International Taxation Quiz

A country's right to tax income generated within its borders due to a connection between the country's resources and the income-generating activity.

The concept that a country can tax income only if the non-resident taxpayer has a physical presence or engages in activities within the country, benefiting from its public goods.

A fixed place of business that allows a non-resident company to conduct its business activities within a country.

A non-resident business selling goods or services to residents of a country without having a physical presence or engaging in activities within that country.

The principle that a taxpayer should pay taxes where they derive their economic benefit, where their income is generated or wealth is produced.

The tangible and identifiable connection between a country and the income-generating activity, justifying taxation.

The public goods and services provided by a country, such as roads, infrastructure, and legal systems, which benefit economic activities and justify taxation.

A treaty between two or more countries to avoid double taxation of income, ensuring that income is only taxed once.

A method of taxation relief where Country R (the resident country) doesn't tax foreign income if it has already been taxed in Country S (the source country).

A method of taxation relief where Country R (the resident country) allows its residents to reduce their domestic taxes by the amount of taxes paid to Country S (the source country) on foreign source income.

A type of foreign tax credit where Country R (the resident country) allows its residents to claim a full credit for the entire amount of taxes paid to Country S (the source country) on foreign source income.

A type of foreign tax credit where Country R (the resident country) allows its residents to claim a credit for only a portion of the taxes paid to Country S (the source country) on foreign source income, usually calculated based on a proportional rate.

The principle that residents of Country R (the resident country) should be taxed on their worldwide income, regardless of where it is earned, ensuring fairness and preventing tax avoidance.

The situation where a taxpayer's income is subject to taxation in both their resident country (Country R) and the source country (Country S), potentially leading to double taxation.

The rate at which a country taxes income, expressed as a percentage.

The overall effective tax rate applied to a taxpayer's worldwide income, considering both domestic taxes and foreign tax credits.

A type of tax credit that limits the amount of foreign tax credit a taxpayer can claim to the amount of tax the country would have collected on the foreign source income.

An agreement between two or more countries to eliminate double taxation on income earned in both countries.

The situation where income is taxed twice, once in the country where it was earned and again in the country where the taxpayer resides.

A type of tax credit that allows a taxpayer to reduce their domestic tax liability by the amount of foreign tax paid on foreign source income.

The practice of deliberately arranging transactions to take advantage of different tax laws in different countries, often to avoid paying higher taxes.

The ability of a country to collect taxes from its residents on all income, regardless of its source.

Income earned from sources outside the country of residence.

Income earned from sources within the country of residence.

A test used to determine if a company is a resident of a country for tax purposes, considering its management and control. Typically, a country where decisions are made and day-to-day operations are managed is considered its place of effective management.

The minimum period an individual must spend physically in a country to be considered a resident, based on a set number of days.

A person who holds citizenship or residency in two or more countries, potentially leading to double taxation issues.

A rule used to determine the residence of a taxpayer in a case of dual residency, often based on factors like: a person's permanent home, center of vital interests, habitual abode, or nationality.

A measure of presence in a country based on an individual's visa and official immigration status.

The concept of an individual's primary home, often linked to their family, assets, and social life.

The place where an individual's main interests and activities are concentrated, usually the location of their family, work, and social life.

The place where an individual usually resides, even if it's not their permanent home, and where they maintain a strong connection.

The automatic right to be considered a resident for tax purposes solely based on being a citizen of a country.

A legal relationship between a person and a country, determining their rights under international law. It's separate from citizenship.

Determines an individual's status and civil rights within a country's legal system. All citizens are nationals, but not all nationals are citizens.

A test used to determine residency based on an individual's economic and social ties to a country, looking at factors like income, investments, family, and interests.

Factors considered in the subjective test, showing a person's ties to a country's economic and social life.

A legal relationship between a person and a country, determining their rights under international law. It's separate from citizenship.

Tests used to determine residency, falling into two categories - objective (e.g., days of presence) and subjective (e.g., economic and social ties).

Factors considered in determining residency for companies, weighing physical presence, activities, and connections to determine their 'home base'.

A test that determines a company's residency based solely on the country of incorporation, without considering its actual business operations.

The objective of the bright-line test is to determine a company's residence based on where it is legally incorporated. This is usually the country where it has its registered office.

The bright-line test doesn't consider where a company actually does business. This can lead to situations where companies avoid taxes by incorporating in a country with low taxes but operating predominantly in another country.

Many countries have adopted additional criteria to identify a company's residency, considering its actual operations and management. This ensures that companies cannot avoid taxation by simply registering in a tax haven.

The location where a company's day-to-day operations are managed, including the decision-making process.

This criterion examines the location where the company's central management and control reside. This could be where the board of directors meets and makes strategic decisions.

Countries like Austria, Belgium, and China focus on the location where the company's management effectively makes decisions. This considers the influence of top management and the non-executive board.

By incorporating multiple criteria beyond the place of incorporation, governments aim to ensure that companies are taxed based on their real business operations and economic presence.