...relief: Relief from double taxation can be provided mainly in two ways (i) Bilateral relief (ii) Unilateral relief. (i) Bilateral relief: Under this method, the Governments of two countries can enter into an agreement to provide relief against double taxation by mutually working out the basis on which relief is to be granted. India has entered into agreement for relief against or avoidance of double taxation with 77 countries up to May,2010. Bilateral relief may be granted in either one of the following methods: (a) Exemption method, by which a particular income is taxed in only one of the two countries; and (b) Tax relief methods under which, an income is taxable in both countries in accordance with the respective tax laws read with the Double Taxation Avoidance Agreements. However, the country of residence of the taxpayer allows him credit for the tax charged thereon in the country of source. In India, double taxation relief is provided by a combination of the two methods. (ii) Unilateral relief : This method provides for relief of some kind by the home country where no mutual agreement has been entered into between the countries. 4.2. Double Taxation Relief Provisions under the Act: Section 90 and 91 of the Income Tax Act, 1961 provides for double taxation relief in India. 4.2.1.Agreement with foreign countries or specified territories –Bilateral Relief [Section 90]: (i) Section 90(1) provides that the Central Government may enter into an agreement with the Government ...
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...of this thesis is to test whether Mauritius is truly a platform for tax evasion and to what extent the measures that are being taken by the Government to combat this bad publicity are effective. The specific objectives of this study are: To understand the purpose and functioning of treaty arrangements Mauritius has with other countries throughout the world. To test the effectiveness of the measures to combat tax evasion. To test the knowledge of employees in the global business sector. Research questions To what extent employees understand the tax regime for global companies? Based on their experience, how complicated do they perceive the tax regime to be? Do they believe that Mauritius is a tax...
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...5. The German tax authorities The „Bundeszentralamt für Steuern“ (The Federal Central Tax Office) is responsible for the tax system in Germany. In order to catch tax evaders the German authorities have ample access privileges. In the case of suspicion of tax evasion they have access to most public databases. Moreover in Germany the bank secrecy in fact doesn’t exist since the banks have to corporate with the tax authorities, if there is any suspicion of tax evasion. Punishment for tax evasion is very strict and hard in Germany. For serious tax evasion the consequence can be high fines and a prison term up to 10 years. The period of limitation for tax fraud amounts also to 10 years. Compared to international regulation Germany is strict regarding tax evasion. Australia and Germany have a double tax agreement which was stated in 1974. Purpose of the agreement is the avoidance of double taxation and tax evasion of individuals and businesses and a general ease in favor for the cross border economic exchange. The agreement says in which country individuals and companies have to pay taxes. Crucial for the tax claim is the habitual residence of the individual or the permanent business establishment of the company. Article 15 of the agreement for example states that a Non-executive director who´s getting paid for his work in Australia, while he is living in Germany, also must pay taxes in Germany. Conclusion: Even if there are many opportunities to avoidance or evasion of taxes...
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... From the Malaysian perspective, to begin with, there must first be a tax liability under the Malaysian Income Tax Act, 1967 (ITA). Once this is established, then one has to check the provisions in the DTA to see whether a reduction of tax rate or total elimination is available. If so, the DTA must be respected. This is clearly provided in the ITA, namely S 132(1) which states that if the Minister by statutory order declares that arrangements set out in such order been made by the with the government of any territory outside Malaysia in order to give to the relief of double taxation in relation to tax beneath this Act and any other foreign tax territory and it was is expedient that those arrangements should have effect (Choong, 2013). Next, as long as the order remains in force, those arrangements shall be effective in relation to tax beneath this Act notwithstanding anything in any written law. Whilst the above law is quite clear, there have been litigations on this aspect. And, as expected, it has been established that due respect should always be given to the DTAs that the Malaysian Government has entered into (Choong, 2013). 2.0 Scope of DTAs Double Taxation Agreement (DTA) is a deal between two nations who want to avoid double taxation by determining the taxing rights of each nation taking into consideration cross-border flows of revenues and provide tax credits or exemptions to eliminating double taxation (Yong, 2012). The objective of the DTA Malaysia to establish...
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...MT570 Taxation (Current Topics) Assignment 2 Question 1 The draft tax determination TD 2009/18 – Income Tax: Can a private equity entity make an income gain from the disposal of target assets it has acquired? – deals with private equity entities disposing of Australian target assets, and per this draft determination, the ATO’s view on this is that yes a private equity entity can make an income gain on the disposal of such assets, although they do acknowledge that each case will depend on fact and circumstance. The draft determination basically states that where a foreign private equity entity that is not in a treaty country carries on a business of deriving a profit from the sale of an Australian asset then the profit is ordinary income under section 6-5 of the ITAA 1997 which is taxable in Australia and is not exempt as a capital gain. Whether a private equity entity can make an income gain on the disposal of its target assets will be a question of fact and circumstance. It will need to be determined on what account the asset was being held on and in order to determine this. The investment strategy and the form and substance of the private equity entity must be looked at in detail and at length to determine this. Basically, if the intent of the private equity entity is to acquire the target asset, become a long term investor and derive dividend income from its shares then the gain made from disposal would be held on capital account as the disposal would be...
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...Major areas for final settlement of tax liability : Tax deducted at source for the following cases is treated as final discharge of tax liabilities. No additional tax is charged or refund is allowed in the following cases:- * Supply or contract work * Band rolls of hand made cigarettes * Import of goods * Transfer of properties * Export of manpower * Real Estate Business * Export value of certain items including knit and woven garments. * Local shipping business * Royalty, technical know-how fee * Insurance agent commission * Auction purchase * Payment on account of survey by surveyor of a general insurance company * Clearing & forwarding agency commission * Transaction by a member of a Stock Exchange * Courier business * Compensation against acquisition of property * Premium value over face value of a share * Income from transfer of securities of a sponsor shareholder. * Winning lotteries. Tax Recovery System : In case of non-payment of income tax demand the following measures can be taken against a taxpayer for realization of tax:- * Imposition of penalty, * Attachment of bank accounts, salary or any other payment, * Filing of Certificate case to the Special Magistrate. Advance Payment of Tax : Every taxpayer is required to pay advance tax in four equal installments falling on 15th September; 15th December; 15th March and 15th June of each year if the latest assessed income exceeds Taka four lakh. Penalty...
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...The Role of Income Tax Treaties in International Taxation Tax treaties are bilateral agreements between countries. The purpose of bilateral tax treaties is typically expressed to be “the avoidance of double taxation and the prevention of fiscal evasion.” As most countries contain within their domestic law provisions to prevent double taxation of their residents where another country taxes the same income on a source basis, the main operation of tax treaties in this respect is for other types of double taxation that can arise as elaborated below. The prevention of fiscal evasion primarily refers to cases where taxpayers fraudulently conceal income in an international setting and rely on the inability of tax administrations to obtain information from abroad. The exchange of information article in tax treaties are the major provision dealing with this problem. Because of the capital flight experienced by many developing and transition countries, exchange of information is important, but in practice there are some considerable hurdles to successful exchange. From the perspective of developing and transition countries, there are a number of other purposes of tax treaties that are usually unstated but in many cases are more important. First, there is the division of tax revenues to be derived from income involving the two countries that are parties to the treaty. Where flows of income from business and investment are balanced between two countries, or even among a...
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...business objectives such as increased profitability and reduced risks. Also, these complex structures allow the company to reduce its overall tax burden. One such strategy is discussed in this paper. Transfer pricing allows the company to price the inter-company transactions. Transfer pricing simplifies the accounting of transactions that take place between affiliated or related entities. Companies have freedom in valuing inter-company transactions. But, if strategically implemented, this strategy allows the company to save taxes and retain large amount of profits. Keywords: Transfer mispricing, tax-havens, Double Irish Dutch Arrangement Transfer Pricing Transfer pricing is the methodology used to set the prices for goods sold or services provided between related entities within an enterprise. Related entities are those which are under control of a single corporation and include branches and companies that are wholly or majority owned ultimately by the parent company. Generally, such a transfer price should be equal to the price which the entity would charge to an independent customer, an arm’s length customer. Such a price is termed as an “arm’s length price” (Transfer Pricing, Wikipedia, 2015). Financial accounting does not differentiate between affiliates and treats the corporate group as a single entity. But the federal income tax law treats affiliates as separate economic actors. This allows multinational companies a free rein to determine where their profits should...
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...Double Taxation Avoidance Agreement - India & Mauritius: Does revising treaty loosen up the existing relations? The island Mauritius located in the south west part of the Indian Ocean lies about 3,900kms south west of India. Despite the long distance separation between the countries, Mauritius still possesses the seeds of Indian origin sown back in 1820’s during the time of colonial rule. According to the statistical data, 68% of the Mauritians are Indian origins called as ‘Indo – Mauritians’. The another interesting fact which still more strengthens the Indian origin prevalence in the country is by noticing the chronological tenure of presidents and prime ministers of Mauritius which reveals that all presidents except Karl Offmann and all prime ministers except Paul Berenger are from the community Indo – Mauritians. Indian influence is felt still in Mauritius. The diplomatic relations began between the two countries post-independence. India is maintaining very good relations with Mauritius from the then 1948 to the present in terms of political, commercial and cultural relations. Frequent visits of the presidents, prime ministers and government bureaucrats of their respective countries to the foreign countries indicates their interest in strengthening the existing relations and development of the countries with mutual support. The very recent Limit of Credit extended to Mauritius in civilian infrastructure development is 500million USD by India. Today, India is developed...
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...well-developed tax structure with clearly demarcated authority between Central and State Governments and local bodies. Central Government levies taxes on income (except tax on agricultural income, which the State Governments can levy), customs duties, central excise and service tax. Value Added Tax (VAT), (Sales tax in States where VAT is not yet in force), stamp duty, State Excise, land revenue and tax on professions are levied by the State Governments. Local bodies are empowered to levy tax on properties, octroi and for utilities like water supply, drainage etc. In last 10-15 years, Indian taxation system has undergone tremendous reforms. The tax rates have been rationalized and tax laws have been simplified resulting in better compliance, ease of tax payment and better enforcement. The process of rationalization of tax administration is ongoing in India. Since April 01, 2005, most of the State Governments in India have replaced sales tax with VAT. 1.Direct Taxes a. Taxes on Corporate Income Companies residents in India are taxed on their worldwide income arising from all sources in accordance with the provisions of the Income Tax Act. Non-resident corporations are essentially taxed on the income earned from a business connection in India or from other Indian sources. A corporation is deemed to be resident in India if it is incorporated in India or if it’s control and management is situated entirely in India. Domestic corporations are subject to tax at a basic...
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...increase in cross border transactions in the era of globalised world there has been increase in the number of cases tax evasion & avoidance. The problem of tax evasion in developing countries is therefore exacerbated, where evasion even by a wealthy few can have a comparatively large impact. The revenue needs of developing countries, in combination with the severity of corruption, tax evasion and fraud in many developing countries, highlight the importance of increasing global transparency concerning the location of untaxed wealth. Globalization and the liberalization of economic activity, resulting in the exponential increase in cross border commercial and financial transactions, has in effect converted the private sector into a world without borders. This has created a major problem for national tax authorities because globalization in the private sector has not been accompanied by similar changes in the reach and enforcement powers of national tax authorities. 1.2 In confronting the impact of globalization and liberalization of economies, national tax authorities face several problems. Some of them are illustrated below: 1. National tax authorities has administration of one national government. 2. There is no concept of International tax administration yet. 3. There is a traditional legal rule that one government does not enforce the tax laws of other governments. 4. Bank secrecy and other confidentiality laws (“de jure bank secrecy”) in many jurisdictions...
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... Role in International Tax Policy A Research and Policy Brief for the Use of the NGO Committee on Financing for Development Hamrawit Abebe, Ryan Dugan, Michael McShane, Julie Mellin, Tara Patel, and Linda Patentas Graduate Program in International Affairs, Milano School of International Affairs, Management, and Urban Policy, The New School March 7, 2012 TABLE OF CONTENTS EXECUTIVE SUMMARY BACKGROUND AND PERSPECTIVES BACKGROUND AND ANALYSIS THE OECD, G77, G20, AND EU ON UPGRADING THE UN TAX COMMITTEE KEY INSTITUTIONAL PLAYERS ARGUMENTS FOR AND AGAINST A UN TAX BODY 3 4 8 12 17 REFLECTIONS AND RECOMMENDATIONS RELATIONSHIP BETWEEN OECD AND UN TAX COMMITTEE GLOBAL TAX POLICIES POLICY RECOMMENDATIONS 20 28 38 APPENDIX GLOSSARY AND ACRONYMS REFERENCES 44 48 52 2 Executive Summary The report provides an analytical view on the role of the United Nations in tax policy, highlighting the interventions made by and challenges to key players in attempts to streamline global tax cooperation. The first section of the paper provides a background on the importance of tax related issues, emphasizing its importance within the Monterrey Consensus. Debates are introduced between two key institutional players regarding global tax cooperation, the OECD’s Committee on Fiscal Affairs and the UN Tax Committee. Views from key players the OECD, Group of 77, Group of 20, and European Union are addressed in the areas of international tax cooperation, the inclusion...
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...employment 5)tax relief and rebates 6)individual tac computation 7)interest income 8)dividend income 9)rental income 10)witholding tax 11)partnership-tax treatment for investment income 12)estate under administration 13)estates under administration 14)settlements 15)trusts 16)badges of trade 17)business income 18)business expenses 19)interest expenses 20)trading stock 21)capital allowances 22)industrial building allowance 23)controlled sales 24)mining allowance & prospecting expenditure 25)approved donation & zakat 26)group relief for companies 27)restriction on use of loss on change in ownership 28)company taxtion 29)double dedustion 30)research & development 31)exemption for increased exports of goods & commodities 32)exemption for increased exports of manufactured products & agricultural produce 33) exemption for increased exports of qualifying services 34)income tax (deduction for cost of acquisition of proprietary rights) 35)income tax (deduction for cost on acquisition of a foreign owned company) 36)single tier dividend system & section 108(6) 37)professional communication tools-reports,letters.... 38)tax incentives-pioneer statuss,investment tax allowance,renvestment allowance 39)computation of chargeable income-company 40)self assessment for individual & companies 41)tax avoidance & wilful evasion 42)tax audit & tax investigation 43)advanced ruling 44)company liquidition 45)transfer of assests 46)double taxqation agreements 47)transfer...
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...What is tax haven? Why are all tycoons so crush on them? In January 9, 2015, Cheung Kong Holdings Limited announced the restructuring arrangement of combining Cheung Kong Holdings and Hutchison Whampoa to form a new listed company: “CK Hutchison Holdings Limited”. This newly established company is incorporated at Cayman Islands (SCMP, 2015) which has been commonly known as “tax haven”. As the name implies, tax haven is a place where levy taxes at a very low rate or even not at all to companies registered there. It has been an interesting phenomenon that most of the largest corporations in the world, they are not registered at the place where they operate their major business or make most of the profits. Indeed, how is this mechanism works? How could the multi-national corporations in the world transfer their profits made all over the world to these tax havens to avoid tax? Advantages of tax havens If we look at the figures provided by HKEX in 2013, 724 out of 1602 companies listed in Hong Kong Stock Exchange market are incorporated in Cayman Islands (881903, 2015). This has indicated that it has already been a common practice for listed companies to be registered in these offshore financial centre. Take Cayman Islands as an example, being one of the most popular tax havens in the world, not only it has a no profit tax levied, but also it comes with much looser company law and other financial regulations. For the investors who want to register a company in Cayman Islands...
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...Tax Havens pull up socks in ‘transparency’ era The great ‘subprime’ crisis has had its share of fallouts over past 24 months; yet there is a silver lining emerging from under the dark clouds which has the world order gearing up for a brand new era of financial discipline and enhanced regulation. Ironically, one of the positives borne out of the recent economic upheaval has been staggering focus on ensuring robust transparency standards in tax matters. Before delving further into how tax transparency and information exchange are critical for sorting financial disorder across economies, let me try and explain the concept of ‘money laundering’ and how the absence of strict standards in tax discipline have abated this menace. This also helps putting in perspective the role that the international tax policy, in tandem with other non-tax measures, plays in combating tax evasion, whether with or without aid of money laundering. What’s the color of money!! Money laundering is loosely used to describe ‘washing’ of unaccounted or illicitly sourced money through a cobweb of complex financial transactions, usually involving more than one jurisdiction. The objective of the process deployed to ‘clean’ the money is to hide either the ownership or the destination of such funds. A typical ‘laundering’ scheme could see three stages: a) Placement stage – at this stage, the objective of stakeholders is to move the illicit funds away from source location; sources of such funds can be...
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