2. 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
3. MEANING OF INTERNATIONAL
TAXATION
The study or determination of tax on a person or
business subject to the tax laws of different
countries or the international aspects of an
individual country's tax laws.
4. SCOPE OF INTERNATIONAL
TAXATION
• Taxation of Residents on foreign income
• Taxation of Non Residents
• Cross border taxation of MNCs
5. TYPES OF INTERNATIONAL
TAXATION
• Residence based taxation :Residents of the
country are taxed on their worldwide (local and
foreign) income.
• Source Based Taxation :Only local income from
a source inside the country is taxed. Usually
nonresidents are taxed only on their local income
6. TAXABILITY OF TRANSACTION
• Scope of Total income is defined in Section 5 of
Income Tax Act, 1961
• Two step process:
• Identify whether it is Indian Income or Foreign
Income
• Determine taxability of both the incomes by
identifying the control of business
9. FOREIGN REMITTANCES
• Section 195 of Income Tax Act, 1961
• TDS on Non Resident Payments
• Withholding Taxes
• Royalty and Fees for Technical Services
10. DOUBLE TAXATION
Double taxation occurs when tax is paid more than once
on 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
13. TAX AVOIDANCE METHODS
• Profit shifting via transfer pricing
Arm’s length pricing
Limitation On Benefits: LOB
• Thin capitalization
14. TAX TREATY
A tax treaty is an agreement between two countries
that outlines a series of articles which clarifies the tax
rules between the countries on specific subjects.
Types:
• OECD model tax treaty
• UN model tax treaty
15. 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
16. BUDGET 2015: CHANGES IN
INTERNATIONAL TAXATION
• GAAR is deferred by two years and will apply with
effect from 1st April 2018, i.e. AY 2018-19 and FY
2017-18
• Residence status of company is re-defined
• Place of Effective Management(POEM) test for
determination of residence
17. • 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 the
manner of granting foreign tax credit
• Reporting by Persons paying any sums to Non Residents
• Measures to curb Black Money stashed abroad