International Tax Law Principles By Christine,SE.Ak.,M.Int.Tax ©

Agenda Concept of International Tax Juridical double taxation Economic double taxation World wide income vs territorial income Methods to relief double taxation Conflict-conflict under international tax law

Pengertian Perpajakan Internasional Ketentuan-ketentuan yang mengandung aspek-aspek internasional yang terkandung di dalam UU pajak penghasilan suatu negara. Di Indonesia, pajak internasional adalah aspek internasional yang ada di dalam UU PPh.

International Tax System (Prof. Bird (1988)) Residents taxed on worldwide income (residence principle) and non-residents taxed on domestic income (source principle) Source country has primary right to tax active income (business profits) Residence country has primary right to tax passive income (source country accepts rate limits)

International Tax System (Prof. Bird (1988)) Residence country taxation of profits of foreign subsidiary deferred until repatriation to parent company Residence country provides relief from double taxation Allocation of income between jurisdictions based on the arm’s length principle

Jurisdiction to tax under international tax law Residence jurisdiction Residence Country Source jurisdiction Source country

Dimensi Perpajakan Internasional Taxation of foreign income yaitu pengenaan pajak atas penghasilan yang berasal dari luar negeri yang diperoleh penduduk (residents) baik orang pribadi maupun badan. Taxation of nonresidents yaitu pengenaan pajak atas penghasilan yang diperoleh orang asing (foreigners) yang berasal dari dalam negeri.

Pemajakan Resident vs Non resident WW Income WP Dalam Negeri (resident) Penghasilan DN DN LN Penghasilan LN Source-based income DN Hanya dikenakan pajak dari penghasilan yang bersumber di Negara pemberi penghasilan LN WP LN Negeri (non resident)

Why Double Taxation occur? Please discuss.

Why Double Taxation occur? Meningkatnya transaksi internasional - Globalisasi - e-commerce 2. Kedaulatan Negara untuk mengenakan pajak (Sovereignty to tax) yang menimbulkan konflik. Karakteristik konflik penyebab double taxation: - Resident-Source conflict the most common - Resident-Resident conflict (dual resident) - Source-source conflict (dual source) - etc.

Juridical Double Taxation Definisi: Pengenaan pajak oleh dua atau lebih negara dari WP yang sama atas income yang sama dalam periode yang sama (same taxable period)

$ Interest Negara S Negara sumber Mengenakan pajak atas penghasilan bunga  territorial income Dimensi: Taxing the foreigner’s income Mekanisme pengenaan pajak: withholding tax yang dilakukan oleh perusahaan X Perusahaan X Loan Interest $ Negara S Negara D Negara D  Negara domisili Mengenakan pajak atas penghasilan bunga  worldwide income Dimensi Taxing the foreign income Mekanisme pengenaan pajak: dengan self assessment system, dilakukan oleh Mr. Y sendiri Mr Y

Economic Double Taxation Definisi: Pengenaan pajak beberapa kali (multiple taxation) terhadap income yang sama Terhadap WP yang berbeda Dalam periode yang sama

Parent Co. (shareholder) Mengenakan pajak atas laba usaha Subsidiary Co. Subsidiary Co. $ Negara A Negara B Dividen Mengenakan pajak atas penghasilan dividen yang berasal dari laba usaha Subsidiary Co. Parent Co. (shareholder)

Residence-source conflict Worldwide income PT A Residence country Source country Domestic source income Tax at source

How to relief double taxation? Yang menerapkan adalah residence country. Ada 3 metode untuk menangani residence-source conflict: Deduction Method deduction for taxes paid to a foreign government in respect of foreign-source income. Exemption Method exemption for foreign source income Credit Method  credit against taxes otherwise payable for income taxes paid to a foreign country.

Comparison of methods for relieving Double Taxation Deduction Method Credit Method Exemption Method Foreign-source income 100 Foreign tax (40%) 40 Deduction for foreign tax Nil Net Domestic Income 60 Domestic Tax before credit (50%) 30 50 Less: FTC nil Final Domestic Tax 10 Total Domestic and Foreign Tax 70

How to relief double taxation? (cont..) Pilih metode dan terapkan di dalam: Domestic tax laws  PPh Ps. 24 Tax Treaty Article 4  tie breaker rule (dual residents conflict) Article 23A and 23 B  exemption vs credit

How to relief double taxation? Kredit Pajak Luar Negeri Credit Method Per Country Limitation Principle Source Rule PPh yang dapat dikreditkan salah satunya adalah PPh pasal 24 Pasal 24: Ayat (1) Ayat (2) Ayat (3), Pasal 28

Source-source conflict Example: Design Fee  related to source rules Negara A Residence Country Negara B Source country (1) tempat desain dibuat Negara C Source country (2) Tempat desain dibangun

Residence-residence conflict Place of incorporation Country A Place of effective management Country B

Income Characterization/Qualification conflict Given the same facts, the residence and source country would apply different articles of the Convention on the basis of differences in their domestic law. Ex: Pierre Boulez Case

Conflict of interpretation of tax treaty provisions Contracting States agree on all the facts of the particular case, but disagree on how the provision of the Convention should be applied to them.

Measurement/Allocation Conflict Measurement of income Related to transfer pricing method Compensating Adj. (Art. 9) Mutual Agreement Procedure (Art. 25)