TRANSFER PRICING AND TAXATION INTERNATIONAL
PUTRI AYU PUSPA RENGGANIS
20208970
4EB11
basic concepts of international taxation
The principles that must be understood in international taxation
Doernberg (1989) mention three elements that must be met netraliats in international taxation policy:
1. Capital Export Neutrality (Domestic Market Neutrality): Wherever we invest, the burden of taxes paid should be the same. So it makes no difference if we invest in domestic or foreign. So do not get when investing abroad, a greater tax burden because of the two countries bear the tax. This will underpin Income Tax Act Art 24 governing foreign tax credits.
2. Capital Import Neutrality (International Market Neutrality): investment from wherever derived, subject to the same tax. So that investors from both domestic or overseas will be subject to the same tax rate when investing in a country. It is the right of taxation of the same underlying with taxpayer of the Interior (WPDN) of the permanent establishment (PE) or Fixed Uasah Agency (BUT), which can be a branch of the company or service activities through the time-test of the regulations.
3. National Neutrality: Every country has the same tax on income. So if any foreign taxes that can not be deducted as an expense credited earnings deduction.
Connection with the tax concept of income from abroad
Each country claims to impose taxes on income generated within its borders. However, the national philosophy on the taxation of resources from abroad is different and this is important from the perspective of a tax planner.
Foreign tax credit
Based on the principle of worldwide taxation, foreign earned income of a domestic company is taxable in full fine imposed in the host country or countries of origin. for avoid reluctance among businesses to expand abroad and to maintain the concept of neutralization abroad, the domicile of the parent company (country seat) may elect to treat paid foreign tax credit against tax liability as a domestic parent company or deduction as a deduction on income taxable.
Creditors of foreign tax can be calculated as a direct credit on income tax paid on earnings branch or subsidiary and any tax withheld at source, such as dividends, interest, and royalties are sent back to domestic investors. The tax credit can also be estimated if the amount of foreign income tax paid is not too obvious (when the foreign subsidiary sent most profits come from overseas to domestic holding company).
Dividends are reported in the parent company's tax return should be calculated gross (gross - up) to cover the amount of tax levy taxes plus all applicable overseas. This means that the domestic parent companies receiving dividends which includes taxes owed to foreign governments and then pay the tax.
Indirect Tax Credit that allowed foreign (foreign income taxes deemed paid) is determined as follows:
Payment of dividends (including the entire tax levy) / Profit after income tax of foreign X foreign tax can be credited.
International tax planning within multinational corporations
In the tax planning of multinational companies have certain advantages over a purely domestic firm because it has greater flexibility in determining the geographic location of production and distribution systems. This flexibility provides the opportunity to utilize their own differences over national tax jurisdiction so as to lower the overall corporate tax burden.
The observation of these tax planning issues at the start with two basic things:
a. Tax considerations should never have control of the business strategy
b. Constant changes in tax laws limit the benefits of tax planning in the long term.
Variables in the international transfer pricing.
Transfer prices set a monetary value on the exchange between firms that take place between the operating unit and is a substitute for market prices. In general, the transfer price is recorded as revenue by one unit and the unit cost by others. Cross-border transactions of multinational corporations are also open to a number of environmental influences that created the same time destroying the opportunity to increase profits through transfer pricing. A number of variables as tax rate competition inflation rates, currency values, limitations on the transfer of funds, political risk and the interests of joint venture partners are very complicated transfer pricing decisions.
Fundamental problems in the transfer pricing method.
Tax factor
Reasonable transaction price is the price to be received by parties not related to special items the same or similar in the exact same situation or similar. Reasonable method of determining the transaction price that is acceptable is:
(1) the method of determining the comparable uncontrolled price.
(2) method of determining the resale price.
(3) plus the cost price determination methods and
(4) other methods of assessment rates
Factor Tariff
Tariffs for imported goods also affect transfer pricing policies of multinational corporations. In addition to the balance identification, multinational companies should consider the costs and benefits, both internal an external. High tax rates paid by the importer will generate the income tax base is lower.
Competitiveness Factors
Similarly, a lower transfer price can be used to protect the ongoing operation of the influence of foreign competition is increasingly tied to the local market or other markets. Such competitiveness considerations must be balanced against the many losses that the opposite effect. Transfer rates for competitive reasons may invite anti-trust action by the government.
Performance Evaluation Factors
Transfer pricing policy is also influenced by their influence on behavior management and is often the main determinant of company performance.
.jpg)
0 komentar:
Posting Komentar