principles-of-taxation-exam-directive.pdf

lOMoARcPSD|7165506 Principles of Taxation Exam Directive Introduction to principles of taxation (Katholieke Universiteit Leuven) Scan to open on Studocu Studocu is not sponsored or endorsed by...

lOMoARcPSD|7165506 Principles of Taxation Exam Directive Introduction to principles of taxation (Katholieke Universiteit Leuven) Scan to open on Studocu Studocu is not sponsored or endorsed by any college or university Downloaded by Elif Orhan ([email protected])  lOMoARcPSD|7165506 COUNCIL DIRECTIVE 2006/112/EC of 28 November 2006 on the common system of value added tax TITLE I SUBJECT MATTER AND SCOPE Article 1 1. Which of the statements is incorrect? Choose (D) is they are all correct (a) Under the assumption of diminishing marginal utility of income, vertical equity requires that a high-income taxpayer pays a higher amount of tax than a low-income taxpayer. (b) Horizontal equity requires that taxpayers that are in comparable situations should pay the same amount of tax (c) The principle of legality requires that the essential elements of a tax are determined by the legislative branch of government. (d) Three statements above are correct Article 2 1. Which of the statements is correct? Choose (D) is they are all incorrect (a) Bankruptcies and insolvencies of VAT-taxpayers are partially responsible for the VAT- gap (b) In a system if progressive tax rates, a deduction from the tax base at the top of the income results in an identical saving for all taxpayers, regardless of their total income subject to tax (c) The ability to pay principle requires that when a family tax unit that is jointly taxed depends on the same amount of income as a single taxpayer, the tax burden applied to the family unit must be higher than the tax rate for the single taxpayer with the same amount of income (d) The three above statements are incorrect Article 3 1. Which of the statements is correct? Choose (D) is they are all incorrect (a) Although capital gains are subject to proportional tax rates, capital losses are generally deductible against ordinary income, subject to progressive rates (b) Income from immovable property is generally taxed at a source on a gross basis, by way of withholding tax. (c) When a client pays his lawyer not in cash, but by supplying him a piece of art, the latter is not taxable on the receipt as income earned from a business activity (d) The three above statements are incorrect Article 4 1. Which of the statements is correct? Choose (D) is they are all incorrect (a) An employee uses his own car to drive from the office to the client and pays for the petrol himself. When the employer later reimburses those expenses, the reimbursement constitutes taxable income. (b) Under the concept of income as in increase in the net value of assets over time, capital gains realised on assets are income (c) In the context of personal income taxes, a “splitting regime” is a mechanism under which a coefficient is applied to the taxpayer’s income to take account of the number of dependent children. Downloaded by Elif Orhan ([email protected])  lOMoARcPSD|7165506 (d) The three above statements are incorrect Article 5 1. Which of the statements is correct? Choose (D) is they are all incorrect (a) Article 17 of the OECD Model, which deals with income of a sportspersons and entertainers, only applies to sportspersons and entertainers that exercise those activities in an independent capacity. Income of sportspersons and entertainers that are active as an employee is covered by article 15 of the OECD Model, on employment income. (b) A non-compete payment is not covered by article 15 of the OECD Model, because the provisions apply to “income from employment” and a non-compete payment is paid after the employment agreement has been terminated. (c) X is a Belgian resident individual with Dutch nationality. X has worked as a civil servant for the Dutch government for his entire career, but now he is retired. X receives a monthly pension from the Dutch government in respect of is former employment. Under the treaty between Belgium and the Netherlands, which is identical to the OECD Model, the Netherlands is entitled to tax the pension (d) The three above statements are incorrect Article 6 1. Which of the statements is correct? Choose (D) is they are all incorrect (a) If an employee has spent more than 183 days in the work state in a 12-month period, the work state is entitled to rax the employee’s salary under the provisions of the PECD Model. To determine the 183 days-threshold, only workdays are considered; Sundays and holidays are excluded (b) According to a provision in the national tax law of State A, private pensions are taxable in state A if the premiums for the pension scheme were deductible in state A for tax purposes, irrespective of the recipient’s country of residence. X is an individual who is resident in state B, but who has worked in state A for tax purposes. Under the tax treaty between A and B, which is identical to the OECD Model, state A is entitled to tax the pension paid to X (c) In order to avoid situations of abuse, payments for a personal performance that are not paid to an entertainer, but to a “star company” incorporated and controlled by that entertainer, are taxable in the state where the entertainer performs his activities. (d) The three above statements are incorrect Article 7 1. Which of the statements is correct? Choose (D) is they are all incorrect (a) Because the sovereignty principle justifies taxation on the basis of the relationship of subordination between the taxpayer and his government, the tax authorities (as part of the executive branch of government) are free to enact rule that introduce new taxes. (b) The consequence of the principle of horizontal equity in the matter of income taxation is that all taxpays must pay an identical amount of tax (c) Because the user fees are mandatory payments for services or goods provided by the public authorities, they are regarded as taxes. (d) The three above statements are incorrect Article 8 Downloaded by Elif Orhan ([email protected])  lOMoARcPSD|7165506 1. Which of the statements is incorrect? Choose (D) is they are all correct (a) When a tax benefit for gifts to charities takes the form of a tax credit, the effect is that the amount of the gift is deducted from the tax base, and that high-income taxpayers obtain a higher tax benefit than low-income taxpayers (b) Most individual income tax systems are progressive tax systems. Art. 23 of the OECD Model therefore provides that if a resident individual earns income from sources outside his State of residence, which is taxable in the state of source under the OECD model, the state of residence must exempt that income but may take the foreign income into account to determine the tax rate that applies to the income earned in the State of residence that is taxable there (c) Because a global income tax system aggregates all categories of income from all sources and subjects’ total income to a single progressive tax rate, it reflects the ability to pay principle better than a schedular tax system (d) The three statements above are correct Article 9 1. Which of the statements is correct? Choose (D) is they are all incorrect (a) When dividend income is taxed at source, the tax is generally levied on the gross amount without deduction of expenses. (b) Income from the sale of real property is regarded as periodic income from immovable property for personal income tax purposes (c) In the context of income from immovable property, imputed income refers to the effective income received from renting out the property (d) The three above statements are incorrect Article 10 1. Which of the statements is correct? Choose (D) is they are all correct (a) Income tax on resident individuals is generally levied only on income earned in the territory of the state of which the taxpayer is a resident (b) A VAT taxpayer can deduct the input-VAT (i.e., on supplies t him), from the output-VAT charged to his customers (i.e., on supplies by him). That right can be exercised immediately when the invoice showing the input VAT is received (c) International economic double taxation means that a taxpayer who is resident on one state and earns income from sources in another state is subject to income tax in both states on that same income during the same year. (d) The three above statements are correct Article 11 1. Which of the statements is correct? Choose (D) is they are all incorrect (a) Under the OECD Model, the general rule is that the profits from the operation of a ship in international traffic are taxable in the state where the ship is registered (b) Under the rules of the OECD model, royalties are exclusively taxable in the state where the payer of the royalties’ is a resident (c) A company that is resident in state A sells food in state B through a vending machine. Under the tax treaty between A and B, which is identical to the OECD Model, that vending machine can constitute a permanent establishment, even is the company does not have personnel permanently present in state B to operate the machine (d) The three above statements are incorrect Downloaded by Elif Orhan ([email protected])  lOMoARcPSD|7165506 Article 12 1. Which of the statements is correct? Choose (D) is they are all incorrect (a) Activities of a street musician, who occasionally collects money from passer-by, is an economic activity subject to VAT (b) A pure holding company whose only activity is holding a shareholding in a subsidiary and that does not provide services for the company in which it is holding shares is not an economic activity subject to VAT (c) A Belgian company that manufactures furniture, sells and ships 100 chairs to a company established in Mexico. The Belgian company is required to charge Belgian VAT on sales to its Mexican customer (d) The three above statements are incorrect Article 13 1. Which of the statements is correct? Choose (D) is they are all incorrect (a) Because the jurisdiction to levy taxes is based on the concept of sovereignty, a state is only entitled to levy taxes from a person that are subject to its sovereignty, i.e., the citizens of that state (b) The rules that define which persons or entities are the taxpayers that are subject to a tax are generally referred to as the rules governing the material scope of tax (c) Progressivity can be achieved in a personal income tax system only by applying a graduated tax scale (d) The three above statements are incorrect Article 14 1. Which of the statements is correct? Choose (D) is they are all incorrect (a) X is an individual that is regarded as a resident for tax purposes under the domestic law of both state A and state B, State A and B have concluded a tax treaty that corresponds to the OECD Model. X resident of the state of which he is a national. (b) Under the OECD Model, a construction project that has lasted eight months constitutes a permanent establishment (c) Under the OECD Model, a company resident in state A that provides services to customers based in State B is only taxable in B on the profit derived from those services if it has a physical presence in B which is materialised through the existence of a so-called permanent establishment. That is why digital service providers that have no physical presence in the state of their customers do not pay corporate tax on their profits in the state where their customers are based. (d) The three statements above are incorrect Article 15 1. Which of the statements is correct? Choose (D) is they are all incorrect (a) Under the European Parent/Subsidiary Directive, dividends distributed by a subsidiary based in Member State A to its parent company in Member State B, may not be subject to corporate tax in State B (b) Under the OECD Model, a force of attraction applies in the context of business profits. Consequently, if a resident of a contracting state has a permanent establishment in the other contracting state A and state B corresponds to the OECD Model, the office space constitutes a permanent establishment in state B. (c) A company established in state A rents office space in state B soley for the purpose of collecting information in state B. The activity of collecting information has a preparatory Downloaded by Elif Orhan ([email protected])  lOMoARcPSD|7165506 character. If the tax treaty between state A and state B corresponds to the OECD Model, the office space constitutes a permanent establishment in state B. (d) The three statements above are incorrect Article 16 1. Which of the statements is correct? Choose (D) is they are all incorrect (a) Payments from individual life insurance contracts without any link to employment are not regarded as pensions under the OECD Model (b) Royalties derived by an entertainer from the sale of a CD recorded at a live concert is covered by article 17 of the OECD Model (c) Under the OECD Model, employment income earned by an international truck driver is taxable only in the residence state of the company operating the trucking business. (d) The three statements above are incorrect Article 17 1. Which of the statements is correct? Choose (D) is they are all incorrect (a) In the context of VAT, the reverse charge mechanism means that the supplier of goods or services in required to register as a taxable person in another Member State and charge VAT under the rules of the Member State (b) If a German company provides consultancy services to a private individual established in Canada, VAT is due in Germany (c) For VAT purposes, the provision of accommodation is a hotel take place where the hotel is located (d) The three statements above are incorrect Article 18 1. Which of the statements is correct? Choose (D) is they are all correct (a) The supply of medical services by doctors in their professional capacity is exempt from VAT (b) Member Staes are allowed to apply reduced VAT rates to the supply of water and the transport of passengers (c) Mixed VAT-taxpayers are allowed to deduct a portion of the input-VAT (i.e., on supplies to them), from the VAT charged on their output that is not exempt from VAT (d) The three statements above are correct Article 19 1. Which of the statements is correct? Choose (D) is they are all correct (a) A student, resident & national of State A, who is studying at KU Leuven for one year period in Belgium, is not taxable in Belgium scholarship received from the education fund in State A, provided that the tax treaty between Belgium and State A follows the OECD Model (b) If the tax treaty between Belgium and State B follows the OECD Model, interest paid by a Belgian company on a loan concluded with a group company-based ins State B is subject to withholding tax in Belgium. It is also taxed in State B should alleviate the double taxation by giving an ordinary tax credit for the Belgian withholding tax. (c) A company director, resident of State X, exercising his function on behalf of a company resident of State Z, is taxable on his directors fees in State z, provided that the tax treaty between X and Z follows the OECD Model (d) The three statements above are correct Downloaded by Elif Orhan ([email protected])  lOMoARcPSD|7165506 Article 20 1. Which of the statements is correct? Choose (D) is they are all correct (a) If a Belgian retail store buys oranges from a Spanish producer and the goods are transported from Spain to Belgium through the port of Antwerp, at the port an importation takes place that makes the Belgian importer liable to pay Belgian VAT to the Belgian treasury (b) If a Belgian private individual buys a horse from a Netherlands-based professional horse breeder which the buyer transports to Belgium with his own truck, VAT is due in the Netherlands on that sale (c) If a Belgian company sells bricks to a French company that is building houses in Belgium and supplies the bricks at the Belgian construction sites, this an instar-community supply of goods and French VAT tis to be charged (d) All the above statements are correct Downloaded by Elif Orhan ([email protected])