International Commercial Tax (Cambridge Tax Law Series)

Description

International Commercial Tax, 2nd edition takes account of the substantial developments of the last decade. With more than sixty percent new material, the book considers the outcomes of the OECD's BEPS project and the substantial consequential 2017 revisions of the OECD and UN Model tax treaties. With the continuing rise in the economic importance of non-OECD countries and the UK distancing itself from the EU, there has been a refocusing with less direct attention on UK domestic law and greater focus on the approaches of other significant countries, especially other common law jurisdictions. This provides greater flexibility as to how a particular point or issue is illustrated with practical examples. Greater attention is given to the UN Model, which is increasingly important. The book continues to compare the approach under model tax treaties with EU law and is updated with copious references and illustrations from the burgeoning jurisprudence of the EU Court. Copyright Contents Preface List of Abbreviations Introduction 1 Fundamentals and Sources of International Tax Law 1.1 Tax Fundamentals What Are Taxes and What Are the Different Types? Income Tax and Payments as Building Blocks Other Taxes and Ways of Classifying Taxes 1.2 Sources of International Tax Law and Their Interrelationship 1.2.1 Domestic Law 1.2.2 Tax Treaties What Are They and Where Did They Come From? How Tax Treaties Take Effect in Domestic Law? What Taxes Do They Cover? Can a Treaty Create or Increase Tax? The Multilateral Instrument 1.2.3 EU Law EU Treaties Directives 1.2.4 Other Sources GATT and GATS Investment Treaties European Convention on Human Rights 1.3 Approaches to Interpretation of Material 1.3.1 Domestic Law 1.3.2 Treaty Interpretation Vienna Convention Treaty Definitions Commentaries Which Commentary? By Mutual Agreement 1.3.3 Interpretation of EU Law by the CJEU 1.3.4 Anti-abuse Rules and Their Interaction 2 The Jurisdiction to Tax 2.1 Forms of Economic Allegiance 2.1.1 The Person 2.1.1.1 Who Is a Person: The Tax Subject Domestic Characterisation of Entities Entities Organised under Domestic Law Entities Organised under Foreign Law Meaning of ‘Person’ in the OECD Model 2.1.1.2 Residence as a Connecting Factor Domestic Law ‘Residence’ under the OECD Model Primary Test Tiebreakers 2.1.1.3 Beneficiaries of EU Law 2.1.2 The Activities 2.1.2.1 Characterising Income-Producing Activities Domestic Characterisation OECD Model Characterisation 2.1.2.2 Locating the Activity Domestic Law Earning Activities Allocating Payments Problems in Allocating Business Profits Assignment of Taxing Rights under the OECD Model 2.1.2.3 Activities Covered by EU Law FEU Treaty Directives 2.2 Divided Allegiance: The Problems of Double Taxation and Under-taxation 2.2.1 Principles 2.2.1.1 Tripartite Relationship 2.2.1.2 Economic Considerations 2.2.1.3 Cross-border Restrictions OECD Model EU Law 2.2.1.4 Interstate Relationship Internation Equity Harmful Tax Competition and the BEPS Project EU Law Considerations 2.2.2 Methods of Allocating Taxing Rights Double Tax Relief Interstate Relationship 3 Source Country Taxation 3.1 The Recipient/Schedular Approach 3.1.1 Other Income 3.1.2 Income from Immovable Property Immovable Property Income From EU Law 3.1.3 Business Profits: Subsidiary versus Permanent Establishment 3.1.3.1 Enterprise of a Contracting State 3.1.3.2 Subsidiaries: Exclusive Taxation 3.1.3.3 Permanent Establishments: Shared Taxation 3.1.3.3.1 What Is a Permanent Establishment? Physical Presence General Test Building Sites Express Exclusions Personal Presence Agency Permanent Establishment Independent Agent Exception Services Permanent Establishment Position of Associated Corporations Artificial Avoidance of PE Status and Digitalisation of the Economy EU Law 3.1.3.3.2 Attribution of Profits: Separate Enterprise Approach Delineating Activities Calculating Profits Real Transactions Intra-enterprise Dealings 3.1.3.4 Discrimination in Taxation of Business Profits OECD Model Permanent Establishments Subsidiaries EU Law 3.1.4 Dividends, Interest and Royalties 3.1.4.1 Dividends OECD Model Scope of Article 10 Limited Source Country Taxation Portfolio Investors Direct Investors Dividends and PEs EU Law Parent-Subsidiary Directive Fundamental Freedoms 3.1.4.2 Interest OECD Model Scope of Article 11 Limited Source Country Taxation Interest and PEs EU Law 3.1.4.3 Royalties OECD Model EU Law 3.1.5 Capital Gains OECD Model EU Law 3.1.6 Income from Employment and Independent Personal Services 3.1.6.1 Employment OECD Model Employment Salaries Etc Exercised In Non-resident Employers EU Law 3.1.6.2 Independent Personal Services OECD Model EU Law 3.2 The Payer/Deductions and Base Eroding Payments Domestic Law OECD Model EU Law 3.3 Quantification and Characterisation Issues 3.3.1 Quantification: Transfer Pricing between Associates 3.3.1.1 Identifying Associates Generally under the OECD Model Scope of Article 9(1) 3.3.1.2 Independent Enterprise Approach Arm’s Length Pricing Traditional Transaction Methods Transactional Profit Methods Problem Areas: Services and Intellectual Property Administrative Matters Special PE Issues 3.3.1.3 Formulary Apportionment 3.3.1.4 EU Law Fundamental Freedoms Common Consolidated Corporate Tax Base 3.3.2 Characterisation: Focus on Dividends, Interest and Royalties 3.3.2.1 Defining the Boundaries Dividends Interest Royalties Generally Distinguishing from Other Payments 3.3.2.2 Thin Capitalisation Domestic Rules OECD Model EU Law 3.3.3 Dual Characterisation: Reconciliation Rules OECD Model EU Law 4 Residence Country Taxation 4.1 Foreign Tax Relief 4.1.1 Methods 4.1.1.1 Domestic Law: Unilateral Relief Deduction Exemption Credit 4.1.1.2 OECD Model Exemption Credit 4.1.1.3 EU Law 4.1.2 Problems with Corporations 4.1.2.1 Economic Double Taxation Domestic Law: Unilateral Relief Portfolio Investors Direct Investors OECD Model EU Law Parent-Subsidiary Directive Fundamental Freedoms 4.1.2.2 Controlled Foreign Corporations Domestic Law Defining a CFC Exemptions and Thresholds Defining CFC Income Computing Income Attributing Income Relieving Double Taxation PEs OECD Model EU Law 4.2 Expenses/Losses 4.2.1 Allocation of Expenses between Foreign and Domestic Income Domestic Law OECD Model EU Law 4.2.2 Foreign Loss/Domestic Income Generally EU Law 4.2.3 Foreign Income/Domestic Loss Generally EU Law 4.2.4 Group Relief Generally EU Law 5 The Limited Scope of Treaties 5.1 Mismatches between Source and Residence Countries 5.1.1 Mismatches in the Fundamental Features of a Payment 5.1.1.1 Allocation of Payment Residence Country Sees Entity Source Country Does Not Source Country Sees Entity Residence Country Does Not PEs as Hybrid Entities 5.1.1.2 Quantification of Payment Two Scenarios Involving In-Kind Cross-border Payments Economic Double Taxation and Corresponding Adjustments 5.1.1.3 Timing of Payment Mismatch of Depreciation Rates Mismatch in Tax Year and Basis of Accounting 5.1.1.4 Characterisation of Payment Generally Secondary Transfer Pricing Adjustments Indirect Mismatches 5.1.2 BEPS Response to Hybrid Mismatch Arrangements 5.2 Beyond the Bilateral 5.2.1 Mismatch of Source: PEs and Third Countries 5.2.1.1 Payments Received by PEs Generally EU Law 5.2.1.2 Payments Made by PEs Generally EU Law 5.2.2 Mismatch of Residence 5.2.2.1 Taxation of the Person Generally Double Taxation Duplicate Losses EU Law 5.2.2.2 Payments Made by the Person: Dual Source Generally Double Taxation Duplicate Deductions EU Law 5.2.3 Intermediaries: Re-sourcing and Other Re- characterisation 5.2.3.1 Intermediary Country PE Subsidiary Access to Treaty Network: Treaty Shopping Access to Lower Corporate Tax 5.2.3.2 Source Country Taxation Treaty Shopping Beneficial Owner Limitation of Benefits and Treaty GAAR EU Law Tax Treaties: Most-Favoured Nation and Limitation of Benefits Shopping Primary EU Law Offshore Indirect Transfers 5.2.3.3 Residence Country Taxation Foreign Tax Relief CFC Rules EU Law 6 Changes of Source and Residence 6.1 Changes of Source Jurisdiction 6.1.1 Creation of Source Transfer of Assets to PE Transfer of Assets to Subsidiary 6.1.2 Termination of Source Transfer of Assets from a PE Transfer of Assets from a Subsidiary 6.1.3 Transfer of Ownership of Source Transfer of a PE Transfer of a Subsidiary 6.1.4 Variation of Form of Source 6.1.4.1 Conversions PE into Subsidiary Subsidiary into PE 6.1.4.2 Mergers Assets Mergers Corporate Mergers 6.1.4.3 Divisions Assets Divisions Corporate Divisions 6.2 Changes of Residence Jurisdiction 6.2.1 Commencing Residence 6.2.2 Cessation of Residence 7 Bilateral Administrative Issues 7.1 Exchange of Information 7.1.1 OECD Model 7.1.2 1988 Multilateral Convention Automatic Exchange of Financial Account Information Country-by-Country Reporting Tax Inspectors without Borders 7.1.3 EU Law 7.2 Dispute Resolution 7.2.1 OECD Mutual Agreement Procedure 7.2.2 EU Law 7.3 Assistance in Collection of Tax 7.3.1 OECD Model 7.3.2 Assistance in Collection Agreements 7.3.3 EU Law Conclusion References