16
International Taxation (Subject) / Concepts (Lesson)
Advertisement
- Tax Rates progressive, flat or proportional, regressive
- Characteristics of a tax system equity, certainty & simplicity, convenience, economic efficiency/ neutrality
- Reasons for wealth taxes redistribution of wealth, social justice, equity
- forms of wealth tax wealth stock, wealth transfers, wealth appreciation
- Residence of companies place of incorporation test, place of management test
- Place of management test place of management, principal business location, tax residence of shareholders?
- Residence of individuals different approaches Time spent in a particular country (>183 days), connections with a country (personal and economic ties), complex issue/ complex guidance/ uncertainty, statuory residence tests (new for UK), 2013-14 (6th April 13 to 5th April 14)
- UK HMRC Tiers of Control shop floor (on the spot), head office (executives and senior staff who actually make the business run day-to-day), central policy core of the whole enterprise
- Why do we have DTAs to enable tax neutrality (best products/ services, atlowest price possible, without tax considerations influencing investment decisions - in theory), to facilitate trade and cross-border activity, to avoid double taxation wherever possible (involves some countries giving up rights to tax), to assist developing countries
- How are DTAs helpful important for managing tax risk, is there a need to file a tax return overseas/ does the overseas country have the right to tax?, what withholding tax will I pay?, how will the tax be collected by the two countries?, what if two tax authorities disagree?
- Advertisement
- History of DTAs - three important principles the profits of a PE can be taxed in the host country, tax residence of a business depends on the place of centre of management (de Beers), subsidiaries treated as separate entities (distinct from parent)
- Structure of OECD Model 1-5 = definitions, residents, taxable presence6-21 = classify and allocate different types of income to one or both states for tax purposes22 = rights to tax capital23 = Methods of double tax relief24 - 31 = administration and anti-avoidance
- PE - specifically included place of management (possession of actual decision making power, needs to have a place/ site of its own), branch, office, factory, workshop (where things are worked on, repaired etc), mines etc (place of extraction of natural resources), long-term building/ construction project (12 month rule for each individual site or project, from date work begings until work completed or permanently abandoned, doesn't cease if only temporary interruptions)
- PE - specifically excluded storage/ warehouse facilities, information collection, activities of a preparatory (e.g. before business activity starts) or auxiliary (not directly part of business activity of whole enterprise) character
- Authorized OECD Approach (AOA) to attribution of profits to a PE (Art. 7) 1. Consider the PE as separate and ask what activities it carries out and functions it performs2. Value the dealings between the PE and the remainder of the entity on arm's length terms (market value) - intangibles and internal loans are difficult to attribute though
- UN Model variations between developed and developing countries, source state taxation (provides for more profits to be taxed in the source state), definition of PE (e.g. 6 month rule for building and construction), services PE, force of attraction rule, tax sparing