International Tax Primer. Third Edition. Brian J. Arnold

Transcription

1 International Tax Primer Third Edition Brian J. Arnold Wolters Kluwer

2 Preface xi CHARTER 1 Introduction Objectives of This Primer What Is International Tax? Goals of International Tax Rules The Role of the Tax Adviser in Planning International Transactions 7 CHARTER 2 Jurisdiction to Tax Introduction Defining Residence Residence of Individuais Residence of Legal Entities Treaty Issues Relating to Residence Source Jurisdiction Introduction Employment and Personal Services Income Business Income Investment Income 26 CHARTER 3 Taxation of Residents Introduction Taxation of Residents on Their Worldwide Income Tax Policy Considerations The Tax Consequences of Residence Double Taxation Computation of the Foreign Source Income of Residents In General 32 v

3 Foreign Exchange Gains and Losses The Treatment of Losses Tax Administration Issues Exceptions to Worldwide Taxation Nonresident Companies and Other Legal Entities Temporary Residents Special Issues Exit or Departure Taxes Trailing Taxes Resident for Part of a Year 41 CHAPTKR 4 Double Taxation Relief Introduction International Double Taxation Defined Relief Mechanisms Deduction Method Exemption Method Participation Exemption Credit Method General Rules Types of Limitations Indirect or Underlying Credit Comparison of the Exemption and Credit Methods Treaty Aspects Allocation of Expenses Tax Sparing 66 CHAPTER 5 Taxation of Nonresidents Introduction Tax Policy Considerations in Taxing Nonresidents Threshold Requirements Source Rules Double Taxation Excessive Taxation of Nonresidents Computation of the Domestic Source Income of Nonresidents Taxation of Various Types of Income of Nonresidents Business Income In General Brauch Taxes Income from Immovable Property Income from Employment Investment Income: Dividends, Interest, and Royalties 81 vi

4 5.8.5 Capital Gains Administrative Aspects of Taxing Nonresidents Introduction Obtaining Information about Domestic Source Income of Nonresidents Collection of Tax from Nonresidents 84 CHARTER 6 Transfer Pricing Introduction The OECD Transfer Pricing Guidelines United Nations, Practical Manual on Transfer Pricing for Developing Cowitries The Arm's-Length Standard Introduction Comparability Analysis Comparable Uncontrolled Price Method Resale-Price Method Cost Plus Method Comparison of Traditional Methods Profit-Split Method Transactional Net Margin Method Sharing of Corporate Resources Introduction Loans or Advances Performance of Services Use of Tangible Property Use or Transfer of Intangible Property Cost-Contribution Arrangements Disregarded Transactions Transfer Pricing Documentation Requirements Treaty Aspects of Transfer Pricing Tax Policy Considerations: Formulary Apportionment and the Future of the Arm's-Length Method 107 CHARTER 7 Anti-avoidance Measures III 7.1 Introduction III 7.2 Restrictions on the Deduction of Interest: Thin Capitalization and Earnings-Stripping Rules Introduction The Structural Features of Thin Capitalization and Earnings-Stripping Rules CFC Rules Introduction 118 vii

5 7.3.2 Structural Features of CFC Rules Definition of a CFC Designated Jurisdiction or Global Approach Definition and Computation of Attributable Income Nature and Scope of Exemptions Resident Taxpayers Subject to Tax Relief Provisions Tax Treaties and CFC Rules Nonresident Trusts Foreign Investment Funds 131 CHARTER 8 An Introduction to Tax Treaties Introduction Legal Nature and Effect of Tax Treaties Vienna Convention on the Law of Treaties The Relationship between Tax Treaties and Domestic Law The OECD and UN Model Tax Treaties The Process of Negotiating and Revising Tax Treaties Objectives of Tax Treaties Interpretation of Tax Treaties Introduction The Interpretive Provisions of the Vienna Convention on the Law of Treaties The Interpretation of Undefined Terms in Accordance with Domestic Law - Article 3 (2) Summary of the Provisions of the OECD and UN Model Treaties Introduction Coverage, Scope, and Legal Effect The Distributive Rules: Articles 6 through Introduction Business Income Employment and Personal Services Income Income and Gains from Immovable Property Reduced Withholding Rates on Certain Investment Income Other Types of Income Administrative Cooperation Special Treaty Issues Nondiscrimination Treaty Abuse Introduction Treaty Shopping OECD BEPS Action 6: Preventing Treaty Abuse 171 viii

6 8.8.3 Resolution of Disputes Administrative Cooperation Attribution of Profits to Permanent Establishments 178 CHAPTER 9 Emerging Issues Introduction Base Erosion and Profit Shifting (BEPS) Introduction The 1998 OECD Harmful Tax Competition Report The G20/ BEPS Project Hybrid Arrangements What Is a Hybrid Arrangement? Hybrid Entities Hybrid Financial Instruments OECD BEPS Proposais for Hybrids Pees for Management, Technical, and Consulting Services Introduction The Taxation of Income from Management, Technical, and Consulting Services under Tax Treaties Proposed Article on Pees for Management, Technical, and Consulting Services in the UN Model Treaty Arbitration The Digital Economy - Electronic Commerce Introduction Tax Challenges Posed by the Digital Economy 205 Glossary of International Tax Terms 209 Index 217 ix