(International) What is a tax treaty?

Note: DPM Network Music Distribution is not a legal or tax authority. We do not give legal or tax advice. DPM Network Music Distribution simply reports and provides information as per what we’ve been instructed to. Please consult a tax professional or legal authority for advice and direction.

A “tax treaty” is an agreement made by two countries to resolve issues involving double taxation of passive and active income. Tax treaties generally determine the amount of tax that a country can apply to a taxpayer’s income and wealth.

One of the most important aspects of a tax treaty is the policy on withholding taxes, which determines how much tax is levied on income (interest and dividends) from securities owned by a non-resident. For example, if a tax treaty between country A and country B determined that their bilateral withholding tax on dividends is 10%, then country A will tax dividend payments that are going to country B at a rate of 10% and vice versa.

To keep this simple and relate it to you. Let’s say you are in New Zealand, if you made 200 sales in the USA and 200 sales in New Zealand, then only the sales in New Zealand would have withholding of 5% due to the tax treaty that the USA and New Zealand may have. If 200 sales = $50 then it’s only $2.50 that is withheld. Every penny counts and whenever we make payments we will seek to lower any fee through Pay Pal and others to ensure your withholding is a non-issue.

To get this money back or receive a credit, you would receive a tax form at the end of the calendar year for you to provide to your accountant within your country.

Please see the definition of what is a tax treaty more in deep in Wikipedia