‘Aspects of International Taxation – A study’ by ICAI (Revised 2016)

ICAI Releases Revised Edition 2016 of ‘Aspects of International Taxation – A study’

The ICAI has released revised edition 2016 of ‘Aspects of International Taxation – A study’ which overs all aspects of International Taxation including taxation of non-residents, DTAAs, Transfer Pricing, advance rulings, taxation of e-commerce, Foreign tax credit, BEPS etc. It’s a detailed guide on International Taxation containing 832 pages.

International Taxation has always been a complex subject both for students and practitioners due to its dynamic and ever changing nature. Further, due to increase in cross border transactions, mergers and acquisitions, e-commerce, capital mobility and so on, the international taxation laws have become more and more complex. This ever increasing complexity in taxation laws of the global village has been a matter of consultations, dialogues, debate, discussions at various forums. The resultant of the same is identification of the concept of Base Erosion and profit shifting (BEPS) and the action points to resolve the issues.

Every practising chartered accountant understands that International Taxation is an upcoming area of practice owing to global developments in respect of BEPS action plans. Since the CA professionals are competent and well prepared to take up the challenges involved in working in the borderless world, ICAI too is geared up to support them in respect of the required knowledge updation. To help it’s members to build the capacities in the area of international taxation, the publication “Aspects of International Taxation- A Study” has been revised by the Committee on International Taxation. This publication broadly covers all aspects of International Taxation, including taxation of non-residents, DTAAs, Transfer Pricing, advance rulings, taxation of e-commerce, Foreign tax credit, BEPS etc. Like the earlier version, this revised version too would be of immense use to ICAI members.

 ICAI’s ‘Aspects of International Taxation – A study’ (Revised Edition 2016)

Index of Contents

1. Economic analysis of international taxation

1.1 A Glimpse of International Trade

1.2 Avoidance of double taxation – History and economic Justification history and economic justification

1.3 What is a treaty?

1.4 How does a treaty become law?

1.5 Source rule v. Residence rule of taxation

2. Broad features of the Income-tax Act, 1961

2.1 Charge of tax and persons

2.2 Scope of total income

2.3 Source

2.4 Concept of ‘deemed accrual’- section

2.5 Business connection

2.6 Residential status and control and management

2.6.1 Individuals

2.6.2 Firms, AOPs and HUFs

2.6.3 Company

2.7 Jurisdictional test in India

2.8 Heads of income

3. Taxation of Non-residents

3.1 Foreign income and foreign tax payers – Categories of income

3.1.1 Royalties and FTS

3.1.2 Shipping income

3.1.3 Income from exploration of minerals

3.1.4 Income from operation of aircrafts

3.1.5 Income from turnkey power projects

3.1.6 Dividend and interest

3.1.7 Income from Bonds or Global Depository Receipts purchased in foreign currency

3.1.8 Tax on non-resident sportsmen or sports association or entertainer

3.2 Withholding tax

3.2.1 A look into Section

3.2.2 Meaning of the term ‘chargeable to tax’

3.2.3 Rate at which tax is to be deducted

3.2.4 Tax Residency Certificate

3.2.5 Withholding at a higher rate – Section 206AA

3.2.6 Withholding tax provisions in respect of Specified payments

3.2.7 Credit for tax deducted at source

3.2.8 Consequences of Non-deduction of Tax at Source from Payments to non-resident

3.3 Treaty shopping

3.3.1 Treaty overrides the Act

3.3.2 Treaty shopping and tax havens

3.3.3 Tackling treaty shopping

3.4 Other relevant provisions for taxation non-residents/ Foreign Companies

3.4.1 MAT on Foreign Companies

3.4.2 Equalisation Levy

3.4.3 Return Filing Obligations

4 Double Taxation

4.1 Concept of double taxation

4.2 Circumstances that give rise to “Double Taxation”

4.3 The Concept of Tax Neutrality

4.3.1 Capital export neutrality

4.3.2 Capital import neutrality

4.3.3 National neutrality

4.4 Methods of avoiding double taxation

4.4.1 Tax Treaties (Bilateral relief)

4.4.2 Unilateral Relief

5 Double Taxation Avoidance Agreements

5.1 Interpretation of tax treaties

5.2 Scope of tax treaties

5.3 Chapter I – Article 1: Persons Covered

5.4 Chapter I – Article 2: Taxes covered

5.5 Chapter II – Article 3: Definitions

5.6 Chapter II – Article 4: Residence under tax treaties

5.7 Chapter II – Article 5: Permanent Establishment

5.8 Chapter III Distributive Rules

5.9 Chapter III – Article 7: Business Profits (Attribution Rule and Force of Attraction Rule)

5.10 Chapter III – Article 9: Associated Enterprises (AE)

5.11 Chapter III – Article 10: Dividend

5.12 Chapter III – Article 11: Interest

5.13 Chapter III – Article 12: Royalties and Fees for Technical Services (FTS)

5.14 Chapter III – Article 14: Independent personnel services (IPS)

5.15 Chapter III – Article 15: Dependent personal services

5.16 Chapter III – Article 21: Other Income

5.17 Chapter V – Article 23: Elimination of double taxation

5.18 Limitation of benefits (LOB)

5.19 Chapter VI – Article 24 : Non-discrimination

5.20 Chapter VI – Article 25 : Mutual Agreement Procedure

5.21 Protocol to DTAAs

6. Transfer Pricing

6.1 Introduction

6.2 International transaction

6.3 Associated Enterprises

6.4 Specified domestic transaction

6.5 Arm’s-length price

6.6 Computation of arm’s-length price

6.7 Safe harbour rules (SHRs)

6.7.1 Safe Harbour

6.7.2 International Transactions

6.8 Advance Pricing Agreement

6.9 Documentation

6.10 Other provisions

6.11 Penalties

6.12 Controversial issues/ Recent Developments in transfer pricing

6.12.1 Introduction

6.12.2 Risk Adjustments

6.12.3 Marketing Intangible

6.12.4 Management Services/ Intra-group service charges

6.12.5 Documentation requirements

6.12.6 Application of prescribed method for computation of arm’s length price

6.12.7 Dispute Resolution Mechanism 6.12.8 Customs law v. Transfer pricing legislation

6.13 Conclusion

7. Advance Rulings – Law and Procedure

7.1 Introduction

7.2 Constitution of Authority for Advance Rulings

7.3 Purpose and advantage of the scheme of Advance Ruling

7.4 Definition of advance ruling and eligibility

7.5 Procedure in detail for making an application seeking an advance ruling

7.6 Procedure in detail to be followed by the AAR after the filing of the application by the Applicant

7.7 Opportunity of hearing & right to appoint authorized representative to appear before the Authority

7.8 Proceedings before the AAR are not open to general public

7.9 Time limit within which the AAR is required to pronounce its rulings

7.10 Withdrawal of an application

7.11 Rejection of an application

7.12 Ex-parte Ruling

7.13 Situations in which the AAR can declare a ruling pronounced by it as void

7.14 Powers of AAR

7.15 Binding force of a ruling

7.16 Binding nature of CBDT Circulars on AAR

7.17 Extension of time for completing the assessment by Assessing Officer’s in case matter is referred for advance ruling

7.18 Draft’ specimen application to be filed before AAR

8. Contentious Issues

8.1 Payment for software

8.2 E-Commerce transactions

8.3 Indirect transfer of assets

8.4 Retrospective amendment

8.5 Foreign Tax Credit

8.6 Base Erosion and Profit Shifting

9. Base Erosion Profit Shifting

9.1 Introduction

9.2 Summary of Action Points

ANNEXURES

A. Withholding tax rates for various kinds of income viz. royalty / FTS, dividend and Interest with select countries

B. Synopsis of Some Important Judgements and Advance Rulings

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