QUESTIONS AND ANSWERS ON
INTERNATIONAL TAXATION
PRINCIPLES
What is a corporate tax residence?
this is an important concept which is the basis for
determining which country has the taxing rights over a
company's profits
Where is an entity generally deemed to be a resident?
either in the place of incorporation or place of central
control/ management
What could missteps in determining corporate
residency result in?
unanticipated multiple tax liabilities in multiple jurisdictions
What organisation promotes free market policies and
trade??
the OECD
What is the OECD?
Organisation for Economic co-operation and Development
What model plays a role in removing tax related
barriers to cross border trade and investment?
the Model Tax Convention
What does the OECD model State re double
residency?
that an entity will be taxable where it has a permanent
establishment, the physical location that it does business
from
, What is a company branch treated as re tax?
treated as an extension of the existing operation in the
country of residence and therefore all profits from the
branch activities are taxed under the rule of the main
entity's country of residence
Is a branch treated the same as the resident entity?
yes, hence losses can be easily transferred between each
entity
How can assets be transferred between branches?
can be easily transferred between entities at cost so no
gain or loss on the transfer is recognised
What is a subsidiary?
this is treated as a separate legal entity and prepares its
own financial statements in accordance with the
framework in that entity's circumstances and pays taxes
based on the tax regime in the country the subsidiary is in
Is loss relief available between the subsidiary and the
parent entity?
no because they are taxed under different tax regimes in
different countries
What happens if assets are transferred between
parent and subsidiary countries?
they may be subject to capital taxes as they operate under
different tax regimes
What issue happens when a business uses a website
or server located in another country?
issues arise as to whether this is classified as a
permanent establishment for residency purposes
Can a website be classified as a permanent
establishment?
no, the view is its just a set of files
INTERNATIONAL TAXATION
PRINCIPLES
What is a corporate tax residence?
this is an important concept which is the basis for
determining which country has the taxing rights over a
company's profits
Where is an entity generally deemed to be a resident?
either in the place of incorporation or place of central
control/ management
What could missteps in determining corporate
residency result in?
unanticipated multiple tax liabilities in multiple jurisdictions
What organisation promotes free market policies and
trade??
the OECD
What is the OECD?
Organisation for Economic co-operation and Development
What model plays a role in removing tax related
barriers to cross border trade and investment?
the Model Tax Convention
What does the OECD model State re double
residency?
that an entity will be taxable where it has a permanent
establishment, the physical location that it does business
from
, What is a company branch treated as re tax?
treated as an extension of the existing operation in the
country of residence and therefore all profits from the
branch activities are taxed under the rule of the main
entity's country of residence
Is a branch treated the same as the resident entity?
yes, hence losses can be easily transferred between each
entity
How can assets be transferred between branches?
can be easily transferred between entities at cost so no
gain or loss on the transfer is recognised
What is a subsidiary?
this is treated as a separate legal entity and prepares its
own financial statements in accordance with the
framework in that entity's circumstances and pays taxes
based on the tax regime in the country the subsidiary is in
Is loss relief available between the subsidiary and the
parent entity?
no because they are taxed under different tax regimes in
different countries
What happens if assets are transferred between
parent and subsidiary countries?
they may be subject to capital taxes as they operate under
different tax regimes
What issue happens when a business uses a website
or server located in another country?
issues arise as to whether this is classified as a
permanent establishment for residency purposes
Can a website be classified as a permanent
establishment?
no, the view is its just a set of files
