INTERNATIONAL TAXATION

Tax Neutrality Decision making unaffected by taxes Tax Distortion Tax discriminates between alternatives Tax Incentives Intentionally introduced to stimulate certain behavior Tax Revenues Major source of government spending International Dimension Relevance of taxes in transactions involving multiple countries Tax Code Set of laws governing taxation Tax Policy Issues Concerns related to tax laws and their implications EU Directives Regulations from the European Union Incentive De...

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 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 ...

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 sour...

What is the primary objective of multinationational companies in terms of taxation? To minimise the company's worldwide tax liability BUT - must not disort business or adversely affect efficency of operations - must also consider ethics and CSR What is the difference between tax avoidance and tax evasion? - tax avoidance is used to describe extremely aggressive strategies and structures used by business to reduce taxes far below what most governments expect - whereas illegal activities...

How are foreign branches taxed US taxes on income when earned For _____ that are taxed immediately, what amount of deduction are they allowed to take? branches; lesser of foreign taxed imposed and foreign tax credit What is the foreign tax credit Pre credit US tax X Foreign source income/total income How are foreign subsidiaries taxed they are taxed in foreign countries, earnings are not taxed until brought back to the US in forms of dividends In what system are citizens and residents ta...

The OECD tax convention provides a bilateral model, is a multilateral convention on double taxation feasible/allowed in the current international scenario? Yes The Model Convention main objectives are to avoid double taxation and to prevent fiscal evasion, indicate in the list below other possible objectives: - Certainty of Tax Treatment to investors - Exchange of information - To promote investment & Mutual Relation - Tax Credit/Relief - Prevent Tax Discrimination - Allocating Taxing Ju...

What are main goals of tax planning? - tax burden optimization (to diminish or defer tax liability) - minimize the incidence of double taxation - reduce potential future years tax liabiliites - maximize the tax saving from allowable deductions and tax credits - avoid penalties for underpayment of estimated taxes What are some strategies in international taxation planning? - Taking advantage of legal loopholes and lack of coordination between different tax jurisdictions - the use of favou...

the 7 income types profit income: income from - agriculture & forestry - business operations - self-employed work surplus income: income from - non-self-employed work - capital - renting and leasing - other activities basic principles of taxation 1. ability-to-pay principle 2. efficient allocation of national wealth (while trying not to distort behavior) 3. benefit principle (individual, group, general) tax planning making decisions that achieve highest surplus after tax: acceptab...

Different taxes, know some 1. Income Tax 2. Wage Tax 3. Corporate Income Tax 4. Value Added Tax 5. Real Estate Tax 6. Real Estate Transfer Tax 7. Gift Tax 8. Stamp Duties How to avoid Real Estate Transfer Tax? Buy Real Estate with a company and then sell shares of the company. Sell less than 95% of the shares to avoid Real Estate Transfer Tax. 3 purposes of taxes: 1. Generate revenue