Chapter 3 - International taxation

Question 1

When is a company deemed to be resident for tax purposes?

Answer 1

Place of incorporation
Place of control/central management

Question 2

What are the features of operating as a subsidiary?

Answer 2

Overseas subsidiary is a separate entity for tax purposes
Loss relief is not available for the group because subsidiary will be paying tax under a different tax regime
Overseas subsidiary cannot claim the same tax depreciation as the parent on any assets
Assets transferred from the parent may also result in capital gains tax

Question 3

What are features of operating as a branch?

Answer 3

Branch is treated as an extension of the UK activity and all profits from it subject to UK taxation
Loss relief is available for the group
Branch can claim tax depreciation on all assets
Assets can be transferred between the branch and holding company at no gain/no loss.

Question 4

When does transfer pricing apply to group situations?

Answer 4

Goods are sold inter-company
Loans take place at favourable rates