Introduction to International Tax and Jurisdiction to Tax

Transcription

1 Webber Wentzel Introduction to International Tax and Jurisdiction to Tax Lecture given by Professor Michael Honiball Partner, Webber Wentzel Presented at the University of Johannesburg 1 February 2012

2 Overview of Lecture Introduction to International Tax What is International Tax? Inbound and outbound investments; Regulatory environment; International double taxation; Elimination of international double taxation; and Role of the International Tax adviser. Jurisdiction to Tax General introduction; Source; Residence; Tax treaty provisions; Termination of residence; Citizenship/nationality; and Domicile.

3 Introduction to International Tax What is International Tax? No income taxes are international; There is no global tax levying law; There is no International Tax court; All taxes are levied under domestic law o federal/national level; o provincial/state/cantonal level; and/or o local/municipal government level.

4 Introduction to International Tax, cont. What is International Tax? International Tax comprises o the cross-border aspects of domestic tax; o the tax aspects of customary international tax law; and o tax treaty law. Objectives of International Tax: o promote fairness equal tax burdens on domestic and foreign taxpayers; o enhance domestic competitiveness and economic growth; o obtain a fair share of cross-border revenues; o ensure an equitable balance between capital export neutrality (CEN) and capital import neutrality (CIN); and o to prevent double taxation.

5 Overview: Inbound and outbound investments Must be looked at from a South African perspective: o Outbound: a South African resident exports capital, goods or services to a foreign country; and o Inbound: a non-south African imports capital, goods or services into South Africa. Outbound: generally involves the taxation of the resident on a resident basis; Inbound: generally involves the taxation of the non-resident on a source basis; Distinguish between trading with a foreign country, and trading in a foreign country; Capital export neutrality (CEN): tax laws neither encourage nor discourage the outflow of capital (e.g. CFC rules); and Capital input neutrality (CIN): tax laws neither encourage nor discourage the inflow of capital (e.g. interest withholding tax).

6 Overview: Regulatory environment Domestic direct and indirect tax laws; Foreign direct and indirect tax laws; Bilateral tax agreements (e.g. DTA); Multilateral tax agreements (e.g. SACU); Other international trade & investment protection agreements; and Others, e.g. SADC, EU, AU, WTO.

7 Overview: International double taxation Double, triple or multiple taxation is accepted as an impediment to international trade; Double taxation may be economic (same income/different taxpayer) or judicial (same income/same taxpayer); and An objective of international tax levying, and of international tax planning, is to avoid double tax.

8 Overview: Elimination of international double taxation Can be addressed in domestic legislation through unilateral relief or in a tax treaty; Various methods are used unilaterally, including exemptions, deductions, credits and delays; Two main tax treaty (bilateral) methods are used, namely, the exemption method, and the credit method; and Unusual methods include incentives (domestic/unilateral) and tax sparing (tax treaty/bilateral).

9 Overview: Role of the International Tax adviser Domestic tax knowledge is essential; International Tax planning may be defensive or offensive; Involves tax efficient structuring advice within the laws of all the relevant jurisdictions; Involves the reduction of the incidence of taxation on a global basis (all jurisdictions); There are certain specialisations within international tax, like transfer pricing; Detailed knowledge of tax treaty interpretation is essential; Exchange control knowledge is essential in a South African context; and Anti-avoidance considerations should be noted.

10 Jurisdiction to Tax: General Introduction Connecting factors; Source vs. residence; Citizenship/nationality/domicile; and Source-plus/residence-minus.

11 Jurisdiction to Tax: Source Introduction; Actual source: o General principles: case law; and o Specific types of income: case law. Deemed source: o Income; and o Capital gains. Source in a treaty context.

12 Jurisdiction to Tax: Residence Introduction; Individuals; Companies; Trusts and foundations; and Effective management as a residence test.

13 Jurisdiction to Tax: Tax treaty provisions Residence individuals; Residence persons other than individuals; DTA tie-breaker; Effective management in a DTA context; OECD MTC; and SADC MTC.

14 Jurisdiction to Tax: Termination of residence Introduction; CGT exit tax; Income exit tax; and PE left behind?

15 Jurisdiction to Tax: Citizenship/nationality Introduction; US green card vs. citizenship; Cook vs. Tait265 US 49 (1924); and Cessation of citizenship.

16 Jurisdiction to Tax: Domicile Introduction; Domicile by operation of law: o Birth/origin; o Unmarried minors; and o Mental capacity. Domicile of choice; UK position; and SA position: Domicile Act 3 of 1992.

17 Prescribed and Recommended Reading Olivier & Honiball : International Tax : A South African Perspective 2011 (Chapters 1 and 2) prescribed; Silke on International Tax (LexisNexis 2010) (Chapter 2) recommended; Brian J Arnold and Michael J McIntyre: International Tax Primer, 2 nd Edition, Deverieux Neilon, May 2002 recommended; and Roy Rohatgi: Basic International Taxation 2 nd Edition, Volume 1 (Richmond 2005) recommended.

18 QUESTIONS? 18

19 Presenter s Details: 19 Professor Michael Honiball Partner, Webber Wentzel Tel: Fax: michael.honiball@webberwentzel.com Websites:

20 20 BOTSWANA BURUNDI ETHIOPIA KENYA MALAWI MAURITIUS MOZAMBIQUE RWANDA SOUTH AFRICA TANZANIA UGANDA ZAMBIA JOHANNESBURG 10, 16 & 18 Fricker Road, Illovo Boulevard, Johannesburg, 2196, South Africa PO Box 61771, Marshalltown, Johannesburg, 2107, South Africa T CAPE TOWN 15 th floor, Convention Tower, Heerengracht, Foreshore, Cape Town, 8001, South Africa PO Box 3667, Cape Town, 8000, South Africa T Legal Notice: these materials are for training purposes only and do not constitute legal or other professional advice.