Global Withholding Tax: Regulations and Implications

Withholding tax and income tax serve different purposes but are interconnected. Withholding tax is deducted at the source before income reaches the recipient, whereas income tax is calculated and paid later based on total earnings. While withholding tax helps in advance tax collection, income tax covers the overall tax liability of an individual or business. Taxpayers reconcile withheld amounts with actual tax liabilities when filing annual returns. Governments use withholding tax to reduce tax evasion, while income tax ensures fair taxation based on total earnings. Understanding both concepts helps taxpayers manage obligations effectively.