International Taxation

International taxation, is an area of tax, where tax is determined, in respect of an income, which is earned by a tax resident of one country, from business operations, rendering of services, employment, capital gains, dividend, interest or any other income, in another country.In such cases, both the country where the income arises,as well as the country where the person earning the income is a tax resident, seek to levy and recover tax.The international tax advisor interprets rules of international taxation, ensure that such income is taxed in only in one of the countries, or in case it is typed in both the countries, the overall tax burden is not more than, the higher of the tax rate applicable in either of the countries.

Tax	International Taxation
Author	CA Arinjay Jain
Topics Covered	DTAA, Transfer pricing, NR Taxation, AAR, Double taxation relief, Black money act, Interpretation of tax treaties, Anti Avoidance Measures, Ecommerce Transactions, FDI, GMT

International Tax Interpretation of Tax Treaties (DTAA)

For the purpose of international tax, and avoidance of double taxation, countries enter into DTAA, which generally contains various Article. Each of these article either deal with a different type of income, provides for method through which double taxation can be avoided or eliminated.
An international tax advisor interprets the concept of double taxation in international tax through reading of various article that are discussed as under:

• Double Taxation Avoidance Agreement (DTAA)
• Different Types and Methods of Double taxation avoidance agreements (DTAA)
• Double Taxation Avoidance Agreement Examples
• Article 1 Persons Covered:
  • who all can avail the benefit of DTAA
• Article 2 – Which taxes are covered under Double Taxation Avoidance Agreement ?
  • The benefit of a Tax Treaty is available only in respect of taxes covered under the DTAA.
• Article 3 – General Definitions
  • If a particular term is defined under Article 3, this meaning should be used for interpreting the terms of the Tax Treaty
• Article 4 – Concept of Residence in Tax Treaties
  • In case a person qualifies as a tax resident of both the contracting states, the tie breaker Rule specified in Article 4 should be considered.
• Article 5 – Permanent Establishment
  • Business profits derived by resident of a contracting state are taxable in the state of source , only when such a person has a permanent establishment in the state of source
• Article 7 – Business Profits
  • Mechanism to compute business profits, is provided for an Article 7
• Article 11 Taxation of Interest
  • The right to tax interest is generally shared between the State of Source and the State of Residence.
  • The rate at which taxes will be withheld in the State of Source vary from 10 to 15%.
  • The state of residence may tax such interest at full rate after providing credit for taxes paid in the State of Source.
• Article 12 – Royalty and Fees for Technical Services
  • The right to tax Royalty and Fees for Technical Services is generally shared between the State of Source and the State of Residence.
  • The rate at which taxes will be withheld in the State of Source vary from 10 to 15%.
  • The state of residence may tax such Royalty and Fees for Technical Services at full rate after providing credit for taxes paid in the State of Source.
• Article 13 – Capital Gains
  • Income arising from sale of capital assets, is chargeable to tax under Article 13.
  • Capital assets may comprise of immovable property, movable property pertaining to the permanent establishment , shares , debentures or any other capital asset.
  • The mode of computation of capital gains is generally provided under the domestic tax laws of the state of source.
• Article 14 Independent Personal Services
• Article 16 – Directors Fees
• Article 21 – Other Income
  • Any item of income which is not taxed as per the provisions of the specific Article, is liable to tax under Article 21
• Article 23 – Elimination of Double Taxation
  • In order to avoid double taxation of same income, this clause provides that the income shall either be exempt in the state of residence, or the state of residence shall reduce the taxes paid in the state of source against the tax liability in the state of residence.
• Article 24 Non Discrimination
  • This clause provides that the tax treatment of non resident shall not be less favourable than that of a resident of state of source.
• Article 25 Mutual Agreement Procedure
  • The two contracting states can , resolve dispute arising on the interpretation and application of DTAA through mutual agreement procedure.
• Article 26 – Exchange of information
  • In order to deal with cases of tax evasion and tax avoidance, this class provides that the two contracting states can exchange information available in there contracting states, in respect of taxpayers, who do not pay their tax in the other contracting state
• Article 28 – Member of Diplomatic Mission and Consular Posts
• Article 30 – Termination
  • The two contracting states can terminate the tax treaty by following the procedure provided in Article 30.
• India Singapore DTAA
• DTAA between India and USA
• Singapore Capital Gains Tax
• Tax Residence Certificate (TRC)
• Section 91 of Income Tax Act with Example
• List of Countries having Double Taxation Treaty with India

Transfer Pricing in International Taxation

Transfer Pricing provisions are used for arriving at the arm’s length price, that should be charged for, product sold or services rendered, by one enterprise, to another enterprise, who are a part of the same multinational group.

By using arms length price, both for revenue as well as expenses, the profits on which tax are paid, are ascertained correctly. Transfer pricing is an integral part of international tax services, in determination of tax on international transactions.

• Need of Transfer Pricing
• Applicability of Transfer Pricing in India
• Meaning of Transfer Price
• What is Transfer Price
• Evolution of Transfer Pricing in India [Pre 2001 ERA] – Section 92
• Computation of Income having regard to the ALP – Section 92
• Associated Enterprises Transfer Pricing – Section 92A (1)
• Deemed Associated Enterprises – Section 92A (2)
• International Transaction – Section 92B of Income Tax Act
• Arm’s Length Price
• Comparable Uncontrolled Price Method
• Resale Price Method
• Cost Plus Method
• Profit Split Method
• Transactional Net Margin Method in Transfer pricing – (TNMM)
• Other method Transfer Pricing
• Functions Assets and Risks Analysis
• Documents and Compliances – Documentation required under the income tax act 1961
• Functional Analysis, Economic Analysis, Audit Report Section 92E
• Penalties – Section 270A, Section 271(AA)
• Country by Country Reporting
• Specified Domestic Transaction under Transfer Pricing
• Safe Harbour Rules for Specified Domestic Transaction
• Safe Harbour Rules for International Transaction
• Transfer Pricing Assessment Procedure in India
• Secondary Adjustment Section 92CE of Income Tax Act
• Dispute Resolution Mechanism Under Transfer Pricing
• Advance Pricing Agreement
• Mutual Agreement Procedure Transfer Pricing
• Miscellaneous Transfer Pricing Provisions
• Transfer Pricing MCQ with Answers

Non Resident Taxation – International taxation

This section deals with various topics which are a part of international tax advisory services, including specifically the determination of residential status, income which is deemed to accrue or arise in India, certain presumptive basis of taxation in respect of specified income of non resident, deduction of TDS on various payments to non resident, taxation of capital gains arising to non residents and multiple choice question, which deal with various practical situations relating to the taxation of non resident in India.

We provide international taxation consultancy, in respect of each of these topics. Our international tax advisory services are provided by professionals with over two decades of experience in international taxation.We also, assist company in international tax compliance, relating to their business operations in India.

• Introduction to Non-Resident Taxation
• Residential Status Section 6
  • Residential Status of an Individual
  • Residential Status of HUF
  • Residential Status of Company
• Place of Effective Management
• Special Provisions for Foreign Company said to be resident in India – Section 115 JH
• Scope of total income on the basis of Residential Status – Section 5
• Meaning of Income Received or Deemed to be Received
• Income Deemed to be received in India – Section 7
• Income deemed to accrue or arise in India – Section 9
  • Taxability of Offshore Funds
  • Income deemed to accrue or arise in India – Section 9 of Income Tax Act
  • Deemed Interest Income – Section 9(1)(v) of Income Tax Act
  • Section 9(1)(vi) of Income Tax Act – Deemed to accrue or arise of Royalty Income
  • Section 9(1)(vii) of Income Tax Act – Fee for Technical Services
• Section 10 of Income Tax Act – Exempt Income of Non Residents
• Presumptive Taxation for Non residents
  • Section 44B of Income Tax Act – Shipping Business of Non Residents
  • Section 172 of Income Tax Act
  • Section 44BB of Income Tax Act
  • Section 44BBA of Income tax act
  • Section 44BBB of Income Tax Act
  • Section 44c of Income Tax Act
  • Section 44DA of Income Tax Act
• Capital Gains – Section 45 of Income Tax Act
  • No Exemption u/s 10 on Urban Agricultural Land – Explanation 1 to Section 2(1A)
  • Short Term and Long Term Capital Assets
  • Section 47 of Income tax act – Transactions not regarded as transfer
  • Section 48 of Income Tax Act – Mode of Computation of Capital Gains
  • Section 111a of Income tax act
  • Section 112a of Income tax act
• Special Provisions Prescribed Under Chapter XII A of Income tax act
  • Section 115a of Income Tax Act
  • Section 115ab of Income tax act
  • Section 115AC of Income tax act
  • Section 115AD of Income tax act – Tax on Income of Foreign Institutional Investors
  • Tax on Non Resident Sportsmen or Sports association
• MAT on Foreign Companies
• Special provisions relating to conversion of India Branch of a Foreign Bank into a Subsidiary Company – Chapter XII BB of Income Tax
• Section 195 of Income Tax Act – Withholding tax on payment to Non Resident
• Miscellaneous Provisions for Non Residents
• MCQ on Non Resident Taxation – International Taxation

Authority for Advance Rulings

An international tax advisor can assist you in obtaining an Advance Rulings, through which, you can be certain about the amount of taxes that should be applied for, a transaction that you may undertake in the State of Source:

• Authority for Advance Rulings
• Authority for advance rulings MCQs

Double Taxation Relief – International Tax

Our international tax expert, can help you compute the right amount of taxes payable in India. Further our international tax specialist can also assist you in claiming the credit of taxes that you may have paid overseas, against your Indian tax liability.

• Double Taxation
• Double Taxation Relief – Unilateral and Bilateral Relief
• Section 91 of Income Tax Act with Example
• Foreign Tax credit against MAT or AMT – RULE 128
• Double Taxation Relief MCQ

Black Money and Imposition of Tax Act 2015

• What is Black Money
• Basis of Charge – Section 3 – Black money and imposition of Tax Act 2015
• Definition of Assessee – Section 2(2)
• Applicability of Black Money Act to Persons Resident in India
• Definition of Undisclosed asset located outside India – Section 2(11)
• Asset Located outside India Acquired by NR out of income not chargeable to tax in India – Section 2(11)
• Relevant previous year for chargeability to tax
• Valuation of an Undisclosed Asset located outside India – Section 3(2)
• Scope of total undisclosed Foreign Income and Asset – Section 4(1)
• No Allowance and Set off for computation of Total undisclosed Foreign Income and Asset – Section 5
• Tax Authorities under the Black Money Act – Section 6
• Assessment of foreign income and assets – Section 10
• Rectification of Mistake Section 12
• Appeal to Commissioner – Black Money and Imposition of Tax Act 2015
• Appeal to Appellate Tribunal – Black Money and Imposition of Tax Act 2015
• Appeal to High Court – Section 19 – Black Money Act
• Revision of Orders Prejudicial to Revenue – Black Money Act
• Recovery of Tax Dues – Black Money and Imposition of Tax Act 2015
• Penalty on undisclosed foreign income and asset
• Offences and Prosecution under Income tax act
• Black Money and Imposition of Tax Act 2015 MCQs

Interpretation of Tax Treaties – International Taxation

• What is International Tax Law
• Double Taxation and Connecting Factors
• Treaty Definition
• DTAA Meaning
• Interpretation of Treaties – Monist or Dualistic View
• Extrinsic aids to Interpretation of Tax Treaties
• MCQ on Interpretation of Tax Treaties – International Taxation

Anti Avoidance Measures

Our international tax specialist can review your tax structure and advice whether the overall business operations structure, shall meet the requirement of the Indian general Anti Avoidance Regulations.

• General Anti Avoidance Rule
  • Section 95 of Income Tax Act
  • Section 96 of Income Tax Act
  • Section 97 of Income Tax Act
  • Section 98, 99, 101, 102 of Income Tax Act
• Tax avoidance
• GAAR Examples
• FAQ on GAAR
• What is Treaty Shopping
• Measures for Anti Treaty Shopping in Tax Treaties
• Base Erosion and Profit Shifting
• BEPS Action Plans
• Controlled Foreign Corporation
• Anti Avoidance Measures in International Taxation MCQs

Taxation of Ecommerce Transactions

• E-commerce Transactions
• What is E-commerce Transaction
• Issues in E-commerce Transactions
• Equalization levy Finance act 2016
• Ecommerce Transactions MCQ

International Tax Case Studies

The following case studies have been prepared by our team of international tax specialist, considering the provisions of international tax income tax applicable in India.
Each of these cases deal with a specific situation. in case you need any further advisory services in respect of the case studies, you may please feel free to reach out to us.

• Applicability of Base Erosion Concepts – Transfer Pricing – International tax
• Whether two Enterprise are Associated Enterprise
• Transfer Pricing Penalties India
• Secondary Adjustment Transfer Pricing
• Cost Plus Method Transfer Pricing
• Advance Pricing Agreement Transfer Pricing
• Notified Jurisdictional Area Transfer Pricing
• Applicability of Transfer Pricing and Base Erosion
• Income deemed to accrue or arise in India
• Presumptive taxation Transfer Pricing – International Tax
• Adjustment and Scope of Assessment – Advance Pricing Agreement
• Interest paid by a Foreign Bank Branch to overseas HO and other Branch – Non Resident Taxation
• NRI returning to India and continuing to have overseas income
• Taxation of Non-resident sportsperson
• Computing value of Assets for application of POEM Test
• Power to hold that POEM of Non resident is in India
• Salary earned in India and Article 15 short stay exemption
• Company engaged in operations of Aircraft
• Corporate restructuring overseas – Non Resident Taxation

Foreign Direct Investment

• Foreign Investment (FDI) in India through Equity shares
• Foreign Direct Investment in India – FDI India
• Foreign Tax credit against MAT or AMT – Rule 128

Related Articles 

• Global Minimum Corporate Tax
• Slump Sale Agreement
• Slump Sale
• No PE Certificate
• Advanced Diploma in International Taxation (ADIT) Syllabus
• Revised Guidance Note on Tax Audit under Section 44AB