International Taxation Flashcards
True or False: If a Corporation is resident in Country A but also does business in Country B, source country taxation refers to how the Corporation is taxed in Country B.
True.
True or False: If a country taxes all of an individual’s income wherever earned, that country’s tax system is referred to as a territorial tax system.
False. A country that taxes all of an individual’s income wherever earned is a worldwide tax system, not a territorial system.
True or False: Since more than one country may decide to tax the same income, double taxation can arise in international taxation.
True.
True or False: If a US citizen is resident outside of the US, the US still retains it right to tax the US citizen on their worldwide income.
True.
True or False: There is only one model tax treaty (i.e., the OECD model tax treaty).
False. There are several model tax treaties, including the OECD, United Nations, and US model treaties.
True or False: Tax treaties address many issues, including (i) which country has the right to tax certain income, (ii) how to resolve differences of opinion, (iii) when taxpayer information can be exchanged, and (iv) when withholding taxes on payments of certain income may be reduced.
True.
True or False: Treaty shopping refers to the affirmative use of a treaty by one party to take advantage of a favorable treaty provision. For example, assume that if a Corporation in Country A paid interest directly to an affiliate in Country C, such interest would be subject to a 30% withholding tax. However, if the Corporation first paid the interest to an affiliate in Country B that in turn paid the interest to an affiliate in Country C, the Corporation may be able to avoid the 30% withholding tax assuming that anti-treaty shopping provisions did not apply.
True.
True or False: If a US tax treaty prevents your foreign client from being subject to federal income tax, it does not necessarily mean your client escapes state income taxation.
True.
Your client is a non-US corporation that is thinking of expanding into the US market. They have come to you asking for very general advice on whether they will be subject to US income tax. You should determine whether your client is eligible for the benefit of a US tax treaty. If so, a key question will be whether your client has a permanent establishment (PE) in the US.
True or False?
True.
Your client is a non-US corporation that is thinking of expanding into the US market. They have come to you asking for very general advice on whether they will be subject to US income tax. Even if your client does not have a PE and is not engaged in a trade or business, certain passive income earned by your client from the US could be subject to a 30% withholding tax.
True or False?
True.
Your client is a non-US corporation that is thinking of expanding into the US market. They have come to you asking for very general advice on whether they will be subject to US income tax. If a US tax treaty does not apply, a key question is whether your client is engaged in a US trade or business.
True or False?
True.
True or False: If a US MNC does business overseas through export, a branch, or a partnership, the income from that activity will be immediately taxed in the US.
True.
True or False: If a US MNC owns 100% of a foreign subsidiary, the passive income of that foreign subsidiary is generally not taxed in the US until it is repatriated to the US.
False. Passive income of a foreign subsidiary is generally not deferred. Rather, it is taxed immediately to the US shareholder.
True or False: US MNCs have been criticized for shifting income from high-tax to low-tax jurisdictions.
True.
True or False: If the foreign subsidiary of a US MNC makes investments in US property, the US MNC may have Subpart F income.
True.
