国际税收整理

课后习题整理

一．Base for international tax: country taxation

1. What is international tax? What does it mainly address?

答：International tax means a series of tax issues resulting of different tax rules and conflicting jurisdictions made by countries, and solutions.

The base of International tax is different countries'taxation. 二．International

income taxation

1. How does a country generally design its income taxation system? 答：① territorial （属地）:taxati On On Iy Of in-coun try in come,e.g. HOng Kong;

②TeSide ncy 属人）:taxatio n of all in come of reside nts an d/or CitiZe ns;

③ exclusio nary（例夕卜）:SPeCifiC in clusi on or exclusi on of Certa in amoun ts, classes, or items of income in/from the base of taxation;

④Hybrid（混合）：e.g. USA , UK

2. Why is it important to make clear source of income? 答：①in a territorial system, SOUrCe ofte n determ ines Whether or not the in come is taxed;②SOurCe of in come is also importa nt in reside ncy SyStemS that grant CrS for taxes of other jurisdictions.

三．Tax residence

1. What is the main difference between a tax resident and a non-tax resident for tax liability purpose?

答：①a tax reside nt: world-wide tax liability;

② a non-tax reside nt: Iimited tax liability.

2. Can you name some tests in determining whether a person is a resident? 答：①For corporati on:

place-of-incorporation test , place-of-management test, residence-of-the

shareholders test;

?For in dividual:

a fact-and-circumstances test/ domicile test , number of days test, intention

test.

3. Take an example to prove how different countries apply differing tests to judge a person's residence?

答：China: for individual: domicile test , number of days test（a full year）;

for corporation: place-of-incorporation test

or place-of-management test.

Ireland: for individual: number of days test（183 days） ,domicile test for

corporation: now :place-of-incorporation test past :place-of-management test.

四．Income source jurisdiction and rules

1. What is source jurisdiction?

答：It's an important form of state tax sovereignty. It determines that income from home country is subject to tax.

2. How to determine the source of employment and personal services income?

答：①ACCOrding to the place Of PrOVing services. FOr independent services, it refers to the fixed place; For dependent services, it refers to the place where services

are perfOrmed.

②ACCOrdi ng to the Payme nt place of SerViCe in come.

3. HOw tO determine the sOurce Of lOcatiOn Of business incOme? What is PE? 答：

①There are ChiefIy two test: one is the PE rule , the other is the place of transaction or trade or signing contracts rule.

②PE means "permanent establishment", and it refers to a fixed place of business,suchas an office, branch, factory or mine, which generally gives rise to income or value added tax liability in a particular jurisdiction, a dependent agent or an employee is also treated as a PE. And PE is an important basis to judge whether business income is taxable by a country.

4. How to determine the source of investment income?

答：①For divide nd, test: reside nce COuntry of the divide nd payer;

②For in terest, test: gen erally: reside nce COuntry of the in terest payer;

Some country: signing place of loan contract, or residence country of loaner.

③ For royalties, test: place of usage; residence COUntry of royalty owner; residence country of royalty payer.

④ For ren ts, test: USage place of the property; Sig ning place of renting con tract; residence country of rent payer.

五.International double taxation and relief

1. What is International double taxation?

答：Double taxation occurs when tax is paid more than once by two or more jurisdictions on the same taxable income or asset ,and it can be legal or economic. 国际重复征税是指两个或者两个以上的国家、地区,对同一或不同跨过纳税人的

同一跨国征税对象征收相同或相似的所得税。一般包括法律性重复征税和经济重复征税。

2. What is the main difference between legal International double taxation and economic International double taxation?

答：① Legal double taxati on taxes the Same taxable earning or asset.

②Econo mic double taxati on taxes differe nt taxpayers. 法律性重复征税：同一跨国纳税人（总公司、分公司属于同一纳税人）；经济重复征税：总公司、分公司分属不同跨国纳税人。

3. Take an example to prove International double taxation arising from the same tax jurisdiction and relief.

答：

4. What approaches are used to solve International double taxation resulting from residence-source conflicts?

答：Tax treaties of OECD and the UN can be used to solve international double taxation; there is also uniformity in source rules and international practices for solving the problem.

Besides,the deduction method, the exemption method and the credit method are another means of solving the problem .

Unilateral,bilateral, multilateral approaches.

5. What is the main difference between deduction method and credit method? 答：① The Credit method : foreig n taxes Paid by a reside nt taxpayer SerVe to reduce domestic taxes .

②The deduct ion method : it allows reside nts and CitiZe ns to deduct foreig n taxes paid as a current expense in computing their taxable worldwide income. 抵免法：将国内国外所得乘以税率减去在国外所得取得的收入的税额。扣除法：税前扣除视同费用；

6. Which specific relief methods does international community agree to? 答：The OECD and the UN models only authorize the credit and exemption methods, not the deduction method .

六.International tax avoidance and tax haven

1. What is tax haven.

答： a country or territory which has no income tax or little income taxation, and is easy to be used to avoid or evade taxation of relevant countries or territories.

2. How many types of tax havens are there in the world?

答：① Nil-tax have ns: no in come tax, no CaPitaI gains tax, no in herita nce tax .

②FOreig n SOUrCe exempt have ns: tax you on IoCaIly derived in come only.

③ Law-tax have ns : some may have SPeCiaI con CeSSi on s;some USeS tax double treaties.

3. Name some Non-tax features of tax heavens.

答：Privacy：financial affairs be kept private from prying eyes.

Easy of residence: easy to obtain permission to live.

political stability ;

convenient communications: good telephone and broadband internet access and easy travel.

Lifestyle factors: good schooling and climate and so on.

4. How does an international taxpayer make use of a tax haven? 答：make use of transfer pricing to transfer profit;

abuse international tax treaty;

make use of trust investment to transfer property;

set up internal insurance company;

thin capitalization;

choose advantaged forms of enterprise organization;

Emigration;

5. Does China has anti-tax-haven rules?

答：Yes. In CFC rules.

6. What are the advantages of being a tax haven?

答：attract FPI; promote employment; develop economy; reduce taxation; promote cultural exchanges.

7. What are the reasons for some jurisdictions desiring to be tax havens?

答：There are many advantages of being a tax haven. For example: attract FPI;

promote employment; develop economy; reduce taxation; promote cultural exchanges.

七.International transfer pricing and rules

1. What is international transfer pricing ?

答：IntematiOnaltranSfer PriCing refers to a kind Of non-PriCing actiOn taken by related parties within the group while carrying on purchasing and selling business. It can be used as an imPortant instrument of avoiding tax .

2. Take an examPle to Prove that international transfer PriCing Can be used to avoid international tax?

答：

3. What are the main Contents of international transfer PriCing rules ?

答： A Country will set uP International transfer PriCing rules to Prevent transnational enterPrise using transfer PriCing to evade tax. It Contains those details:

Adjustment: Arm's length PriCe (1.CUP, 2.RP, 3.CP); Formulary aPPortionment method; AdvanCed PriCing agreement.

4. What is formulary aPPortionment method?

答：Attributes Profit or loss to eaCh jurisdiCtion based on faCtors suCh as the ProPortion of sales 、assets、or Payrolls .

5. Talk about transfer PriCing rules in China ? 答：

八. Controlled foreign corporation and rules

1. How does a multinational firm use a CFC to avoid tax ?

答：ComPanies form foreign subsidiaries in tax havens and shift inCome to those subsidiaries ,the tax was avoided until the tax haven Country distributes a dividend to the shareholding ComPany .

E.g. CCo is a resident CorPoration in China with tax rate 25%, while BCo is a ComPany in the British Virgin Islands with tax rate 0, whiCh is jointly held 100% of total shares by CCo.

1) If CCo sells the ProduCts direCtly to HCO in Hong Kong at 8 million, and the Cost of these ProduCts is 4 million, the amount of tax is 1 million.

2) If CCo sells ProduCts to BCo at non-market PriCe 4 million,and the Cost of these ProduCts is 4 million. And BCo sells the ProduCts to a ComPany in Hong Kong at market PriCe 8 million. If the Profit 4 million isn't distributed, the total amout of tax is 0.

2. What is CFC?

答：CFC are those CorPorations whiCh are registered in low-tax or no-tax Countries and regions ,but Controlled by native residents and used for tax avoidanCe.

3. What is the relationshiP between deferral system and CFC rules ?

答：Deferral system is the basis of CFC rules , generally sPeaking, no deferral system, no CFC rules. And China is a exCePtion that has no deferral system but has CFC rules .

4. What are the main Contents of a Country's CFC rules?

答：①COn trol test. Differe nt COun tries have differe nt Sta ndards ,in Chi na, the test is controlled by all shareholders at 50% and single at 10%.

②tax haven tests. There are designated jurisdiction(blacklistwhitelist、greylist) and

global approaCh.

?taxpayer defi niti on.

④recog niti on of taxable in come.

⑤ excepti on rules. CFC derives in come through active bus in ess

activities ,located in a non-low-tax rate country or region which is designated by the SAT ; annual profits of the CFC are not more than 5 million .

5. When was china's CFC rules established ?

答：2008.

6. Can you name some differences between china and foreign jurisdictions for purposes of CFC rules ?

答：US CFC rules aims at preventing its citizens and corporations from artificially deferring otherwise taxable income through use of foreign entities.

UK CFC rules taxes on undistributed income of low tax controlled foreign companies of which they are shareholders.

German CFC rules applies to all its shareholders matters nothing with its holding percentage as long as it meets two tests: firstly , German residents control non-German corporation , secondly ,that corporation is taxed at a rate of less than 25% on the passive income.

7. Must a foreign corporation which is established in a tax haven and controlled by our residents be a CFC for our tax purpose ?

答：No. If not satisfying some condition , the corporation won't be a CFC for our tax purpose. The conditions are listed as following: the foreign corporation is not owned about 50% by all its shareholders or 10% by its single shareholder; the income is derived from active activities ;the annual profits are not more than RMB 5 million.

九. Thin capitalization and rules

1. What's thin capitalization ?

答： A company said to be thinly capitalised when its capital is made up of a much greater proportion of debt than equity, ie. its gearing, or leverage, is too high. Thin capitalization is one of the most important tax avoidance techniques adopted by multi-national firms. It can be divided into domestic type and international type. It occurs when an entity's capital is made up of a much greater proportion of debt than equity. The capitalization is one of the most important tax avoidance techniques adopted by multi-national firms.

2. Give an example to prove that capitalization can be used to avoid tax.

答：There's an entity B, a resident corporation in china , with a registered capital of 100 million . And it subjects to the enterprise income tax rate of 25%. Besides , the normal interest rate is about 10%. Each year B gains a seal income of 800 million at a cost of 500 million. Recently B borrowed 400 million from related corporation C at an interest rate of 20% for the advancementof its business.Now the interest is 8 million, and the income tax is 73 million. When B increase its load from C to 800 million ,the interest comes to an amount of 16 million, and the income tax is 71 million. The corporation B gains a benefit of 2 million by avoiding income tax.

3. What's the main contents of thin capitalization rules ?