INTERNATIONAL TAXATION

Presented By:

Aakanksha Gupta

Eesha Gupta

CONTENTS

• Meaning & Scope of International Taxation

• Types of International Taxation

• Taxability of Transaction

• Foreign Remittances

• Double Taxation & Relief Measures

• Tax Avoidance Methods

• Tax Treaty

• Budget 2015 Changes

MEANING OF INTERNATIONAL

TAXATION

The study or determination of tax on a person or

business subject to the tax laws of differentcountries or the international aspects of anindividual country's tax laws.

SCOPE OF INTERNATIONAL

TAXATION

• Taxation of Residents on foreign income

• Taxation of Non Residents

• Cross border taxation of MNCs

TYPES OF INTERNATIONAL

TAXATION

• Residence based taxation :Residents of thecountry are taxed on their worldwide (local andforeign) income.

• Source Based Taxation :Only local income froma source inside the country is taxed. Usuallynonresidents are taxed only on their local income

TAXABILITY OF TRANSACTION

• Scope of Total income is defined in Section 5 ofIncome Tax Act, 1961

• Two step process:

• Identify whether it is Indian Income or ForeignIncome

• Determine taxability of both the incomes byidentifying the control of business

IDENTIFICATION OF INDIAN

INCOME AND FOREIGN INCOME

IDENTIFICATION OF TAXABILITY

FOREIGN REMITTANCES

• Section 195 of Income Tax Act, 1961

• TDS on Non Resident Payments

• Withholding Taxes

• Royalty and Fees for Technical Services

DOUBLE TAXATION

Double taxation occurs when tax is paid more than onceon the same taxable income or asset.

Types of double taxation:

• Juridical

when the same person is taxed twice on the same income

by more than one state

• Economic

when more than one person is taxed on the same item

RELIEF FROM DOUBLE

TAXATION

• Exemption

• Deduction

• Credit

Bilateral relief Unilateral relief

TAX AVOIDANCE METHODS

• Profit shifting via transfer pricing

Arm’s length pricing

Limitation On Benefits: LOB

• Thin capitalization

TAX TREATY

A tax treaty is an agreement between two countriesthat outlines a series of articles which clarifies the taxrules between the countries on specific subjects.

Types:

• OECD model tax treaty

• UN model tax treaty

DIFFERENCE BETWEEN THE

MODELS

OECD MODEL TAX TREATY

• Residence based taxation

• Capital export neutrality

• Signed between countries with comparable tax systems

• Credit Method

UN MODEL TAX TREATY

• Source based taxation

• Capital import neutrality

• Signed between countries with unequal economic status

• Exemption method

BUDGET 2015: CHANGES IN

INTERNATIONAL TAXATION

• GAAR is deferred by two years and will apply witheffect from 1st April 2018, i.e. AY 2018-19 and FY2017-18

• Residence status of company is re-defined

• Place of Effective Management(POEM) test fordetermination of residence

• Reduced Tax on Royalty and Fees for Technical Services(FTS) paid to Non Residents from 25% to 10%

• CBDT is now empowered to frame rules to notify themanner of granting foreign tax credit

• Reporting by Persons paying any sums to Non Residents

• Measures to curb Black Money stashed abroad

REFERENCES

• http://www.incometaxindia.gov.in/pages/international-taxation.aspx

• http://indialiaison.com/residential_status.htm

• http://www.expatarrivals.com/india/taxes-in-india

• http://taxguru.in/income-tax/faq-tds-residents-us195-income-tax-act.html

THANKS