Double taxation relief is the mechanism by which a taxpayer avoids paying full tax twice on the same income. Double taxation arises when one country taxes income because it is earned there and another taxes it because the recipient lives there. Relief is given in three main ways: the exemption method, where the residence country does not tax the foreign income; the credit method, where it taxes the income but allows foreign tax paid to be set against the home tax bill; and the deduction method, where foreign tax is treated as an expense.
Relief comes from two sources. Double taxation treaties divide taxing rights between the two states and limit source taxes such as withholding tax. Where no treaty applies, most countries grant unilateral relief under domestic law. Claimants generally need proof of tax residency and of the foreign tax paid. Treaty claims are described under tax treaty relief.