance is refunded like any excess payment. Two practical conditions: the collector must have filed its statement so the credit appears in your annual tax statement, and your PAN must be correctly recorded on the remittance. A salaried remitter can also ask their employer to account for it against salary withholding. See LRS limits and TCS.
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.
