20240409 Intro_to_Intl_Taxation_2024.pdf

Introduction to International Taxation. Dr. Achim Roeder Ruhr-Universität Bochum Summer Term 2024  Organisational matters – content & language Content: Lecture: § Tax aspects of cross-border activities with a focus on double taxation issues § Unilateral as...

Introduction to International Taxation. Dr. Achim Roeder Ruhr-Universität Bochum Summer Term 2024  Organisational matters – content & language Content: Lecture: § Tax aspects of cross-border activities with a focus on double taxation issues § Unilateral as well as bi- or multilateral regulations to prevent double taxation as well as double non-taxation § Focus on transfer pricing § General international tax law and new developments, e.g. OECD Pillar I & II Tutorial: § Repetition of selected contents of the lecture § Focus on German international tax law and transfer pricing Language: Lecture in English Tutorial in German RUB Introduction to International Taxation, Summer Term 2024 2  Organisational matters – schedule & written exam Indicative Schedule, 08:00-12:00: Lecture Tutorial April 09, 23, 30 May 07, 14 June 04, 11, 18 July 02, 09, 16 Written exam: Questions in English Answers can be provided in English or German Date of written exam: probably 23 July 2024, 14:00 to 16:00 RUB Introduction to International Taxation, Summer Term 2024 3  Organisational matters – literature Literature: Arnold, International Tax Primer (5th edition), Den Haag 2023 Malherbe, Elements of International Taxation Bruxelles 2015 Oats Principles of International Taxation (8th edition), London 2021 Rohatgi, Roy Rohatgi on International Taxation, Volume 1: Principles (3rd edition) , Amsterdam 2018 RUB Introduction to International Taxation, Summer Term 2024 4  Structure 1. Economic aspects of cross border taxation 2. Double tax treaties 3. Tax law of the European Union 4. Aspects of transfer pricing 5. Controlled foreign companies 6. Current developments RUB Introduction to International Taxation, Summer Term 2024 5  Structure 1. Economic aspects of cross border taxation 1.1 Fundamentals 1.2 Double taxation and double tax exemption 1.3 Reasons for double taxation and double tax exemption 1.4 Avoidance of double taxation 1.5 Neutrality of taxation for economic decisions 2. Double tax treaties 3. Tax law of the European Union 4. Aspects of transfer pricing 5. Controlled foreign companies 6. Current developments RUB Introduction to International Taxation, Summer Term 2024 6  1. Economic aspects of cross border taxation 1.1 Fundamentals (1) Definition of taxation Taxation required to finance public spending for the provision of public goods, (re-)distribution of resources and economic stabilisation Compulsory levies Objectives: Imposed to raise revenue for the provision of public goods, for the redistribution of income and wealth, to promote social and economic welfare, to support economic stability, to harmonize domestic trade Elements of taxation Tax base (income or revenue, capital, expenditure, consumption, wealth …) Tax rate Taxpayer (legal vs. economic) Criteria to evaluate tax systems: equity (horizontal vs. vertical) and efficiency/neutrality Administrative and compliance costs of taxation RUB Introduction to International Taxation, Summer Term 2024 7  1. Economic aspects of cross border taxation 1.1 Fundamentals (2) Major trends in international taxation over time 1900 to 1950: limited cross border trade 1960s and 1970s: removal of trade barriers, growing integration of capital markets, growing tax evasion 1980s and 2000s: increased co-operation between nations, declining tax rates (OECD average 50% early 1980s to less than 30% today) 2010s: Financial crisis, BEPS, taxation of digital economy 2020s: COVID, climate crisis, war in Ukraine RUB Introduction to International Taxation, Summer Term 2024 8  1. Economic aspects of cross border taxation 1.2 Double taxation and double tax exemption (1) Definitions Legal double taxation § Same tax object § Same tax subject § Identical periods § Comparable tax Economic double taxation § Same tax object § Different tax subject Double tax exemption § No uniform definition § Tax loopholes caused by tax system § Tax loopholes caused by tax planning RUB Introduction to International Taxation, Summer Term 2024 9  1. Basic principles 1.2 Double taxation and double tax exemption (2) Distortion of competition and impact on economic choices of taxpayers regarding international transactions tax base economic target Juridical double taxation or Economic double taxation or double tax exemption double tax exemption RUB Introduction to International Taxation, Summer Term 2024 10  1. Basic principles 1.3 Reasons for double taxation and double tax exemption (1) Sovereign taxation right: No restriction on the state’s right to tax Taxation without regard to other states Connecting factors for taxation Personal attachment (residence rule) Economic attachment (source rule) - digitalization Differing connecting factors Citizenship (e.g. USA) Residence (typically in industrialized countries) Source (typically in developing countries, but trend in industrialized countries) Varying basis for computing the tax Universal tax system: taxation on the basis of worldwide income Territorial tax system: taxation of income arising in fiscal jurisdiction RUB Introduction to International Taxation, Summer Term 2024 11  1. Basic principles 1.3 Reasons for double taxation and double tax exemption (2) Two states with identical Connecting factor connecting factor and tax base for taxation Residence Source Citizenship Universal Taxation basis Territorial Red: double taxation Green: no double taxation Yellow: tax exemption possible RUB Introduction to International Taxation, Summer Term 2024 12  1. Basic principles 1.3 Reasons for double taxation and double tax exemption (3) Tax is levied by residence state Yes No Yes Double taxation Taxation at source Tax is levied by source state No Taxation at place of residence Double tax exemption RUB Introduction to International Taxation, Summer Term 2024 13  1. Basic principles 1.3 Reasons for double taxation and double tax exemption (4) Different connecting factors used simultaneously For example: the same income is taxed twice, first by the country where it is derived under its “source rules” and then in the country where the taxpayer resides under its “residence rule” Qualification conflicts Income characterization conflicts: two states characterize or classify the same income or capital differently and, therefore, apply differing tax provisions Mismatching tax systems: § States have different accounting methods § States require different transfer prices (Example) Avoidance of double taxation Tax is levied by residence state, i.e. the source state waives taxation right Tax is levied by source state, i.e. residence state waives taxation right RUB Introduction to International Taxation, Summer Term 2024 14