INTERNATIONAL TAXATION
FINAL EXAM QUESTIONS AND THEIR
COMPLETE SOLUTIONS
What are bilateral tax treaties?
Bilateral tax treaties aim to avoid double taxation, reduce
withholding tax and promote cooperation between
countries.
Is DTC an example of bilateral tax treaties?
Yes, DTC (double tax convention) is a special kind of
bilateral tax treaty, often based on OECD MC
In taxing business income in bilateral tax treaties, the
principle of residence is a core principle to allocate
taxing rights, why is that?
Bilateral tax treaties allocates taxing rights between
source and residence state. While bilateral treaties which
follow the OECD favor residence taxation, the bilateral
treaties that follow the UN MC favor source taxation. The
principle of of residence is crucial for international taxation
because the state of residence has to provide bilateral
double taxation relief for taxes levied at the source.
What is done to solve cases of double tax residence
for CORPORATIONS within the OECD MC?
OECD MC provides for a mutual agreement procedure
(MAP) to determine the residence. Until MAP is solved, no
treaty benefits would be be granted. Before 2017 OECD
, MC, the criterion was the PoEM (Place of Effective
Management)
What criteria are applied to solve cases of double tax
residence for INDIVIDUALS within the OECD MC?
Within the OECD MC, the criteria are 1) permanent home
2) center of vital interest if he has a permanent home in
both states 3) habitual abode 4) nationality.
How can double tax residence arise?
If, for example, one state applies the incorporation
doctrine (where a company is incorporated/registered) for
determining tax residence, and the other state applies the
PoEM (place of effective management) for determining tax
residence (but ONLY if it is proven that the place of
effective management is actually that state)
What are the guidelines/factors used and considered
in the discussion in case of MAP
- Where are the entity's headquarters located?
- Where does the daily mangement of the company occur?
- Where does the CEO and other senior executives
usually carry on their activities?
- Where are key decisions made?
- Where are the meetings of the board of directors usually
held?
- Where is the daily decision-making done?
- Which country's laws govern the legal status of the
enitity?
- Where is it accountings records kept?
NOTE: Depending on the state, for the purposes of
determinging the poem, some courts put more emphasis
on daily management, whilst other courts refer to the place
where decision-making at the highest level on the
FINAL EXAM QUESTIONS AND THEIR
COMPLETE SOLUTIONS
What are bilateral tax treaties?
Bilateral tax treaties aim to avoid double taxation, reduce
withholding tax and promote cooperation between
countries.
Is DTC an example of bilateral tax treaties?
Yes, DTC (double tax convention) is a special kind of
bilateral tax treaty, often based on OECD MC
In taxing business income in bilateral tax treaties, the
principle of residence is a core principle to allocate
taxing rights, why is that?
Bilateral tax treaties allocates taxing rights between
source and residence state. While bilateral treaties which
follow the OECD favor residence taxation, the bilateral
treaties that follow the UN MC favor source taxation. The
principle of of residence is crucial for international taxation
because the state of residence has to provide bilateral
double taxation relief for taxes levied at the source.
What is done to solve cases of double tax residence
for CORPORATIONS within the OECD MC?
OECD MC provides for a mutual agreement procedure
(MAP) to determine the residence. Until MAP is solved, no
treaty benefits would be be granted. Before 2017 OECD
, MC, the criterion was the PoEM (Place of Effective
Management)
What criteria are applied to solve cases of double tax
residence for INDIVIDUALS within the OECD MC?
Within the OECD MC, the criteria are 1) permanent home
2) center of vital interest if he has a permanent home in
both states 3) habitual abode 4) nationality.
How can double tax residence arise?
If, for example, one state applies the incorporation
doctrine (where a company is incorporated/registered) for
determining tax residence, and the other state applies the
PoEM (place of effective management) for determining tax
residence (but ONLY if it is proven that the place of
effective management is actually that state)
What are the guidelines/factors used and considered
in the discussion in case of MAP
- Where are the entity's headquarters located?
- Where does the daily mangement of the company occur?
- Where does the CEO and other senior executives
usually carry on their activities?
- Where are key decisions made?
- Where are the meetings of the board of directors usually
held?
- Where is the daily decision-making done?
- Which country's laws govern the legal status of the
enitity?
- Where is it accountings records kept?
NOTE: Depending on the state, for the purposes of
determinging the poem, some courts put more emphasis
on daily management, whilst other courts refer to the place
where decision-making at the highest level on the
