BUSINESS TAXATION:
INTERNATIONAL TAXATION
QUESTIONS AND THEIR CORRECT
ANSWERS
What is the worldwide income principle?
A country has the right to tax all worldwide profits
generated by the tax resident
What is the source principle?
A country has the right to tax profits generated there
What is the deduction method?
You can deduct the taxes paid abroad from the full profit
amount tax payment in your home country
What is the exemption method?
Also called the territorial tax system: works on capital
import neutrality= wherever you invest, you are
competitive -> you only pay taxes in the source country
What is the problem with the exemption method?
It´s a good system for tax haven operations
What is the credit method?
Also called the worldwide tax system, it works on capital
export neutrality= wherever you invest you also have to
pay taxes of your home country (but works with tax credit
so you don´t have to pay the full amount)
What is the problem with the credit method?
It´s an incentive for firms to keep their money abroad
What is transfer pricing?
INTERNATIONAL TAXATION
QUESTIONS AND THEIR CORRECT
ANSWERS
What is the worldwide income principle?
A country has the right to tax all worldwide profits
generated by the tax resident
What is the source principle?
A country has the right to tax profits generated there
What is the deduction method?
You can deduct the taxes paid abroad from the full profit
amount tax payment in your home country
What is the exemption method?
Also called the territorial tax system: works on capital
import neutrality= wherever you invest, you are
competitive -> you only pay taxes in the source country
What is the problem with the exemption method?
It´s a good system for tax haven operations
What is the credit method?
Also called the worldwide tax system, it works on capital
export neutrality= wherever you invest you also have to
pay taxes of your home country (but works with tax credit
so you don´t have to pay the full amount)
What is the problem with the credit method?
It´s an incentive for firms to keep their money abroad
What is transfer pricing?
