TA350 C.1 Tax Treaties Professor Jeff Haveson Syllabus/Objectives Summer 2012

Transcription

1 TA350 C.1 Tax Treaties Professor Jeff Haveson Syllabus/Objectives Summer 2012 The objective of TA 350C1, Income Tax Treaties, is to provide the student with an understanding of the role, function and uses of income tax treaties. It examines the general aspects of treaties (policy, legal authority and negotiation), the interpretation of treaties, and provides a detailed examination of the terms of the US Model Income Tax Convention of 2006, the OECD Model Tax Convention of 2005, the United Nations Model Double Tax Convention between Developed and Developing Countries, as well as selected provisions of current United States treaties in force. Topics include: taxation of investment income (i.e. interest, dividends and capital gains), taxation of license fees and royalties, treaty shopping, limitation of benefits, permanent establishment, taxation of the income of natural persons (i.e. personal services), allocation of income between related parties, and nondiscrimination toward foreigners and recent treaty developments. At the completion of the course, the student should have a working knowledge of the types of issues addressed in tax treaties, the range of manners in which topics are addressed, such that it will enable him/her to advise clients and/or employers confidently and competently on moderately complex international treaty matters. Learning Objectives : Week 1- Introduction Week 2 Overview Understand the process by which treaties are negotiated and approved Understand the relation between treaties and domestic law Understand sources of treaty interpretation Understand the genesis and importance of the OECD Model Treaty, the U.S. Model treaty and the UN Model Treaty Set the stage for analyzing who is entitled to claim treaty benefits Review some of the U.S. informational reporting requirements Week 3 Residency Review the definition of U.S. persons under the Code, including the rules for determining when an alien is treated as a U.S. resident for federal income tax purposes Distinguish between the Green Card test and the Substantial Presence Test Understand the definitions of resident under Treaties and how it differs from the test under the Code Understand the operation of the tie-breaker rules Introduce the concept of Limitations on Benefits Understand how treaties are applied to fiscally transparent and hybrid entities Page 1 of 8

2 Week 4 Limitation on Benefits Understand the purpose of a Limitation on Benefits treaty article Discuss the concept of treaty shopping and how a Limitation on Benefits treaty article attempts to address this issue Understand the application of Limitation on Benefits articles to publicly traded companies Understand the application of the ownership / base erosion test Understand the application of active business test exception Analyze the involvement of Competent Authority in determining the application of a Limitation on Benefits article Understand the application of a derivative benefits provision Discuss non-treaty based attacks on entitlement to claim treaty benefits Week 5 Nondiscrimination Discuss the purpose of treaty Nondiscrimination provisions Understand what types of discrimination these articles are designed to address Understand the scope of a nondiscrimination article, specifically who is entitled to claim its benefits Discuss the interplay between nondiscrimination articles and U.S. domestic law Analyze which taxes come within the protection of a nondiscrimination article Week 6 Permanent Establishment Review the U.S. domestic law rules for taxation of foreign persons conducting business in the U.S., specifically taxation of effectively connected income Define permanent establishment and understand its effect on the taxation of foreign persons doing business in the U.S. Understanding the definition of fixed place of business Discuss the types of activities specifically permitted under treaties without subjecting the business to taxation on its business income Discuss the different types of agents and the circumstances under which the activities of an agent will be imputed to the principal for purposes of subjecting the principal to taxation Understand the meaning and importance of consignment manufacturing and contract manufacturing Understand the meaning and importance of sale agent, commission agent and commissionaire structures Understand the application of permanent establishment concepts to e-business Week 7 Business Profits Review the determination of taxable income for foreign persons doing business in the U.S. under general U.S. domestic law Understand the determination of taxable income for foreign persons doing business in the U.S. through a permanent establishment under treaty provisions and how it differs from U.S. domestic law Discuss the force of attraction principle and understand the extent to which it applies Page 2 of 8

3 Discuss how the U.S. domestic law rules for allocating interest deductions in determining taxable income operate when a treaty applies Understand the overlap rule which determines how a treaty is to be applied when income is subject to more than one provision of a treaty Week 8 Investment Income Review the taxation of fixed and determinable, annual and periodical ( FDAP ) income (interest, dividends, rents and royalties) under general U.S. domestic law Understand the ways in which treaties change the taxation of FDAP Discuss how investment income is treated differently in treaties with capital exporting nations and capital importing nations Understand how treaty shopping and limitation on benefit rules apply to limit one s ability to claim treaty protection on investment income Analyze the cascading royalty issues Week 9 Personal Services Review the taxation of foreign persons earning income from the performance of services under general U.S. domestic law. Understand the application of treaty provisions to dependent (employee) and independent personal services. Analyze the specific treaty provisions applicable to directors. artists and sportsmen Understand how income is allocated when services and performed partially within and partially outside a country. Discuss the application of treaty provision to deferred payout of remuneration such as pensions. Bonuses, stock options and social security. Understand the application of treaty provisions to students, apprentices. business trainees, visiting professors, teachers and researchers. Week 10 Real Property and Capital Gains Review the application of the Foreign Investment in Real Property Act ( FIRPTA ) under general U.S. domestic law Analyze how treaties generally allocate the right to tax immovable property Understand the application of treaty provisions to the sale of real property interests subject to FIRPTA Understand the rules relating to taxation of rental income Understand the purpose and use of the net election provided in 871(d) and 882(d) Review the taxation of gains from the sale of personal property under general U.S. domestic law Understand the application of treaty provisions to gains from the sale of personal property Week 11- Open Page 3 of 8

4 Week 12 Relief from Double Taxation Understand the situations under which double taxation may arise Review the relief from double taxation provided under general U.S. domestic law Discuss the various alternative methods which treaties employ to address the issue of relief from double taxation Understand the application of relief from double taxation provisions of treaties and how they interact with U.S. domestic law Discuss the concept of creditable foreign taxes and the application of treaties to the determination of whether a particular payment will give rise to a creditable tax. Week 13- Take Home Final Week 14 Other Income Overview of other income provisions of treaties not previously discussed Understand the specific other income provision in treaties dealing with situations where no treaty provision applies to a specific type of income Week 15 Administrative Cooperation Understand the nature and authority of competent authority Discuss the process by which matters are brought to, and decided by, competent authority. Understand the ability of competent authority to adopt binding interpretations of treaty provisions Discuss the increasing use of arbitration to resolve international disputes Examine the scope of tax cooperation agreements Week 16 Final Exam The final exam will be an open book, proctored exam the week of August 12.. You must arrange for a proctor through CyberCampus in order to take the final exam. Page 4 of 8

5 Weekly Syllabus Description of Topic Week # Dates Introduction w1 4/29/12 5/5/12 Overview w2 5/6/12 5/12/12 Residency w3 5/13/12 5/18/12 Limitation on Benefits w4 5/19/12 5/25/12 Nondiscrimination w5 5/26/12 6/2/12 Permanent Establishment w6 6/3/12 6/9/12 Business Profits w7 6/10/12 6/16/12 Investment Income w8 6/17/12 6/23/12 Personal Services w9 6/24/12 6/30/12 No class w10 7/1/12 7/7/12 Real Property, Capital Gains w11 7/8/12 7/14/12 Relief from Double Taxation w12 7/15/12 7/21/12 Take home final w13 7/22/12 7/28/12 Other Income w14 7/29/12 8/4/12 Administrative Cooperation w15 8/5/12 8/11/12 final exam week w16 8/12/12 8/17/12 Grading Policy This class is designed to provide you with an in depth analysis of the fundamental principles of international tax treaties. You must read the assigned treaty sections and explanations, cases and supplemental materials before each week begins. Please make the appropriate time allowances for preparing for each session. Being adequately prepared for each week s discussion is a key part of your responsibility in this course Grading Criteria Each student's grade will be based upon total points earned on the weekly quizzes, class participation, and final examination (take home and final proctored exam) and weighted as follows: 30% Participation 30% Quizzes 40% Final Exam Grading Scale Students will be graded on the percentage of available points received as follows: A+/A- 90+ B+/B C+/C D/F 0-69 The instructor reserves the right to curve the class grades and override the scale above Page 5 of 8

6 ONLINE CLASS PARTICIPATION: PARTICIPATION IS KEY! - both to your grade and, more importantly, the amount you will learn from this class. If you don't participate it is unlikely you will receive above a C+. I reserve the right to "bump up" your overall grade for active participation. "Class participation" grades will be measured by the effectiveness of your participation -- that is, you must attend class (actually say something in the discussions!), demonstrate that you are prepared for class (through the quality of your responses to my and other's questions), and take part in discussions in a meaningful way by asking informed questions and offering constructive comment and analysis. I do not penalize for incorrect responses to questions as long as they reflect some thought and reading of the material - but if a posting appears to indicate a lack of a meaningful attempt to read the lecture or the other postings, that would harm the grade. Before posting on the discussion board, it is essential that you read the prior postings made by your classmates and myself. Posting which merely repeat that which has already been said will earn no credit and may be penalized if they occur repeatedly. Also, I already know you have mastered the act of cutting and pasting, so try to be original. Rules of Participation: In general, you may not be the first to start the discussion on more than two (2) topics each week. There are no limits on your ability to respond to the comments of myself or other students. By Wednesday of each week, any questions for which the discussion has not started are open to anyone to begin without restriction. All participation needs to be completed by Friday night, so that I can grade the work on Saturday. Don t worry. There will be plenty of opportunity for everyone to contribute. Just don t wait until the end of the week because by then, there may not be much left to say. Cyber classroom participation will be graded on the following scale: A 10 (100%) = Large contribution to the classes understanding. This can be accomplished by a minimum of 2 postings in that week which are complete in their responses to my questions (have appropriate citations and discussion which illustrate a high level of understanding) OR by posing good hypothetical to discussion and/or questions that help all of us better understand the discussion topic. A 9 (still an "A") = very good contribution in the form of either 1 complete posting in response to a question OR several short and sweet responses - correct but not really full of analysis. An 8 = I usually award this to someone who has "spoken" up once with a fair comment - either response or question. A 7 = no postings for week Page 6 of 8

7 QUIZZES: We will have weekly quizzes that test your understanding of that week s materials. The quizzes are usually multiple choice / true false type questions drawn from the problem set questions or questions very similar to those in the problem sets. You will have one hour from the time you start the quiz to submit your answers. I will give you two (2) opportunities to take a quiz and I take the highest score. Therefore it will be necessary for you to complete your preparation of that week s materials BEFORE you sit down to take the quiz. The quiz will be available on Wednesday of each week and must be submitted by 8:00 pm Pacific Time on Sunday evening. After the period for taking the quiz is over, you will receive feedback regarding your performance as well as the reasons why you might have missed a question. If you are still not clear on the reasons for the answer, please ask in the appropriate discussion area of the course. Click on the gradebook tab to see how you are doing. It will be updated regularly with your participation points. Required Materials We will be working primarily with the TA350 printed materials which will be posted online. You will use a copy of the OECD Model Tax Treaty/Commentary (condensed July 2010 edition without historical notes) which I will post in the resource section. Reading is assigned from Bittker & Lokken, Fundamentals of International Taxation, 2010/2011 Student Edition which you can purchase from the bookstore or an online website. In addition, you need to purchase Introduction to the Law of Double Taxation Conventions (publisher: IBFD. To order directly from IBFD, please the following information to Dora Marroquin, D.Marroquin@ibfd.org. 1. Name of Book 2. First and Last name 3. A valid address 4. Ship to and Bill to Address 5. Subject line Golden Gate University so you can get 20% discount 6. When you submit this information, Dora Marroquin will provide you with a credit card link for payment. For the credit card link, the invoice and client number will be provided by Dora. The amount to be charged is This is with the 20% discount. You will receive online access to the book and will be able to print it, if you wish. The book will not be mailed to you. For questions, Dora Marroquin, or Julie Morgan, jmorgan@ggu.edu. You will also be provided a login/password for use of the ThompsonReuters Checkpoint System by the School of Taxation. Finally, although this course is not based in the Code and regulations, you will need to have a current version of the Code and regs. Page 7 of 8

8 Student Academic Integrity GGU's Policy on Student Academic Integrity is in effect at all GGU teaching locations, including regional classroom sites, corporate sites, and distance courses delivered in any medium. This policy applies to all business, taxation, and technology students at Golden Gate University. Academic integrity means doing academic work in a manner that strives to achieve the learning objectives your courses have set out for you. It means that you follow the rules and procedures prescribed by your instructors so that you acquire the skills and knowledge your courses are designed to give you. It means that you engage in ethical practices in taking tests and doing assignments and that you respect intellectual property rights by fully disclosing sources of information that appear in your papers and presentations. GGU provides many resources and services that assist you in learning the required research and documentation skills. Please read GGU s Policy on Student Academic Integrity: grity/attachment/policy+on+academic+integrity.pdf Instructor Bio- Jeff Haveson Jeff is currently a senior International Tax Examiner with the LB&I division of the Internal Revenue Service based in New Jersey. Jeff manages large case audits of multinational taxpayers. He researches and consults on a variety of issues including transfer pricing, foreign tax credits, subpart F, tax treaty issues, and international reorganizations. Jeff supervises the works of a number of team memberseconomists, engineers, technical advisors, regional/national tax counsel - in resolving taxpayer issues and disputes. In addition, Jeff was a regional trainer in the national training program entitled Leveraging International expertise which helped instruct domestic agents and field specialists in many international tax technical areas. Jeff has been an adjunct faculty professor in Golden Gate University s School of Taxation since May He has taught Principles of International taxation for the cybercampus (on-line) program for 5 semesters and 3 semesters of Income Tax Treaties Prior to joining Golden Gate University's School of Taxation faculty, Jeff served as a Tax Director for Lucent Technologies and Bloomberg L.P. working in all areas of international tax planning, tax audits and tax compliance. Jeff holds an M.B.A in Taxation/Finance from the New York University Stern School of Business and a B.S. in Economics from the Wharton School of the University of Pennsylvania. Jeff is a C.P.A. in the states of Pennsylvania and New Jersey. Page 8 of 8