INTERNATIONAL TAXATION
QUESTIONS AND THEIR COMPLETE
SOLUTIONS
what is the international tax law?
International tax law - all the rules that, in a cross-border
context, determine where and how income can be taxed.
what is meant by the "right tax" as a central concept?
the right of a state to levy tax requires a connecting factor
('nexus') with the territory of that state.
what are the two types of nexus
- subjective nexus - generally the taxpayer's place of
residence, unlimited taxing rights, i.e. the taxpayer is liable
to tax on worldwide income
- objective nexus - the source of the income, limited taxing
rights, i.e. the taxpayer is only liable to tax on income
sourced in the state
what is meant by the risk of double taxation?
The combination of subjective and objective nexus by
different states leads to conflicting claims of taxing rights
what are the measures to prevent/reduce double
taxation?
- unilateral measures
- bilateral measures:
a) Unlimited tax liability in both states (Solution: tie-
breaker rules)
, b) Unlimited tax liability in state A, limited tax liability in
state B (Solution: distributive rules)
what is the objective of yhe tax treaties?
- The avoidance of double taxation
- The prevention of tax avoidance and evasion
- The prevention of (specific types of) discrimination
- The exchange of information and mutual assistance
between tax authorities
what is the importance of the OECD Model?
- 'Template' for the majority of current tax treaties
- Official Commentary on the OECD Model
- Every state has its own policy/nuances
what are the tax treaties?
tax treaties are international (bilateral) agreements
between states, which are governed by international law;
tax treaties only create rights and obligations between the
treaty partners and for (residents of) the treaty partners
(not of third countries); the general international law rules
of interpretation
Explian the supremacy of treaty law
self-executing treaties have supremacy over domestic
legislation (they are above national legislation),
consequence: in case of conflict between domestic law
and a tax treaty ➔ priority is given to the tax treaty
explain the process of the application of tax treaty
1. Determine residence state and source state
2. Classification of income ➔ distribution of taxing rights
If double taxation remains: residence state should remove
it
3. Taxation occurs in accordance with domestic law
what is the limitations of the tax treaty?
QUESTIONS AND THEIR COMPLETE
SOLUTIONS
what is the international tax law?
International tax law - all the rules that, in a cross-border
context, determine where and how income can be taxed.
what is meant by the "right tax" as a central concept?
the right of a state to levy tax requires a connecting factor
('nexus') with the territory of that state.
what are the two types of nexus
- subjective nexus - generally the taxpayer's place of
residence, unlimited taxing rights, i.e. the taxpayer is liable
to tax on worldwide income
- objective nexus - the source of the income, limited taxing
rights, i.e. the taxpayer is only liable to tax on income
sourced in the state
what is meant by the risk of double taxation?
The combination of subjective and objective nexus by
different states leads to conflicting claims of taxing rights
what are the measures to prevent/reduce double
taxation?
- unilateral measures
- bilateral measures:
a) Unlimited tax liability in both states (Solution: tie-
breaker rules)
, b) Unlimited tax liability in state A, limited tax liability in
state B (Solution: distributive rules)
what is the objective of yhe tax treaties?
- The avoidance of double taxation
- The prevention of tax avoidance and evasion
- The prevention of (specific types of) discrimination
- The exchange of information and mutual assistance
between tax authorities
what is the importance of the OECD Model?
- 'Template' for the majority of current tax treaties
- Official Commentary on the OECD Model
- Every state has its own policy/nuances
what are the tax treaties?
tax treaties are international (bilateral) agreements
between states, which are governed by international law;
tax treaties only create rights and obligations between the
treaty partners and for (residents of) the treaty partners
(not of third countries); the general international law rules
of interpretation
Explian the supremacy of treaty law
self-executing treaties have supremacy over domestic
legislation (they are above national legislation),
consequence: in case of conflict between domestic law
and a tax treaty ➔ priority is given to the tax treaty
explain the process of the application of tax treaty
1. Determine residence state and source state
2. Classification of income ➔ distribution of taxing rights
If double taxation remains: residence state should remove
it
3. Taxation occurs in accordance with domestic law
what is the limitations of the tax treaty?
