PERENCANAAN PAJAK INTERNASIONAL - BAGIAN - 6

Summary

This video explains the concept of double tax avoidance, which aims to prevent economic disruption caused by multiple taxation of the same income or assets across different countries. It covers both juridical and economic double taxation, the causes behind it, and international taxation principles. The video also discusses methods of avoiding double taxation through treaties, tax credits, and unilateral or bilateral measures. The different approaches and methods, such as the tax credit method and the division of taxing powers, are highlighted to show how countries work together to ensure fair taxation and avoid unnecessary financial burdens for taxpayers.

Takeaways

• 😀 Double taxation avoidance aims to prevent economic disruption between two countries by ensuring mutual benefits through international agreements.
• 😀 Juridical double taxation occurs when the same income or capital is taxed by multiple countries on the same person or entity.
• 😀 Economic double taxation arises when different individuals or entities are taxed on the same income or capital in multiple countries.
• 😀 Double taxation may occur due to overlapping claims on taxation, often resulting from dual residency, dual nationality, or conflicting jurisdictional principles.
• 😀 The global principle allows for worldwide income taxation by the country of residence, while the source principle taxes income where it is earned.
• 😀 There are three key principles in international taxation: capital export neutrality, capital import neutrality, and national neutrality.
• 😀 International double taxation can occur due to conflicting claims between domestic tax principles and territorial (source) taxation.
• 😀 The main solutions for avoiding double taxation include tax treaties, tax credits, and reducing or eliminating tax rates on foreign income.
• 😀 Tax treaties (P3B) allow for negotiated tax exemptions or reductions between two countries to avoid double taxation on income such as dividends, interest, and royalties.
• 😀 Methods for avoiding double taxation include unilateral methods (individual country action), bilateral agreements (negotiation between two countries), and multilateral treaties involving multiple countries.
• 😀 The main methods of avoiding double taxation include exemption, tax credit, and tax-sharing, with each providing different approaches to reducing the tax burden on international income.

Q & A

What is the purpose of avoiding double taxation?

The purpose of avoiding double taxation is to prevent tax imposition that could hinder the economies of the involved countries, ensuring mutual benefit between them. This is achieved through agreements that regulate tax issues arising from transactions between the two countries.

What is the difference between juridical and economic double taxation?

Juridical double taxation occurs when the same income or capital is taxed by more than one country on the same subject. Economic double taxation, on the other hand, happens when two different subjects are taxed on the same income or capital in different countries.

What causes double taxation?

Double taxation can occur due to three main factors: 1) the same taxpayer being taxed in multiple countries (subjective conflict), 2) the same object of tax being taxed in multiple countries (objective conflict), and 3) the taxpayer being taxed both at their country of residence and the source country of the income.

What are the three key principles of international taxation mentioned by Dromborg?

The three principles of international taxation, according to Dromborg, are: 1) Capital export neutrality, where tax burdens are equal regardless of where investments are made, 2) Capital import mutuality, where tax burdens are the same regardless of the origin of the investment, and 3) National neutrality, where each country has equal rights to tax income.

How does international taxation conflict arise?

International taxation conflict arises due to overlapping claims for taxation. The global taxation principle allows a country to tax both domestic and foreign income of its residents, while source taxation principle allows the source country to tax the foreign income of non-resident taxpayers.

What are the two main methods for avoiding double taxation internationally?

The two main methods for avoiding double taxation are: 1) Tax treaties, agreements between two countries that outline how taxes will be handled, and 2) Foreign tax credit, where taxes paid abroad can be deducted from the domestic tax liability.

What are the three approaches for eliminating double taxation?

The three approaches for eliminating double taxation are: 1) Unilateral approach, where a single country enacts laws to avoid double taxation; 2) Bilateral approach, where two countries negotiate to avoid double taxation; and 3) Multilateral approach, where more than two countries negotiate together to avoid double taxation, such as in the Vienna Convention of 1961.

What is the exemption method for avoiding double taxation?

The exemption method involves excluding foreign income from domestic tax base. It can involve subjecting foreign income to a specific tax treatment, such as exemption, while considering the progressive effect of foreign income on global income taxation.

How does the credit method work to avoid double taxation?

The credit method allows taxpayers to offset the taxes paid abroad against their domestic tax liability. It can be done through a full tax credit, where all foreign taxes paid are deducted, or an ordinary tax credit, where only a limited amount of foreign taxes can be credited against the domestic tax liability.

What is the sharing method in double taxation avoidance?

The sharing method involves the division of tax rights between the source country and the country of residence. This can include determining maximum rates or providing tax reductions on foreign income, ensuring fair distribution of taxing rights.