International Tax Law Principles (II)

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1 International Tax Law Principles (II)
CHRISTINE

2 Agenda Double Taxation Relief Non-discrimination Principle
Anti Tax Avoidance Rule

3 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.

4 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

5 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

6 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

7 Tie Breaker Rule Dual- Residents Conflict
Art. 4 OECD Model: Individual: Permanent home; Personal and economic relations are closer (centre of vital interests); Habitual abode; Nationality; Mutual agreement.

8 Tie Breaker Rule Dual- Residents Conflict
Art. 4 OECD Model: Corporate/Company: Place of effective management

9 Conflict of Qualification
Ex: dividend or interest? capital gain or business profit? How to resolve the conflict? Common definition may be resolve the conflict. If not  MAP

10 Non-discrimination Principle
Diatur dalam Pasal 24 di dalam P3B (tax treaty) Mengatur bahwa suatu negara seharusnya memajaki non-residents, foreigners dan foreign-owned domestic corporations dengan cara yang sama atau functionally equivalent terhadap perlakuan perpajakan terhadap residents, citizens atau domestically-owned corporations dalam situasi yang hampir sama.

11 Non-discrimination Principle
Mengatur bahwa orang-orang yang dilindungi dari perlakuan diskriminasi harus tidak diperlakukan kurang menguntungkan dalam transaksi-transaksi tertentu atau keadaan tertentu oleh salah satu negara dibandingkan penduduk atau warga negaranya sendiri nationality, PE, deduction, foreign controlled enterprises

12 Perlawanan terhadap pajak
Tax Avoidance transactions or arrangements entered into by the taxpayer in order to minimize the amount of tax payable in a legitimate way, thus, it does not constitute the criminal offense Tax Evasion the reduction of tax by illegal means, usually involving fraudulent nondisclosure or willful deceit; therefore, it is punishable by criminal sanction (Brian J. Arnold & Michael J. McIntyre, International Tax Primer(2nd ed) (2002) at 81)

13 Anti Tax Avoidance Rule
Debt to Equity Ratio Controlled Foreign Corporations (CFC) Rules Transfer Pricing & Thin Capitalization Rules Advance Pricing Agreement (APA) Hubungan Istimewa (Associated Enterprises) Pasal 18 Ayat (1) Ayat (2) Ayat (3), Ayat (3a) Ayat (4)