INTERNATIONAL TAXATION QUESTIONS AND THEIR CORRECT ANSWERS

Question: What does international tax law encompass in a cross-border context? International tax law comprises rules that determine how and where income can be taxed across international borders. Question: What is the central concept in international tax law regarding taxation rights? The 'right to tax' represents a state's sovereignty, requiring a nexus (connecting factor) with its territory to levy taxes. Question: What are the two types of nexus relevant to international taxation? Subjective nexus (taxpayer's residence) grants unlimited taxing rights, while objective nexus (source of income) leads to limited taxing rights. Question: How does the combination of subjective and objective nexus lead to potential issues? Conflicting claims of taxing rights between states can result in the risk of international double taxation. Question: How can double taxation be mitigated or avoided? Unilateral measures, bilateral tax treaties, tie-breaker rules, and distributive rules are used to prevent or reduce double taxation. Question: Besides avoiding double taxation, what are the objectives of tax treaties? Tax treaties aim to prevent tax evasion, discrimination, and promote international trade and investment through the removal of tax obstacles. Question: How does the supremacy of treaty law affect international tax treaties? In case of conflict, self-executing tax treaties take precedence over domestic legislation. Question: What is the role of tax treaties in relation to domestic law? Tax treaties restrict the application of domestic law and only limit its scope. Question: Can the meaning of concepts differ between tax treaties and domestic law? Yes, certain concepts may have different interpretations in tax treaties compared to domestic law. Question: Who is entitled to tax treaty benefits? Tax treaty benefits are available to residents of contracting states, fulfilling both personal and material scope requirements. Question: What is covered under the material scope of tax treaty application? Tax treaty benefits apply to taxes on income and capital, excluding taxes like VAT, succession duties, and social security contributions. Question: What does Article 2 of the OECD Model specify? Article 2 outlines that tax treaties cover "taxes on income and on capital," with certain exceptions and future taxes. Question: How does Article 1 of the OECD Model define "persons" and "residents"? Article 1 defines "persons" as individuals, companies, and other entities, while "residents" refer to those liable to tax in a contracting state. Question: How is residence determined according to Article 4 of the OECD Model? Article 4 identifies the "liable to tax" principle, indicating the contracting state with