SlideShare una empresa de Scribd logo
1 de 48
Descargar para leer sin conexión
BASICS OF
         INTERNATIONAL TAXATION

     An overview of Indian Income Tax
      Provisions applicable to Non-
      Residents.

     Important Concepts to understand
      Double      Taxation   Avoidance
      Agreements.
CA.
P.R.Sreenivasan,   PS
DY & Associates
Introduction
 Growing importance and emphasis on International
  Taxation

 Taxation of Non Residents & NRIs

 Taxation of foreign nationals

 Cross border taxation of MNCs

 Issues related to black money



CA. P.R.Sreenivasan,
PSDY & Associates
Contents

1. Indian Income Tax Provisions related to
   Non Residents.

2. Double Tax Avoidance Agreements
   (i) DTAA – Purpose and objectives
  (ii) OECD MC vs. UN MC

3. Basic Important DTAA Concepts.
CA.
P.R.Sreenivasan,   PS
DY & Associates
Indian Income Tax Provisions
                     related to Non Residents




CA.
P.R.Sreenivasan,    PS
DY & Associates
Income Tax Provisions related to Non
             Residents
                                         Taxation of
                                        Non Resident


   Definitions            Scope of             Special       Presumptive
  Sec. 2(30), 6           Taxation           provisions      taxation Sec.
                        Section 4,5,9       Chapter XII-A   44B/BB/BBA/
                                                                 BBB




      TDS               DTAA Sec 90            Anti-            Agent
  Sec.195, 197             & 91              Avoidance         Section
                                             Provision        160, 163
                                            Sec 92, 94A
CA.
P.R.Sreenivasan,   PS
DY & Associates
Income Tax Provisions related to Non
            Residents
                    Types of Income         R    R & NR
                                                 OR
 Received or deemed to be received in India        
 by or on behalf of the assessee
 Income that accrues or arises or is deemed        
 to accrue or arise in India
 Income that accrues or arises outside India       
 and is not derived from business controlled
 in or a profession set up in India
 Income that accrues or arises / received          
 outside India
CA.
P.R.Sreenivasan,   PS
DY & Associates
NR & NOR is taxable in India if

                       INCOME
                       EARNED




 Received or
                       Accrues or     Deemed to
deemed to be
                        Arises in   Accrue or Arise
 received in
                          India        In India
    India

CA. P.R.Sreenivasan,
PSDY & Associates
CHAPTER XII-A
   Taxation of NRIs – Special Provisions
 Meaning of NRI – Non Resident Indians
       i.e Indian Citizen or PIO who is NR

 Type of income
     – Income from investment in “foreign exchange
       assets”
     – L.T Capital Gain on sale of “foreign exchange
       assets”
CA.
P.R.Sreenivasan,   PS
DY & Associates
Taxation of NRIs – Special Provisions

 “Foreign Exchange Assets” means
     – Shares in an Indian Company
     – Debentures / Deposits in an Indian company
       other than a private company
     – Central Government Securities
     – Purchased using convertible foreign exchange



CA.
P.R.Sreenivasan,   PS
DY & Associates
Taxation of NRIs – Special Provisions

                        Rate of tax




         Investment                   LTCG on sale of
           Income                      Forex Assets
            20%                            10%




CA.
P.R.Sreenivasan,   PS
DY & Associates
Taxation of NRIs – Special
                 Provisions
 Other benefits available under Chapter XII-A
No need to file return if TDS is deducted

Option to continue availing the benefit even
 after becoming resident on application made
 to the assessing officer.

Chapter XII-A shall not apply if assessee so
 chooses
CA.
P.R.Sreenivasan,   PS
DY & Associates
Tax Deduction at Source for Non Residents
   Section 195 (1)
               Any person responsible to pay to a Non
                resident to withhold tax
               In respect of interest or any other sum
                chargeable under Income tax Act, 1961
               At the time of credit or payment, whichever is
                earlier
               At the rates in force




CA.
P.R.Sreenivasan,   PS
DY & Associates
Tax Deduction at Source for Non Residents
Exceptions
 Interest payable by the Government or a
  PSU Bank or a PFI, TDS shall be deducted
  only at the time of actual payment.

 No TDS required for payment of dividend
  distributed by a domestic company referred
  to in Sec 115-O.


CA.
P.R.Sreenivasan,   PS
DY & Associates
Tax Deduction at Source for Non Residents
  Application for non deduction or lower deduction of tax
   The payer may apply to the AO for determination
    appropriate portion of the sum to be paid on which tax
    has to be deducted – Sec 195(2)

   The payee may also apply to the AO for grant of a
    certificate authorizing him to receive the amount without
    deduction of tax at source – Sec 195(3)

   The assessee (i.e payee) may also apply to the AO for a
    certificate for deduction of tax at lower rate U/s.197
CA.
P.R.Sreenivasan,   PS
DY & Associates
Tax Deduction at Source for Non Residents
                   Remittance of money abroad
                           Sec 195(6)
                          Formalities
                            Before
                           Outward
                          Remittance



     Information to be
                                  Certificate from CA to be
  furnished in Form 15CA
                                   obtained in Form 15CB
 - To be filed electronically

CA.
P.R.Sreenivasan,   PS
DY & Associates
Anti Avoidance Provisions
 Transfer Pricing – Sections 92 to92F
     – Applies to “International Transactions” carried
       out between two or more “Associated
       Enterprises”.
     – Meaning of “Associate Enterprise” – One
       enterprise participates directly / indirectly in the
       management / control / capital of the other.
     – Pricing of transactions shall be at “Arm’s
       length”.
     – 5% variation between the ALP and the actual
       price is allowed
CA.
P.R.Sreenivasan,    PS
DY & Associates
Anti Avoidance Provisions
 Sec 94A - Black listing of “Tax Havens”
 Inserted by Finance Act 2011 w.e.f 1st June
  2011
 Referred to as “Tool box of counter measures”
 To prevent “Tax Avoidance”
 Authorizes Government to black list non-
  cooperative jurisdictions
 Penalize both Indian Assessee as well as the
  Non Resident concerned

CA.
P.R.Sreenivasan,    PS
DY & Associates
Anti Avoidance Provisions
         Salient features of Section 94A
 Government may specify certain non -
  cooperative jurisdictions as “Notified
  Jurisdictional Areas” (NJA).
 If an assessee enters in to a transaction with
  a person in an NJA
     – All parties to the transaction will be regarded as
       “Associated Enterprises”
     – The transactions will be considered as an
       “International Transaction”
     – All provisions of Transfer Pricing will apply
     – Additional records may be prescribed by CBDT
CA.
P.R.Sreenivasan,   PS
DY & Associates
Anti Avoidance Provisions
 Tax Information Exchange Agreements
     – About 13 TIEAs have been signed in recent
       past
     – Objective is to prevent round tripping of black
       money
 Amendments to existing DTAAs
     – Attempt is being made to amend DTAAs
       already entered in to


CA.
P.R.Sreenivasan,   PS
DY & Associates
Anti Avoidance Provisions
             ROUND TRIPPING
Using tax heavens and benami Non Residents
       Mr.A an Indian                     BC Ltd in India
          resident

                                                           AB Ltd
                       Sends funds                         invests
                        by hawala                         shares /
                       Rs.100 cr to                        debt in
                                                           Indian


          A tax haven                 Invests in a Tax Haven company –
          Deposits in                    AB Ltd. Rs.100 cr as loan and
                                      Rs.10,000/-in equity owned by one
          Local bank                         / more non residents

CA. P.R.Sreenivasan,
PSDY & Associates
Double Tax Avoidance Agreements
                   1. DTAA – Purpose and objectives




CA.
P.R.Sreenivasan,     PS
DY & Associates
Need for DTAA

                          Reason for
                        Double Taxation



                                      Also taxed on
    Resident of India
                                      same income
      Taxed on his
                                 in the country where
     Global Income
                                   it accrues / arises

CA.
P.R.Sreenivasan,   PS
DY & Associates
Need for DTAA
                         Basic rule for
                           taxation


                                    Source Rule
 Residence Rule
                                 “Principle of Situs”

Resident of a country            Non Resident is taxed in
is taxed on his global            the country where the
       income                    income accrues / arises
CA.
P.R.Sreenivasan,   PS
DY & Associates
Need for DTAA
                         Types of Double
                            Taxation



Juridical Double Taxation         Economic Double Taxation




Same person taxed on               Two entities subject to
same income in more               tax on the same income
 than one countries                in two more countries

CA.
P.R.Sreenivasan,   PS
DY & Associates
Need for DTAA
 Juridical double taxations
 Example
                           Company A
                           resident in            USA
                               USA


                           Branch In              India
                             India



            Company A’s branch profits are subject to
            tax in two countries:
            (i) in USA, due to residence; and
            (ii) in India, due to source.


CA. P.R.Sreenivasan,
PSDY & Associates
Need for DTAA
          Economic double taxation
                Arises where one country applies its
                transfer pricing rules.

Example             Taxable profits
                                             Company A
                    = US$ 5 million

                                                                     USA
                                Loan ($100      Interest @ 5% p.a.
                                Million)        ($ 5 million)
                                                                     India
                    Taxable profits
                     = $ 2 million           Company B


     •If as per TP rules in India the arm’s length rate of interest should
     be 4% p.a., it will reduce Company B’s interest deduction by $1 M.

     • Company B’s taxable profits increase by $ 1 M to $ 3 M.

 CA.
 P.R.Sreenivasan,   PS
 DY & Associates
Purpose of DTAA – Sec 90(1)

                                Sec 90(1)
                                 Purpose
                                    of
                                  DTAA




                    Provide     Promote
                                             Exchange    Collection
 To avoid           relief to    mutual
                                                of            &
  double             doubly     Economic
                                            informatio   Recovery
 taxation            taxed       & Trade
                                                 n        of Taxes
                    income      relations
CA.
P.R.Sreenivasan,   PS
DY & Associates
Applicability of DTAA
                          Applicability
                          and effect of
                         DTAA vis-à-vis
                        Income Tax Act


Assessee who               Income is          Conflicting
is resident of              taxed /          provisions in
either or both          taxable in both       IT Act and
   countries               countries            DTAA


                                 More beneficial        DTAA would
                                  provision to          override to
                                    apply -           assessee’s favor
                                 Cir 333 02.04.1982    CIT v. ITC Ltd
CA.
P.R.Sreenivasan,   PS
DY & Associates
Double Taxation Avoidance
               Agreement (DTAA)
                        Legal effect of
                            DTAA


Agreement between
                                 Becomes part of law
   two countries


    Binding on both               Gives rights to the
       countries                      tax payer
CA.
P.R.Sreenivasan,   PS
DY & Associates
Double Taxation Avoidance
               Agreement (DTAA)
                          Modes of
                        granting relief
                          in DTAAs


Exemption method                    Credit Method
Either of the countries             Both countries will
                                 tax, but resident country
   will only tax the                would give credit to
        income                          foreign tax
CA.
P.R.Sreenivasan,   PS
DY & Associates
Double Taxation Avoidance
               Agreement (DTAA)
                        Importance of
                        protocols and
                            notes



                                Amendments to existing
Clarify / expand / restrict
                                  treaties are made
application of the treaty
                                  through protocols
CA.
P.R.Sreenivasan,   PS
DY & Associates
Double Taxation Avoidance
               Agreement (DTAA)
                        In absence of
                           DTAA –
                           Sec 91A



Unilateral relief                         Conditions
 to assessee                                apply


Credit method applied       Income must have       Taxes should have
i.e deduction from tax     accrued / arisen o/s     been paid as per
      is allowed                  India           law of other country
CA.
P.R.Sreenivasan,   PS
DY & Associates
Double Tax Avoidance Agreements
                   Organization for Economic
                   Cooperation & Development
                   (OECD) Model Conventions (MC)
                           vs.
                   United Nations (UN) Model
                   Conventions
CA.
P.R.Sreenivasan,   PS
DY & Associates
Tax Treaty Model Conventions

       The most practiced DTAA models are
       the model treaties framed by -

           the Organization for Economic
            Cooperation & Development [‘OECD’]
            also referred to as OECD MC.


           the United Nations (UN MC).



CA.
P.R.Sreenivasan,   PS
DY & Associates
Double Taxation Avoidance
                   Agreement (DTAA)
       Model treaties and commentaries
         Commentaries on OECD model treaty:
            •      Starting with the 1963 edition, the OECD model
                   treaty has been published with a commentary to
                   each article.

            •      The Commentaries have been referred to as an
                   aid to interpretation by the courts in many OECD
                   countries and in some non-OECD countries (e.g.
                   Malaysia).

CA.
P.R.Sreenivasan,     PS
DY & Associates
Double Taxation Avoidance
                   Agreement (DTAA)
       Model treaties and commentaries
         Other international model treaties –e.g.
            •   ASEAN model.
            •   Andean model


         Some countries have published their own model
          treaty – e.g.
            •   US model
            •   Netherlands model
CA. P.R.Sreenivasan,
PSDY & Associates
Double Tax Avoidance
                        Agreements

                           Articles


CA.
P.R.Sreenivasan,   PS
DY & Associates
Model DTAA - Articles
   Table of Contents of OECD and UN-MC                       UN

   Scope of Convention
   Article 1 – Persons covered                               Unchanged
           2 – Taxes covered.                                Unchanged
   Definitions
   Article 3 – General definitions
            4 – Resident
            5 – Permanent establishment.
   Taxation of income
   Article 6 – Income from immovable property                Unchanged
            7 – Business Profit
            8 – Shipping, inland waterways & air transport
            9 – Associated enterprises
           10 – Dividends                                    Unchanged
           11 – Interest
CA.
P.R.Sreenivasan,   PS
DY & Associates
Model DTAA - Articles
       Table of Contents of OECD and UN-MC                   UN

       Taxation of income
       Article 12 – Royalties / Fee for Technical Services
               13 – Capital Gains
               14 – Independent personal services            Deleted in
                                                             OECD–MC 2000
                 15 – Income from employment                 Unchanged
                 16 – Director’s Fees
                 17 – Artistes and Sportsmen
                 18 – Pensions
                 19 – Government Service                     Unchanged
                 20 – Students
                 21 – Other Income.
       Taxation of Capital
       Article 22 – Capital.

CA. P.R.Sreenivasan,
PSDY & Associates
Model DTAA - Articles
  Table of Contents of OECD and UN-MC                  UN

  Methods for elimination of double taxation
  Article 23A– Exemption method
          23B– Credit method.                          Unchanged
  Special provisions
  Article 24 – Non-discrimination                      Unchanged
          25 – Mutual agreement procedure
          26 – Exchange of information
          27 – Assistance in the collection of taxes   Missing in UN-MC
          28 – Members of diplomatic mission and
                          consular posts               Missing in UN-MC
          29 – Territorial extension.
  Final Provisions
  Article 30 – Entry into force
           31 – Termination.
CA.
P.R.Sreenivasan,   PS
DY & Associates
Important Concepts to
                Understand DTAA


CA.
P.R.Sreenivasan,   PS
DY & Associates
Important Concepts to
                        Understand DTAA’s
                         A Business carried on by a corporation, usually through an office
  Branch
                         or other fixed place of business.
                         The situation in which resident investors bear the same tax
  Capital-export         burden whether they invest at home or abroad.
  neutrality

  Capital-import         The situation in which residents investing in a source country bear
  neutrality             the same tax burden as other investors in that country.

                         The Commentary to the OECD Model Treaty or to the UN Model
                         Treaty. It explains the provisions of the Model Treaty and records
                         the reservations and observations of the member countries to
  Commentary             those provisions. The Commentary to the OECD Model Treaty is
                         very influential for the interpretation and application of tax treaties.



                      An official of a treaty country who is responsible for the resolution
  Competent authority of disputes and issues of interpretation arising under a tax treaty.

CA. P.R.Sreenivasan,
PSDY & Associates
Important Concepts to Understand
                         DTAA’s
     Contracting         The Countries that are parties to a tax treaty.
     States
                         Foreign taxes paid by a resident of a country are
     Credit Methods      credited against the residence country’s tax on the
                         resident’s foreign-source income.
     Exemption           Exemption from domestic tax of some or all foreign-
     method              source income derived by residents.
                         An exemption method under which certain foreign-
     Exemption with      source income is exempt from tax but is taken into
     progression         account in determining the rates of tax applicable to
                         other income.

     Foreign affiliate   A foreign corporation in which a domestic tax-payer has
                         a significant direct or indirect ownership interest (usually
                         10 percent or more of the shares).


CA. P.R.Sreenivasan,
PSDY & Associates
Important Concepts to
                   Understand DTAA’s
                        Tax practices that are adopted by a tax-haven country to
     Harmful tax        poach on the tax base of other countries by exploiting
     competition        the weaknesses in the international tax rules of those
                        countries.
                        An entity that is treated as a separate taxable entity
                        (usually as a corporation) in one country and as a
     Hybrid entity
                        transparent or flow-through entity in another country.

                        The treatment by one country of the residents or citizens
     Most-Favoured-     of another country not less favourably than the
     nation treatment   treatment of the residents or citizens of any other
                        country (but not its own residents or citizens).
                        The treatment of non residents or foreigners by a
     National
                        country not less favourably than the treatment of its own
     treatment
                        residents or citizens.

CA. P.R.Sreenivasan,
PSDY & Associates
Important Concepts to
                        Understand DTAA’s
                          A generally-accepted notion that a country should tax
                          non residents, foreigners and foreign-owned domestic
     Non-                 corporations in a manner that is the same as or is
     discrimination       functionally equivalent to the treatment afforded to
                          residents, citizens or domestically-owned corporation in
                          similar circumstances.

                          A rule under which a corporation is considered to be a
     Place-of-            tax resident of the country in which it is incorporated.
     incorporation
     test

                     A rule under which a corporation is considered to be a
     Place-of-       tax resident of the country in which it is controlled or
     management test managed (usually where the board of directors meets
                     and exercise control over the affairs of the corporation).

CA. P.R.Sreenivasan,
PSDY & Associates
Important Concepts to
                    Understand DTAA’s
                       The deferral avoidance, or reduction of tax by lawful
     Tax avoidance
                       means.
                       The reduction of tax by illegal means, usually involving
     Tax evasion       fraudulent non disclosure or willful deceit.

                       Countries which subject income (or some forms of
     Tax havens        income) or entities (or certain entities) to low or no
                       taxation.
                       The allowance of a credit for the amount of foreign
     Tax Sparing       taxes that were not paid because of a tax incentive or
                       holiday in the foreign country.
     Thin              Restriction on the deductibility of interest payments
     capitalization    made by corporations with excessive debt to equity
     rules             ratios to their substantial non resident shareholders.

CA. P.R.Sreenivasan,
PSDY & Associates
Important Concepts to
                  Understand DTAA’s
                       Rules in tax treaties that establish the residence of a
  Tie-breaker rules    dual-resident taxpayer in one country for treaty purposes.

                       The use of a tax treaty by a person who is not resident in
                       either of the treaty countries, usually through the use of
  Treaty shopping
                       conduit entity resident in one of the countries.

                       A tax levied by the source country at a flat rate on the
                       gross amount of dividends, royalties, interest, or other
  Withholding tax      payments made by residents to non residents. The tax is
                       collected and paid to the government by the resident
                       payer.




CA. P.R.Sreenivasan,
PSDY & Associates
CA. P.R.Sreenivasan,
PSDY & Associates

Más contenido relacionado

La actualidad más candente

Basic principles of income tax
Basic principles of income taxBasic principles of income tax
Basic principles of income taxAmeet Patel
 
Latest Updates And All Latest Issues Of Income Tax India
Latest Updates And All Latest Issues Of Income Tax IndiaLatest Updates And All Latest Issues Of Income Tax India
Latest Updates And All Latest Issues Of Income Tax IndiaPraveen Kumar
 
Income Tax Introduction
Income Tax IntroductionIncome Tax Introduction
Income Tax Introductionneelima kogta
 
Income from Other Sources
Income from Other SourcesIncome from Other Sources
Income from Other SourcesChella Pandian
 
Classification of taxes ppt doms
Classification of taxes ppt domsClassification of taxes ppt doms
Classification of taxes ppt domsBabasab Patil
 
International Taxation - DS Vivek
International Taxation - DS VivekInternational Taxation - DS Vivek
International Taxation - DS VivekKarthik S Raj
 
International Taxation
International TaxationInternational Taxation
International TaxationKarthik S Raj
 
Business Taxation Notes
Business Taxation NotesBusiness Taxation Notes
Business Taxation Notesjitendrasangle
 
Income tax introduction
Income tax  introductionIncome tax  introduction
Income tax introductionShijinaSaji
 
Basic concept and definition related to income tax
Basic concept and definition related to income taxBasic concept and definition related to income tax
Basic concept and definition related to income taxFiaz Ahmad
 
Income tax basic concepts
Income tax basic conceptsIncome tax basic concepts
Income tax basic conceptsDr.Sangeetha R
 

La actualidad más candente (20)

Income Tax
Income TaxIncome Tax
Income Tax
 
Basic principles of income tax
Basic principles of income taxBasic principles of income tax
Basic principles of income tax
 
Latest Updates And All Latest Issues Of Income Tax India
Latest Updates And All Latest Issues Of Income Tax IndiaLatest Updates And All Latest Issues Of Income Tax India
Latest Updates And All Latest Issues Of Income Tax India
 
income tax
income taxincome tax
income tax
 
Income Tax Introduction
Income Tax IntroductionIncome Tax Introduction
Income Tax Introduction
 
Income from Other Sources
Income from Other SourcesIncome from Other Sources
Income from Other Sources
 
Classification of taxes ppt doms
Classification of taxes ppt domsClassification of taxes ppt doms
Classification of taxes ppt doms
 
International Taxation - DS Vivek
International Taxation - DS VivekInternational Taxation - DS Vivek
International Taxation - DS Vivek
 
International Taxation
International TaxationInternational Taxation
International Taxation
 
Chapter 1
Chapter 1Chapter 1
Chapter 1
 
income tax
income taxincome tax
income tax
 
Income tax return
Income tax returnIncome tax return
Income tax return
 
Business Taxation Notes
Business Taxation NotesBusiness Taxation Notes
Business Taxation Notes
 
Income tax A.Y 2014-2015
Income tax A.Y 2014-2015Income tax A.Y 2014-2015
Income tax A.Y 2014-2015
 
Withholding tax
Withholding taxWithholding tax
Withholding tax
 
Income tax introduction
Income tax  introductionIncome tax  introduction
Income tax introduction
 
Basic concept and definition related to income tax
Basic concept and definition related to income taxBasic concept and definition related to income tax
Basic concept and definition related to income tax
 
Income tax basic concepts
Income tax basic conceptsIncome tax basic concepts
Income tax basic concepts
 
In Come Tax Law Of India
In Come Tax Law Of IndiaIn Come Tax Law Of India
In Come Tax Law Of India
 
Income tax basics
Income tax basicsIncome tax basics
Income tax basics
 

Destacado

International taxation presentation
International taxation presentationInternational taxation presentation
International taxation presentationKarthik S Raj
 
International taxation
International taxationInternational taxation
International taxationAnam Shahid
 
International Taxation
International Taxation International Taxation
International Taxation karomah95
 
Methods of avoiding the double taxation
Methods of avoiding the double taxationMethods of avoiding the double taxation
Methods of avoiding the double taxationMakha U
 
Double Taxation Avoidance Agreement - DTAA
Double Taxation Avoidance Agreement - DTAADouble Taxation Avoidance Agreement - DTAA
Double Taxation Avoidance Agreement - DTAAnishidh41
 
Module 1 Introduction To International Tax
Module 1 Introduction To International TaxModule 1 Introduction To International Tax
Module 1 Introduction To International TaxUmling
 
Research topics in international taxation
Research topics in international taxationResearch topics in international taxation
Research topics in international taxationMartin Hearson
 
International Tax Environment
International Tax EnvironmentInternational Tax Environment
International Tax EnvironmentAvijit Palit
 
International Taxation - Tax Research Paper
International Taxation - Tax Research PaperInternational Taxation - Tax Research Paper
International Taxation - Tax Research PaperKesha Haley
 
Assignment international taxation
Assignment international taxationAssignment international taxation
Assignment international taxationEesha Gupta
 
Taxation 101 basic rules and principles in philippine taxation by jr lopez go...
Taxation 101 basic rules and principles in philippine taxation by jr lopez go...Taxation 101 basic rules and principles in philippine taxation by jr lopez go...
Taxation 101 basic rules and principles in philippine taxation by jr lopez go...JR Lopez Gonzales
 
The value added tax and sales tax in ethiopia
The value added tax and sales tax in ethiopiaThe value added tax and sales tax in ethiopia
The value added tax and sales tax in ethiopiaAlexander Decker
 
INTERNATIONAL TAXATION FOR BEGINNER
INTERNATIONAL TAXATION FOR BEGINNERINTERNATIONAL TAXATION FOR BEGINNER
INTERNATIONAL TAXATION FOR BEGINNERkaustubhpd
 
01 General Principles of Taxation
01 General Principles of Taxation01 General Principles of Taxation
01 General Principles of Taxationkrista3633
 
2015 Upload Campaigns Calendar - SlideShare
2015 Upload Campaigns Calendar - SlideShare2015 Upload Campaigns Calendar - SlideShare
2015 Upload Campaigns Calendar - SlideShareSlideShare
 

Destacado (20)

International taxation presentation
International taxation presentationInternational taxation presentation
International taxation presentation
 
International taxation
International taxationInternational taxation
International taxation
 
BASICS OF INTERNATIONAL TAXATION
BASICS OF INTERNATIONAL TAXATIONBASICS OF INTERNATIONAL TAXATION
BASICS OF INTERNATIONAL TAXATION
 
International Taxation
International Taxation International Taxation
International Taxation
 
Methods of avoiding the double taxation
Methods of avoiding the double taxationMethods of avoiding the double taxation
Methods of avoiding the double taxation
 
International taxation
International taxationInternational taxation
International taxation
 
Double Taxation Avoidance Agreement - DTAA
Double Taxation Avoidance Agreement - DTAADouble Taxation Avoidance Agreement - DTAA
Double Taxation Avoidance Agreement - DTAA
 
Module 1 Introduction To International Tax
Module 1 Introduction To International TaxModule 1 Introduction To International Tax
Module 1 Introduction To International Tax
 
Research topics in international taxation
Research topics in international taxationResearch topics in international taxation
Research topics in international taxation
 
International Tax Environment
International Tax EnvironmentInternational Tax Environment
International Tax Environment
 
International Taxation - Tax Research Paper
International Taxation - Tax Research PaperInternational Taxation - Tax Research Paper
International Taxation - Tax Research Paper
 
Assignment international taxation
Assignment international taxationAssignment international taxation
Assignment international taxation
 
Transfer Pricing
Transfer PricingTransfer Pricing
Transfer Pricing
 
Concepts of Taxation
Concepts of TaxationConcepts of Taxation
Concepts of Taxation
 
Taxation 101 basic rules and principles in philippine taxation by jr lopez go...
Taxation 101 basic rules and principles in philippine taxation by jr lopez go...Taxation 101 basic rules and principles in philippine taxation by jr lopez go...
Taxation 101 basic rules and principles in philippine taxation by jr lopez go...
 
Taxpayers views Ethiopia
Taxpayers views Ethiopia Taxpayers views Ethiopia
Taxpayers views Ethiopia
 
The value added tax and sales tax in ethiopia
The value added tax and sales tax in ethiopiaThe value added tax and sales tax in ethiopia
The value added tax and sales tax in ethiopia
 
INTERNATIONAL TAXATION FOR BEGINNER
INTERNATIONAL TAXATION FOR BEGINNERINTERNATIONAL TAXATION FOR BEGINNER
INTERNATIONAL TAXATION FOR BEGINNER
 
01 General Principles of Taxation
01 General Principles of Taxation01 General Principles of Taxation
01 General Principles of Taxation
 
2015 Upload Campaigns Calendar - SlideShare
2015 Upload Campaigns Calendar - SlideShare2015 Upload Campaigns Calendar - SlideShare
2015 Upload Campaigns Calendar - SlideShare
 

Similar a International Taxation - To begin with

Income Tax Overview
Income Tax OverviewIncome Tax Overview
Income Tax Overviewnikitadaga
 
NRI - Finance Act 2020 - Implications for NRIs
NRI - Finance Act 2020 - Implications for NRIsNRI - Finance Act 2020 - Implications for NRIs
NRI - Finance Act 2020 - Implications for NRIsTilak Agarwal
 
Understanding the Impact of Finance Act, 2020 on Residential Status of Indivi...
Understanding the Impact of Finance Act, 2020 on Residential Status of Indivi...Understanding the Impact of Finance Act, 2020 on Residential Status of Indivi...
Understanding the Impact of Finance Act, 2020 on Residential Status of Indivi...Taxmann
 
Investment opportunities in India
Investment opportunities in IndiaInvestment opportunities in India
Investment opportunities in Indiaits secret
 
ICAI-WIRC - Taxability of Trusts-Domestic & International Tax Issues - 28.01....
ICAI-WIRC - Taxability of Trusts-Domestic & International Tax Issues - 28.01....ICAI-WIRC - Taxability of Trusts-Domestic & International Tax Issues - 28.01....
ICAI-WIRC - Taxability of Trusts-Domestic & International Tax Issues - 28.01....P P Shah & Associates
 
Tax on Employment or Professional Tax Deduction - Taxmann
Tax on Employment or Professional Tax Deduction - TaxmannTax on Employment or Professional Tax Deduction - Taxmann
Tax on Employment or Professional Tax Deduction - TaxmannUpasanaTaxmann
 
Liable to Tax: Implications and Ramifications
Liable to Tax: Implications and RamificationsLiable to Tax: Implications and Ramifications
Liable to Tax: Implications and RamificationsDVSResearchFoundatio
 
Icai 17.02.2017 Taxation of foreign remmitances
Icai 17.02.2017 Taxation of foreign remmitancesIcai 17.02.2017 Taxation of foreign remmitances
Icai 17.02.2017 Taxation of foreign remmitancesShweta Ajmera
 
Pmla, fema, it presentation for jito, dubai 20.03.2016
Pmla, fema, it   presentation for jito, dubai 20.03.2016Pmla, fema, it   presentation for jito, dubai 20.03.2016
Pmla, fema, it presentation for jito, dubai 20.03.2016P P Shah & Associates
 
Tds on foreign remittance
Tds on foreign remittanceTds on foreign remittance
Tds on foreign remittanceAshwani Rastogi
 
Guide to FBAR - January 2016
Guide to FBAR - January 2016Guide to FBAR - January 2016
Guide to FBAR - January 2016Amie Akridge
 
Nri taxation
Nri taxationNri taxation
Nri taxationGoStartUp
 
Blog - Expat Tax in India
Blog - Expat Tax in IndiaBlog - Expat Tax in India
Blog - Expat Tax in IndiaHABIBULLAHCO
 
S&A Knowledge Series - Important Disallowances under sec 40A income tax
S&A Knowledge Series - Important Disallowances under sec 40A income taxS&A Knowledge Series - Important Disallowances under sec 40A income tax
S&A Knowledge Series - Important Disallowances under sec 40A income taxDhruv Seth
 
Crtitical issues in Company Law for Private Companies
Crtitical issues in Company Law  for Private CompaniesCrtitical issues in Company Law  for Private Companies
Crtitical issues in Company Law for Private CompaniesCA. Pramod Jain
 

Similar a International Taxation - To begin with (20)

Fema and tax issues nri
Fema and tax issues nriFema and tax issues nri
Fema and tax issues nri
 
Working In India 042209
Working In India 042209Working In India 042209
Working In India 042209
 
Income Tax Overview
Income Tax OverviewIncome Tax Overview
Income Tax Overview
 
NRI - Finance Act 2020 - Implications for NRIs
NRI - Finance Act 2020 - Implications for NRIsNRI - Finance Act 2020 - Implications for NRIs
NRI - Finance Act 2020 - Implications for NRIs
 
Understanding the Impact of Finance Act, 2020 on Residential Status of Indivi...
Understanding the Impact of Finance Act, 2020 on Residential Status of Indivi...Understanding the Impact of Finance Act, 2020 on Residential Status of Indivi...
Understanding the Impact of Finance Act, 2020 on Residential Status of Indivi...
 
Investment opportunities in India
Investment opportunities in IndiaInvestment opportunities in India
Investment opportunities in India
 
India_WT
India_WTIndia_WT
India_WT
 
ICAI-WIRC - Taxability of Trusts-Domestic & International Tax Issues - 28.01....
ICAI-WIRC - Taxability of Trusts-Domestic & International Tax Issues - 28.01....ICAI-WIRC - Taxability of Trusts-Domestic & International Tax Issues - 28.01....
ICAI-WIRC - Taxability of Trusts-Domestic & International Tax Issues - 28.01....
 
Returning NRIs
Returning NRIsReturning NRIs
Returning NRIs
 
Tax on Employment or Professional Tax Deduction - Taxmann
Tax on Employment or Professional Tax Deduction - TaxmannTax on Employment or Professional Tax Deduction - Taxmann
Tax on Employment or Professional Tax Deduction - Taxmann
 
Liable to Tax: Implications and Ramifications
Liable to Tax: Implications and RamificationsLiable to Tax: Implications and Ramifications
Liable to Tax: Implications and Ramifications
 
Icai 17.02.2017 Taxation of foreign remmitances
Icai 17.02.2017 Taxation of foreign remmitancesIcai 17.02.2017 Taxation of foreign remmitances
Icai 17.02.2017 Taxation of foreign remmitances
 
Pmla, fema, it presentation for jito, dubai 20.03.2016
Pmla, fema, it   presentation for jito, dubai 20.03.2016Pmla, fema, it   presentation for jito, dubai 20.03.2016
Pmla, fema, it presentation for jito, dubai 20.03.2016
 
Tds on foreign remittance
Tds on foreign remittanceTds on foreign remittance
Tds on foreign remittance
 
Guide to FBAR - January 2016
Guide to FBAR - January 2016Guide to FBAR - January 2016
Guide to FBAR - January 2016
 
Nri taxation
Nri taxationNri taxation
Nri taxation
 
Blog - Expat Tax in India
Blog - Expat Tax in IndiaBlog - Expat Tax in India
Blog - Expat Tax in India
 
S&A Knowledge Series - Important Disallowances under sec 40A income tax
S&A Knowledge Series - Important Disallowances under sec 40A income taxS&A Knowledge Series - Important Disallowances under sec 40A income tax
S&A Knowledge Series - Important Disallowances under sec 40A income tax
 
Crtitical issues in Company Law for Private Companies
Crtitical issues in Company Law  for Private CompaniesCrtitical issues in Company Law  for Private Companies
Crtitical issues in Company Law for Private Companies
 
Taxability of trusts 18 12-10
Taxability of trusts 18 12-10Taxability of trusts 18 12-10
Taxability of trusts 18 12-10
 

Último

Introduction to Entrepreneurship and Characteristics of an Entrepreneur
Introduction to Entrepreneurship and Characteristics of an EntrepreneurIntroduction to Entrepreneurship and Characteristics of an Entrepreneur
Introduction to Entrepreneurship and Characteristics of an Entrepreneurabcisahunter
 
2024.03 Strategic Resources Presentation
2024.03 Strategic Resources Presentation2024.03 Strategic Resources Presentation
2024.03 Strategic Resources PresentationAdnet Communications
 
MARKET FAILURE SITUATION IN THE ECONOMY.
MARKET FAILURE SITUATION IN THE ECONOMY.MARKET FAILURE SITUATION IN THE ECONOMY.
MARKET FAILURE SITUATION IN THE ECONOMY.Arifa Saeed
 
LIC PRIVATISATION its a bane or boon.pptx
LIC PRIVATISATION its a bane or boon.pptxLIC PRIVATISATION its a bane or boon.pptx
LIC PRIVATISATION its a bane or boon.pptxsonamyadav7097
 
Contracts with Interdependent Preferences
Contracts with Interdependent PreferencesContracts with Interdependent Preferences
Contracts with Interdependent PreferencesGRAPE
 
Work and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB fundingWork and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB fundingHenry Tapper
 
Remembering my Totem _Unity is Strength_ growing in Bophuthatswana_Matthews B...
Remembering my Totem _Unity is Strength_ growing in Bophuthatswana_Matthews B...Remembering my Totem _Unity is Strength_ growing in Bophuthatswana_Matthews B...
Remembering my Totem _Unity is Strength_ growing in Bophuthatswana_Matthews B...Matthews Bantsijang
 
20240315 _E-Invoicing Digiteal. .pptx
20240315 _E-Invoicing Digiteal.    .pptx20240315 _E-Invoicing Digiteal.    .pptx
20240315 _E-Invoicing Digiteal. .pptxFinTech Belgium
 
Mphasis - Schwab Newsletter PDF - Sample 8707
Mphasis - Schwab Newsletter PDF - Sample 8707Mphasis - Schwab Newsletter PDF - Sample 8707
Mphasis - Schwab Newsletter PDF - Sample 8707harshan90
 
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGeckoRWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGeckoCoinGecko
 
Stock Market Brief Deck for March 26.pdf
Stock Market Brief Deck for March 26.pdfStock Market Brief Deck for March 26.pdf
Stock Market Brief Deck for March 26.pdfMichael Silva
 
Taipei, A Hidden Jewel in East Asia - PR Strategy for Tourism
Taipei, A Hidden Jewel in East Asia - PR Strategy for TourismTaipei, A Hidden Jewel in East Asia - PR Strategy for Tourism
Taipei, A Hidden Jewel in East Asia - PR Strategy for TourismBrian Lin
 
Monthly Market Risk Update: March 2024 [SlideShare]
Monthly Market Risk Update: March 2024 [SlideShare]Monthly Market Risk Update: March 2024 [SlideShare]
Monthly Market Risk Update: March 2024 [SlideShare]Commonwealth
 
Solution manual for Intermediate Accounting, 11th Edition by David Spiceland...
Solution manual for  Intermediate Accounting, 11th Edition by David Spiceland...Solution manual for  Intermediate Accounting, 11th Edition by David Spiceland...
Solution manual for Intermediate Accounting, 11th Edition by David Spiceland...mwangimwangi222
 
Slideshare - ONS Economic Forum Slidepack - 18 March 2024.pptx
Slideshare - ONS Economic Forum Slidepack - 18 March 2024.pptxSlideshare - ONS Economic Forum Slidepack - 18 March 2024.pptx
Slideshare - ONS Economic Forum Slidepack - 18 March 2024.pptxOffice for National Statistics
 
Stock Market Brief Deck for March 19 2024.pdf
Stock Market Brief Deck for March 19 2024.pdfStock Market Brief Deck for March 19 2024.pdf
Stock Market Brief Deck for March 19 2024.pdfMichael Silva
 
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdfLundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdfAdnet Communications
 

Último (20)

Introduction to Entrepreneurship and Characteristics of an Entrepreneur
Introduction to Entrepreneurship and Characteristics of an EntrepreneurIntroduction to Entrepreneurship and Characteristics of an Entrepreneur
Introduction to Entrepreneurship and Characteristics of an Entrepreneur
 
2024.03 Strategic Resources Presentation
2024.03 Strategic Resources Presentation2024.03 Strategic Resources Presentation
2024.03 Strategic Resources Presentation
 
MARKET FAILURE SITUATION IN THE ECONOMY.
MARKET FAILURE SITUATION IN THE ECONOMY.MARKET FAILURE SITUATION IN THE ECONOMY.
MARKET FAILURE SITUATION IN THE ECONOMY.
 
LIC PRIVATISATION its a bane or boon.pptx
LIC PRIVATISATION its a bane or boon.pptxLIC PRIVATISATION its a bane or boon.pptx
LIC PRIVATISATION its a bane or boon.pptx
 
New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...
New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...
New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...
 
Contracts with Interdependent Preferences
Contracts with Interdependent PreferencesContracts with Interdependent Preferences
Contracts with Interdependent Preferences
 
Work and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB fundingWork and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB funding
 
Remembering my Totem _Unity is Strength_ growing in Bophuthatswana_Matthews B...
Remembering my Totem _Unity is Strength_ growing in Bophuthatswana_Matthews B...Remembering my Totem _Unity is Strength_ growing in Bophuthatswana_Matthews B...
Remembering my Totem _Unity is Strength_ growing in Bophuthatswana_Matthews B...
 
20240315 _E-Invoicing Digiteal. .pptx
20240315 _E-Invoicing Digiteal.    .pptx20240315 _E-Invoicing Digiteal.    .pptx
20240315 _E-Invoicing Digiteal. .pptx
 
Mphasis - Schwab Newsletter PDF - Sample 8707
Mphasis - Schwab Newsletter PDF - Sample 8707Mphasis - Schwab Newsletter PDF - Sample 8707
Mphasis - Schwab Newsletter PDF - Sample 8707
 
Effects & Policies Of Bank Consolidation
Effects & Policies Of Bank ConsolidationEffects & Policies Of Bank Consolidation
Effects & Policies Of Bank Consolidation
 
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGeckoRWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
 
Stock Market Brief Deck for March 26.pdf
Stock Market Brief Deck for March 26.pdfStock Market Brief Deck for March 26.pdf
Stock Market Brief Deck for March 26.pdf
 
Taipei, A Hidden Jewel in East Asia - PR Strategy for Tourism
Taipei, A Hidden Jewel in East Asia - PR Strategy for TourismTaipei, A Hidden Jewel in East Asia - PR Strategy for Tourism
Taipei, A Hidden Jewel in East Asia - PR Strategy for Tourism
 
Monthly Market Risk Update: March 2024 [SlideShare]
Monthly Market Risk Update: March 2024 [SlideShare]Monthly Market Risk Update: March 2024 [SlideShare]
Monthly Market Risk Update: March 2024 [SlideShare]
 
Solution manual for Intermediate Accounting, 11th Edition by David Spiceland...
Solution manual for  Intermediate Accounting, 11th Edition by David Spiceland...Solution manual for  Intermediate Accounting, 11th Edition by David Spiceland...
Solution manual for Intermediate Accounting, 11th Edition by David Spiceland...
 
Slideshare - ONS Economic Forum Slidepack - 18 March 2024.pptx
Slideshare - ONS Economic Forum Slidepack - 18 March 2024.pptxSlideshare - ONS Economic Forum Slidepack - 18 March 2024.pptx
Slideshare - ONS Economic Forum Slidepack - 18 March 2024.pptx
 
Monthly Economic Monitoring of Ukraine No.230, March 2024
Monthly Economic Monitoring of Ukraine No.230, March 2024Monthly Economic Monitoring of Ukraine No.230, March 2024
Monthly Economic Monitoring of Ukraine No.230, March 2024
 
Stock Market Brief Deck for March 19 2024.pdf
Stock Market Brief Deck for March 19 2024.pdfStock Market Brief Deck for March 19 2024.pdf
Stock Market Brief Deck for March 19 2024.pdf
 
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdfLundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
 

International Taxation - To begin with

  • 1. BASICS OF INTERNATIONAL TAXATION  An overview of Indian Income Tax Provisions applicable to Non- Residents.  Important Concepts to understand Double Taxation Avoidance Agreements. CA. P.R.Sreenivasan, PS DY & Associates
  • 2. Introduction  Growing importance and emphasis on International Taxation  Taxation of Non Residents & NRIs  Taxation of foreign nationals  Cross border taxation of MNCs  Issues related to black money CA. P.R.Sreenivasan, PSDY & Associates
  • 3. Contents 1. Indian Income Tax Provisions related to Non Residents. 2. Double Tax Avoidance Agreements (i) DTAA – Purpose and objectives (ii) OECD MC vs. UN MC 3. Basic Important DTAA Concepts. CA. P.R.Sreenivasan, PS DY & Associates
  • 4. Indian Income Tax Provisions related to Non Residents CA. P.R.Sreenivasan, PS DY & Associates
  • 5. Income Tax Provisions related to Non Residents Taxation of Non Resident Definitions Scope of Special Presumptive Sec. 2(30), 6 Taxation provisions taxation Sec. Section 4,5,9 Chapter XII-A 44B/BB/BBA/ BBB TDS DTAA Sec 90 Anti- Agent Sec.195, 197 & 91 Avoidance Section Provision 160, 163 Sec 92, 94A CA. P.R.Sreenivasan, PS DY & Associates
  • 6. Income Tax Provisions related to Non Residents Types of Income R R & NR OR Received or deemed to be received in India    by or on behalf of the assessee Income that accrues or arises or is deemed    to accrue or arise in India Income that accrues or arises outside India    and is not derived from business controlled in or a profession set up in India Income that accrues or arises / received    outside India CA. P.R.Sreenivasan, PS DY & Associates
  • 7. NR & NOR is taxable in India if INCOME EARNED Received or Accrues or Deemed to deemed to be Arises in Accrue or Arise received in India In India India CA. P.R.Sreenivasan, PSDY & Associates
  • 8. CHAPTER XII-A Taxation of NRIs – Special Provisions  Meaning of NRI – Non Resident Indians i.e Indian Citizen or PIO who is NR  Type of income – Income from investment in “foreign exchange assets” – L.T Capital Gain on sale of “foreign exchange assets” CA. P.R.Sreenivasan, PS DY & Associates
  • 9. Taxation of NRIs – Special Provisions  “Foreign Exchange Assets” means – Shares in an Indian Company – Debentures / Deposits in an Indian company other than a private company – Central Government Securities – Purchased using convertible foreign exchange CA. P.R.Sreenivasan, PS DY & Associates
  • 10. Taxation of NRIs – Special Provisions Rate of tax Investment LTCG on sale of Income Forex Assets 20% 10% CA. P.R.Sreenivasan, PS DY & Associates
  • 11. Taxation of NRIs – Special Provisions Other benefits available under Chapter XII-A No need to file return if TDS is deducted Option to continue availing the benefit even after becoming resident on application made to the assessing officer. Chapter XII-A shall not apply if assessee so chooses CA. P.R.Sreenivasan, PS DY & Associates
  • 12. Tax Deduction at Source for Non Residents Section 195 (1)  Any person responsible to pay to a Non resident to withhold tax  In respect of interest or any other sum chargeable under Income tax Act, 1961  At the time of credit or payment, whichever is earlier  At the rates in force CA. P.R.Sreenivasan, PS DY & Associates
  • 13. Tax Deduction at Source for Non Residents Exceptions  Interest payable by the Government or a PSU Bank or a PFI, TDS shall be deducted only at the time of actual payment.  No TDS required for payment of dividend distributed by a domestic company referred to in Sec 115-O. CA. P.R.Sreenivasan, PS DY & Associates
  • 14. Tax Deduction at Source for Non Residents Application for non deduction or lower deduction of tax  The payer may apply to the AO for determination appropriate portion of the sum to be paid on which tax has to be deducted – Sec 195(2)  The payee may also apply to the AO for grant of a certificate authorizing him to receive the amount without deduction of tax at source – Sec 195(3)  The assessee (i.e payee) may also apply to the AO for a certificate for deduction of tax at lower rate U/s.197 CA. P.R.Sreenivasan, PS DY & Associates
  • 15. Tax Deduction at Source for Non Residents Remittance of money abroad Sec 195(6) Formalities Before Outward Remittance Information to be Certificate from CA to be furnished in Form 15CA obtained in Form 15CB - To be filed electronically CA. P.R.Sreenivasan, PS DY & Associates
  • 16. Anti Avoidance Provisions  Transfer Pricing – Sections 92 to92F – Applies to “International Transactions” carried out between two or more “Associated Enterprises”. – Meaning of “Associate Enterprise” – One enterprise participates directly / indirectly in the management / control / capital of the other. – Pricing of transactions shall be at “Arm’s length”. – 5% variation between the ALP and the actual price is allowed CA. P.R.Sreenivasan, PS DY & Associates
  • 17. Anti Avoidance Provisions  Sec 94A - Black listing of “Tax Havens”  Inserted by Finance Act 2011 w.e.f 1st June 2011  Referred to as “Tool box of counter measures”  To prevent “Tax Avoidance”  Authorizes Government to black list non- cooperative jurisdictions  Penalize both Indian Assessee as well as the Non Resident concerned CA. P.R.Sreenivasan, PS DY & Associates
  • 18. Anti Avoidance Provisions Salient features of Section 94A  Government may specify certain non - cooperative jurisdictions as “Notified Jurisdictional Areas” (NJA).  If an assessee enters in to a transaction with a person in an NJA – All parties to the transaction will be regarded as “Associated Enterprises” – The transactions will be considered as an “International Transaction” – All provisions of Transfer Pricing will apply – Additional records may be prescribed by CBDT CA. P.R.Sreenivasan, PS DY & Associates
  • 19. Anti Avoidance Provisions  Tax Information Exchange Agreements – About 13 TIEAs have been signed in recent past – Objective is to prevent round tripping of black money  Amendments to existing DTAAs – Attempt is being made to amend DTAAs already entered in to CA. P.R.Sreenivasan, PS DY & Associates
  • 20. Anti Avoidance Provisions ROUND TRIPPING Using tax heavens and benami Non Residents Mr.A an Indian BC Ltd in India resident AB Ltd Sends funds invests by hawala shares / Rs.100 cr to debt in Indian A tax haven Invests in a Tax Haven company – Deposits in AB Ltd. Rs.100 cr as loan and Rs.10,000/-in equity owned by one Local bank / more non residents CA. P.R.Sreenivasan, PSDY & Associates
  • 21. Double Tax Avoidance Agreements 1. DTAA – Purpose and objectives CA. P.R.Sreenivasan, PS DY & Associates
  • 22. Need for DTAA Reason for Double Taxation Also taxed on Resident of India same income Taxed on his in the country where Global Income it accrues / arises CA. P.R.Sreenivasan, PS DY & Associates
  • 23. Need for DTAA Basic rule for taxation Source Rule Residence Rule “Principle of Situs” Resident of a country Non Resident is taxed in is taxed on his global the country where the income income accrues / arises CA. P.R.Sreenivasan, PS DY & Associates
  • 24. Need for DTAA Types of Double Taxation Juridical Double Taxation Economic Double Taxation Same person taxed on Two entities subject to same income in more tax on the same income than one countries in two more countries CA. P.R.Sreenivasan, PS DY & Associates
  • 25. Need for DTAA Juridical double taxations Example Company A resident in USA USA Branch In India India Company A’s branch profits are subject to tax in two countries: (i) in USA, due to residence; and (ii) in India, due to source. CA. P.R.Sreenivasan, PSDY & Associates
  • 26. Need for DTAA  Economic double taxation Arises where one country applies its transfer pricing rules. Example Taxable profits Company A = US$ 5 million USA Loan ($100 Interest @ 5% p.a. Million) ($ 5 million) India Taxable profits = $ 2 million Company B •If as per TP rules in India the arm’s length rate of interest should be 4% p.a., it will reduce Company B’s interest deduction by $1 M. • Company B’s taxable profits increase by $ 1 M to $ 3 M. CA. P.R.Sreenivasan, PS DY & Associates
  • 27. Purpose of DTAA – Sec 90(1) Sec 90(1) Purpose of DTAA Provide Promote Exchange Collection To avoid relief to mutual of & double doubly Economic informatio Recovery taxation taxed & Trade n of Taxes income relations CA. P.R.Sreenivasan, PS DY & Associates
  • 28. Applicability of DTAA Applicability and effect of DTAA vis-à-vis Income Tax Act Assessee who Income is Conflicting is resident of taxed / provisions in either or both taxable in both IT Act and countries countries DTAA More beneficial DTAA would provision to override to apply - assessee’s favor Cir 333 02.04.1982 CIT v. ITC Ltd CA. P.R.Sreenivasan, PS DY & Associates
  • 29. Double Taxation Avoidance Agreement (DTAA) Legal effect of DTAA Agreement between Becomes part of law two countries Binding on both Gives rights to the countries tax payer CA. P.R.Sreenivasan, PS DY & Associates
  • 30. Double Taxation Avoidance Agreement (DTAA) Modes of granting relief in DTAAs Exemption method Credit Method Either of the countries Both countries will tax, but resident country will only tax the would give credit to income foreign tax CA. P.R.Sreenivasan, PS DY & Associates
  • 31. Double Taxation Avoidance Agreement (DTAA) Importance of protocols and notes Amendments to existing Clarify / expand / restrict treaties are made application of the treaty through protocols CA. P.R.Sreenivasan, PS DY & Associates
  • 32. Double Taxation Avoidance Agreement (DTAA) In absence of DTAA – Sec 91A Unilateral relief Conditions to assessee apply Credit method applied Income must have Taxes should have i.e deduction from tax accrued / arisen o/s been paid as per is allowed India law of other country CA. P.R.Sreenivasan, PS DY & Associates
  • 33. Double Tax Avoidance Agreements Organization for Economic Cooperation & Development (OECD) Model Conventions (MC) vs. United Nations (UN) Model Conventions CA. P.R.Sreenivasan, PS DY & Associates
  • 34. Tax Treaty Model Conventions The most practiced DTAA models are the model treaties framed by -  the Organization for Economic Cooperation & Development [‘OECD’] also referred to as OECD MC.  the United Nations (UN MC). CA. P.R.Sreenivasan, PS DY & Associates
  • 35. Double Taxation Avoidance Agreement (DTAA) Model treaties and commentaries  Commentaries on OECD model treaty: • Starting with the 1963 edition, the OECD model treaty has been published with a commentary to each article. • The Commentaries have been referred to as an aid to interpretation by the courts in many OECD countries and in some non-OECD countries (e.g. Malaysia). CA. P.R.Sreenivasan, PS DY & Associates
  • 36. Double Taxation Avoidance Agreement (DTAA) Model treaties and commentaries  Other international model treaties –e.g. • ASEAN model. • Andean model  Some countries have published their own model treaty – e.g. • US model • Netherlands model CA. P.R.Sreenivasan, PSDY & Associates
  • 37. Double Tax Avoidance Agreements Articles CA. P.R.Sreenivasan, PS DY & Associates
  • 38. Model DTAA - Articles Table of Contents of OECD and UN-MC UN Scope of Convention Article 1 – Persons covered Unchanged 2 – Taxes covered. Unchanged Definitions Article 3 – General definitions 4 – Resident 5 – Permanent establishment. Taxation of income Article 6 – Income from immovable property Unchanged 7 – Business Profit 8 – Shipping, inland waterways & air transport 9 – Associated enterprises 10 – Dividends Unchanged 11 – Interest CA. P.R.Sreenivasan, PS DY & Associates
  • 39. Model DTAA - Articles Table of Contents of OECD and UN-MC UN Taxation of income Article 12 – Royalties / Fee for Technical Services 13 – Capital Gains 14 – Independent personal services Deleted in OECD–MC 2000 15 – Income from employment Unchanged 16 – Director’s Fees 17 – Artistes and Sportsmen 18 – Pensions 19 – Government Service Unchanged 20 – Students 21 – Other Income. Taxation of Capital Article 22 – Capital. CA. P.R.Sreenivasan, PSDY & Associates
  • 40. Model DTAA - Articles Table of Contents of OECD and UN-MC UN Methods for elimination of double taxation Article 23A– Exemption method 23B– Credit method. Unchanged Special provisions Article 24 – Non-discrimination Unchanged 25 – Mutual agreement procedure 26 – Exchange of information 27 – Assistance in the collection of taxes Missing in UN-MC 28 – Members of diplomatic mission and consular posts Missing in UN-MC 29 – Territorial extension. Final Provisions Article 30 – Entry into force 31 – Termination. CA. P.R.Sreenivasan, PS DY & Associates
  • 41. Important Concepts to Understand DTAA CA. P.R.Sreenivasan, PS DY & Associates
  • 42. Important Concepts to Understand DTAA’s A Business carried on by a corporation, usually through an office Branch or other fixed place of business. The situation in which resident investors bear the same tax Capital-export burden whether they invest at home or abroad. neutrality Capital-import The situation in which residents investing in a source country bear neutrality the same tax burden as other investors in that country. The Commentary to the OECD Model Treaty or to the UN Model Treaty. It explains the provisions of the Model Treaty and records the reservations and observations of the member countries to Commentary those provisions. The Commentary to the OECD Model Treaty is very influential for the interpretation and application of tax treaties. An official of a treaty country who is responsible for the resolution Competent authority of disputes and issues of interpretation arising under a tax treaty. CA. P.R.Sreenivasan, PSDY & Associates
  • 43. Important Concepts to Understand DTAA’s Contracting The Countries that are parties to a tax treaty. States Foreign taxes paid by a resident of a country are Credit Methods credited against the residence country’s tax on the resident’s foreign-source income. Exemption Exemption from domestic tax of some or all foreign- method source income derived by residents. An exemption method under which certain foreign- Exemption with source income is exempt from tax but is taken into progression account in determining the rates of tax applicable to other income. Foreign affiliate A foreign corporation in which a domestic tax-payer has a significant direct or indirect ownership interest (usually 10 percent or more of the shares). CA. P.R.Sreenivasan, PSDY & Associates
  • 44. Important Concepts to Understand DTAA’s Tax practices that are adopted by a tax-haven country to Harmful tax poach on the tax base of other countries by exploiting competition the weaknesses in the international tax rules of those countries. An entity that is treated as a separate taxable entity (usually as a corporation) in one country and as a Hybrid entity transparent or flow-through entity in another country. The treatment by one country of the residents or citizens Most-Favoured- of another country not less favourably than the nation treatment treatment of the residents or citizens of any other country (but not its own residents or citizens). The treatment of non residents or foreigners by a National country not less favourably than the treatment of its own treatment residents or citizens. CA. P.R.Sreenivasan, PSDY & Associates
  • 45. Important Concepts to Understand DTAA’s A generally-accepted notion that a country should tax non residents, foreigners and foreign-owned domestic Non- corporations in a manner that is the same as or is discrimination functionally equivalent to the treatment afforded to residents, citizens or domestically-owned corporation in similar circumstances. A rule under which a corporation is considered to be a Place-of- tax resident of the country in which it is incorporated. incorporation test A rule under which a corporation is considered to be a Place-of- tax resident of the country in which it is controlled or management test managed (usually where the board of directors meets and exercise control over the affairs of the corporation). CA. P.R.Sreenivasan, PSDY & Associates
  • 46. Important Concepts to Understand DTAA’s The deferral avoidance, or reduction of tax by lawful Tax avoidance means. The reduction of tax by illegal means, usually involving Tax evasion fraudulent non disclosure or willful deceit. Countries which subject income (or some forms of Tax havens income) or entities (or certain entities) to low or no taxation. The allowance of a credit for the amount of foreign Tax Sparing taxes that were not paid because of a tax incentive or holiday in the foreign country. Thin Restriction on the deductibility of interest payments capitalization made by corporations with excessive debt to equity rules ratios to their substantial non resident shareholders. CA. P.R.Sreenivasan, PSDY & Associates
  • 47. Important Concepts to Understand DTAA’s Rules in tax treaties that establish the residence of a Tie-breaker rules dual-resident taxpayer in one country for treaty purposes. The use of a tax treaty by a person who is not resident in either of the treaty countries, usually through the use of Treaty shopping conduit entity resident in one of the countries. A tax levied by the source country at a flat rate on the gross amount of dividends, royalties, interest, or other Withholding tax payments made by residents to non residents. The tax is collected and paid to the government by the resident payer. CA. P.R.Sreenivasan, PSDY & Associates