Shared Flashcard Set


Tax Treaties
Topic in International Taxation.
International Studies

Additional International Studies Flashcards




What is Monist States & Dualist States?
It's a way of tax treaty confer rights on taxpayers. Which is a way through incorporation into domestic law

Monist states means international and domestic law are one
system so Treaties automatically prevail over domestic law and taxpayers can directly rely on the treaty
Dualist states is when a country adopt international and domestic laws as two systems so Treaty needs to be incorporated into domestic law. How? May be by act of legislature, UK Order in Council
When is capital gain can be taxed by source country?
When the gain is from the sales of immovable property or from the sales of shares from the company that most of the asset is immovable property.
Explain the major difference between OECD and UN Model Treaty.
OECD favours capital importing countries, so most of the model impose restrictions on source jurisdiction in taxing its income. While UN model normally require residence country to provide relief.

Under the UN Model the source country is given wider taxing rights in:
Art 5 - Permanent establishment
Art 7 - Business profits
Art 9 - Associated enterprises Art 10 - Dividends
Art 11 - Interest
Art 12 - Royalties
Art 13 - Capital gains
Art 21 -Other income
What is the test for residence relief for legal entities according to OECD?
place of incorporation, of creation, of organisation, where managed & controlled & location of a company’s head office
mutual agreement having regard to place of head or main office, of effective management & any other relevant factors (Japan) Determination by the competent authority to resolve the residence issue (Turkey)
What activities likely do not give rise to PE according to OECD Art 5(4)
use of facilities solely for storage, display or delivery. These activities are ordinarily of a preparatory or auxiliary character were thought to be unlikely to give rise to substantial profits (Amazon?).
Under what situation Subsidiary considered PE for tax treaty purpose?
Art 5(7) of the OECD Model states that a subsidiary company will be a PE if the subsidiary permits the parent company to operate from its premises such that the tests in Art 5(1) are met, or the subsidiary acts as an agent such that a dependent agent PE is constituted.
What's the difference between UN and OECD Model in treating dependent personnel services?
Art 14(3) allows an additional monetary limit test is used in conjunction with the two alternate tests.
Art 14(2) of the UN Model defines "professional services" to include services performed in the exercise of independent scientific, literary, artistic, educational or teaching activities as well as in the exercise of the independent activities of physicians, lawyers, engineers, architects, dentists & accountants.
When is 10% of WHT for interest is applicable?
Art 11(6) of the UN & OECD Models ensures that 10% source country tax rate will only apply to an amount of interest which might have been expected to have been agreed upon if the parties to the loan agreement were dealing with one another at arm’s length (ie “market interest”).
Any excess part of the interest remains taxable according to the domestic law of each country but subject to the other Articles of the treaty..
What are the special treatment in taxing wages from employment?
when income is dealt with under specific Articles (ie, directors’ fees (Art 16), pensions (Art 18) & government service (Art 19)).
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