International Tax Planning Research Articles

On the Borrowed Points and Danger Prevention of Cross-Border Tax Planning

International tax planning can reflect the level of an enterprise's multinational business management, but also relates to the financial cost of growth and decline, is a must for enterprise managers. International tax planning refers to the multinational taxpayers to make in advance, used to reduce the international tax obligations of multinational investment and business plans. With the global inflation, the use of reasonable means to reduce the tax burden in the international tax environment has become a practical need to promote the further development and growth of China's multinational companies, but at present, China's multinational enterprises are still in the initial stage of multinational operations, many managers for the discussion of the international tax planning only stays on the surface. Therefore, this paper analyzes the possibility of international tax planning, tax jurisdiction, policy loopholes, tax avoidance risks and hazard prevention from the perspective of Apple, for example, and analyzes Apple's Irish-Dutch Sandwich tax avoidance structure, which provides certain reference significance to our country's multinational tax planning.

International Tax Planning: Taxation of Professional Athletes—Stickhandling Through the Maze

Recent changes in Canadian tax laws have important implications for many professional athletes relocating to Canada from the United States or other countries. At the federal level, proposed changes to the alternative minimum tax, foreign-income reporting requirements, and a broad range of other taxes have introduced complexity and potential traps for the unwary. At the provincial level, the five provinces with a National Hockey League team have raised their top marginal tax rates over the last 10 years. Because the financial stakes can be high, understanding the tax laws and the tax-planning opportunities for professional athletes has become more important than ever. This article addresses some key income tax issues and planning opportunities for professional athletes earning income from the provision of cross-border services in Canada and the United States.

An Inquiry into the Use and Reform of the New Zealand Foreign Trust Regime

This article describes how and to what extent New Zealand foreign trusts are used in international tax planning. It highlights the substantive tax policy concerns that remain outstanding despite the recent reform, and evaluates the political backdrop to reform process, concluding that greater transparency in tax policymaking is desirable.

International Tax Planning and Policies of Developing Countries (Base Erosion and Profit Shifting Agreement)

أدى تعدد وتنوع التبادلات الدولية التجارية والاستثمارية في السنوات الأخيرة إلى ظهور اختلاف الأساليب والمخططات الدولية للتهرب الضريبي التي قد تؤدي إلى تآكل الإيرادات الضريبية في البلدان الصناعية والدول النامية كما ذهبت بعض البلدان الى ان تقلل من الأعباء الضريبية على رأس المال المتنقل وبالتالي تسهل في جذب الاستثمارات. لقد أدت ظاهرة العولمة إلى التقارب بين الدول، ومن الواضح أنها زادت من الحراك الدولي للشركات متعددة الجنسيات وازدادت انشطتها . فانخفاض التكاليف قد تجعل الاستثمار التجاري الحقيقي أكثر قدرة على الحركة عبر البلدان والابتكار المالي والتحرير المالي قد تسهل تجنب الضرائب الدولية من قبل شركات أقل حرية. وتزداد الآثار المترتبة على الحراك المالي أكثر عندما تقوم الشركات بتحويل الدخل إلى الملاذات الضريبية وغيرها من البلدان منخفضة الضرائب من خلال المعاملات المالية. التخطيط الضريبي الدولي هو أداة استراتيجية للحكومات وادارتها المالية، وان تصميم قواعد الضرائب الدولية هو السماح للشركات متعددة الجنسيات بالوصول إلى عملائها في الخارج والتنافس مع الشركات الأجنبية في الأسواق الدولية. وكل هذا يدفع الى خلق الثقة أو اليقين الضريبي لدى الشركات المتعددة الجنسيات عندما يوفرون اليقين الضريبي للشركات ويزيل الازدواج الضريبي من خلال معاهدات ضريبية واضحة وقواعد محدودة تتطلب فرض ضرائب على الأرباح الأجنبية في بلدان المنشأ الامر الذي يسهم في خلق بيئة جاذبة للاستثمارات وبالتالي لا يمكن خلق قواعد ضريبية فعالة دولية اذا لم يكن هناك تخطيط ضريبي دولي ستنعكس اثاره على جميع اقتصاديات البلدان النامية والمتقدمة وهو ما يعزز من تعبئة الايرادات.

International Tax Planning and Ownership Structure in the Czech Republic

International Tax Planning and Ownership Structure in the Czech Republic

International Tax Planning: Canada v. Alta Energy Luxembourg SARL—An Analysis Based on the Vienna Convention on the Law of Treaties

The author analyzes the Supreme Court of Canada's judgment in <i>Canada v. Alta Energy Luxembourg SARL</i> in light of the rules of the Vienna Convention on the Law of Treaties (VCLT), including general principles of law such as good faith and legal certainty pursuant to the principle of systemic integration set out in article 31(3)(c) of the VCLT. The author concludes that the findings of the majority are correct as a matter of public international law.

Legal characteristics of aggressive tax planning

The article studies the problems of legal characteristics of tax planning. It is emphasized that there is no single approach to determining the balance of private and public interests in the field of taxation. This especially concerns situations where taxpayers try to optimize tax payments in a way that does not involve a direct violation of the law, but has signs of abuse of the right, which is characteristic of an aggressive tax planning. It is argued that the solution to this problem is important, since abuse of rights by taxpayers, using the imperfections of legislation, manipulation of differences in tax regulations of different states, as well as active use of low-tax jurisdictions in business schemes leads to huge losses in the budgets of many countries. It is pointed out that aggressive tax planning is not direct violation of the law, otherwise such actions would be qualified as tax offense. The positions of scientists regarding the definition of such a category as “aggressive tax planning” are presented in the article, as well as the author's position on this issue is highlighted. It is noted that the widest toolkit of tax optimization can be used in the implementation of international tax planning. In the past, one of the main, most common and effective methods of aggressive tax planning was the use of low-tax jurisdictions. However, the influence of this factor has been efficiently reduced by modern trends to counteract this phenomenon, in particular, the widespread introduction of anti-BEPS measures and automatic exchange of tax information. Other common tools of aggressive tax planning are listed, including transfer pricing. The negative consequences of aggressive tax planning for the state are described, related to the reduction of tax revenues to the budget, as well as the creation of an anti-competitive environment due to receiving unfair tax advantages. The main methods of combating aggressive tax planning both at the international and domestic level are disclosed. The main signs of aggressive tax planning are identified and the conclusion is drawn that in each specific case, the behavior of the taxpayer, which has signs of aggressive tax planning, should be evaluated for the presence of abuse of the law, which will allow the application of appropriate legal consequences for the purpose of protecting state and public interests.

Proposed novations in global taxation

Subject. Tax competition between jurisdictions, contributing to profit removal of multinational enterprises (MNEs) from taxation is a serious problem in the global economy. To solve it, an international agreement was concluded in 2021 with a wide range of participating countries, which contains important novations for the entire system of global taxation. However, its implementation is an open question. Objectives. The aim is to provide a unique study of the content of the proposed novations in global taxation, and possibilities and prospects for their implementation in national legislation. Methods. The study employs general scientific methods, like abstraction, induction, deduction, synthesis, comparative analysis. Results. The paper describes the content of two components of the said agreement, gives a forecast of possible consequences of their application for MNEs’ profit taxation, substantiates the position that in the modern terms of world economy, the implementation of these novations will be postponed. Conclusions. The novations contained in the international agreement of 2021 specify the application of the territorial principle of taxation for MNEs’ income (pillar 1) and introduce the minimum allowable level of tax on their corporate profits (pillar 2). The implementation of the novations will influence the overall level of corporate taxation in separate countries, especially in low-tax jurisdictions, limit the possibilities of international corporate tax planning and removal of profits from taxation, and modify the practice of granting tax preferences to businesses. However, under current economic and political turbulence in the world economy, one should not expect imminent implementation of the novations into national legislation.

International Tax Planning: Tactics, Size, and Drivers

International Tax Planning: Tactics, Size, and Drivers

On the dynamics between local and international tax planning in multinational corporations

The international dimension of multinational corporations creates opportunities for pursuing both global as well as local (i.e., unilateral subsidiary country) tax planning strategies. To date, however, researchers have limited insights into both the dynamics and relative importance of one versus another strategy for multinationals. We propose and test a group-level ETR-based measure of profit shifting and validate it by showing it correctly identifies profit shifting reductions when shifting costs increase. We confirm that multinationals can keep group ETRs stable after the introduction of tighter tax compliance and documentation rules and suggest they can do so by relying relatively more on local tax planning. In line with the substitution argument, we document that especially groups identified as ex-ante income shifters as well as those with greater target ETR pressure are responsible for the results.

Impact of sanctions on international tax planning and how to use Armenian companies in tax planning

Impact of sanctions on international tax planning and how to use Armenian companies in tax planning

INTERNATIONAL TAX PLANNING FOCUSING ON THE REDUCTION OF THE TAX BURDEN

International tax tax planning is extremely important for companies, as it makes it possible to reduce the tax burden when done well. This article, through a literature review, aimed to discuss the main aspects of international tax planning and its influence on reducing tax burdens. In short, Tax planning is a tool used within the scope of the law, which can be applied through loopholes or other legal systems, in order to reduce the taxpayer’s tax burden as much as possible. It was also noted that tax reduction occurs when the use of international differences in the tax burden results in a reduction of the tax burden in relation to the tax burden in the country of residence. This is achieved by taking advantage of interstate tax differences, differences in international tax systems, and incomplete interstate coordination.

International Tax Planning: Excluded Property Revisited

Many tax consequences under the foreign affiliate rules depend on whether a property owned by a foreign affiliate is excluded property; however, the proper application of the excluded property definition can be challenging for taxpayers in practice. More importantly, the application of the excluded property rules can often lead to unfortunate results that are not in line with the policy intent behind those rules—particularly when the relevant property is shares of another foreign affiliate. This article first focuses on challenges that can arise when applying the excluded property definition in practice, especially in the context of tiered ownership structures involving multiple foreign affiliates. Proposed changes to the excluded property rules that address these challenges and achieve results more consistent with the policy objectives of the rules are then considered.

Taxation Rules for Alternative Investment Companies

This article deals with tax rules for alternative investment companies. The main aim of the contribution is approximation of the specifics of income taxation and also the answer to the question whether companies of this type can be used more widely outside Poland for the purposes of international tax planning.

International Tax Planning: China's New Regime for Taxing Expatriate Income: Tightening the Screws or Vintage Wine in a New Bottle?

Expatriates have been fundamental to China's economic growth, contributing to the country's socioeconomic development and modernization. The second-largest group of expatriates in China are North Americans. Personal income taxation concessions for expatriate workers have been an important instrument to attract and retain skilled foreign labour since China opened its doors to foreign investment and an income tax was adopted four decades ago. A recent overhaul of the law on individual income tax introduced a number of changes to expatriate income taxation, including the winding back of some preferential concessions previously offered only to expatriates. A literal reading of these changes suggests that the new regime has led to harsher tax treatment of expatriates and increased their tax liability. This article considers whether this view holds up, by closely analyzing the new system's major features relating to individual income tax as they affect expatriates. The authors challenge the literal reading of the law and argue that the recent changes have not fundamentally altered the underlying policy on expatriate income taxation. Further, an economically stronger China has not observed any diminishment of the role of personal income taxation as an instrument of government policy, despite the recent changes. A generous interpretation of the legal terms and rules, and of the application of concessions under the amended system, may encourage more lenient treatment of Canadians and other expatriates working and living in China.

Low-Tax Jurisdictions in International Tax Planning

Until recently low-tax jurisdictions have played an important role in the formulation of tax planning schemes by multinational enterprises. However with the onset of global trends towards deoffshorization, existing methods of tax optimization have seen significant changes. As there is currently no one single approach when creating the definition of, or defining a “low-tax jurisdiction”, in this article the definition and the main features of lowtax jurisdictions are proposed and the main stages in the formation and development of low-tax jurisdictions are detailed. On the basis of research carried out on the national legislation of low-tax jurisdictions, the main company types which meet the special legal formulae that can be incorporated into low-tax jurisdictions have been analyzed. In order to highlight similar characteristics and to simplify the analysis of the national legislation of low-tax jurisdictions so that general recommendations covering the nature of measures which can be used to counter illegal tax avoidance, tax evasion, money laundering and other illegal financial machinations, different classifications of low-tax jurisdictions have been analyzed. The unfair and perhaps even illegal use of low-tax jurisdictions often leads to violations of core tax principles which may have an impact on the overall size of budget revenues available to high-tax countries. Therefore, deoffshorization measures are being proposed at the international level. Currently the main global trend has been to increase the transparency of tax information and of financial transactions which are carried out by international exchanges. This is supported by the strengthening and expansion of cooperation between tax authorities which serves to counter the abuse of provisions in international tax treaties on the avoidance of double taxation.

International Tax Planning: The Preacquisition Surplus Election: More Than Meets the Eye?

Regulation 5901(2)(b) permits a corporation resident in Canada (CRIC) to make an election in respect of a dividend paid by a foreign affiliate of the CRIC such that the dividend will be treated as a reduction to the adjusted cost base of the foreign affiliate shares on which it is paid, rather than as a distribution from the foreign affiliate's surplus pools. Making this "preacquisition surplus election" is often perceived as a straightforward, and administratively simple, way for the CRIC to ensure that the dividend does not result in the unwanted, and potentially adverse, distribution of the foreign affiliate's surplus pools. However, as this article points out, it is important that a CRIC undertake a detailed analysis before deciding to make the election, in order to avoid potential exposure to unintended consequences. This article provides an overview of the legislative history of the election and its underlying policy rationale, and describes the limitations of and restrictions on its use. The authors present some conceptual guidelines (along with examples of their application) for identifying certain circumstances in which the making of the election may be particularly favourable or unfavourable. They also compare and contrast this election with the "qualifying return of capital" (QROC) election under subsection 90(3), which may be available in some circumstances as an alternative mechanism for achieving a similar result.

Sovereign wealth fund investments in private funds: selected tax planning considerations in the US, EU and UK

Purpose To discuss US, EU and UK tax-related issues that sovereign wealth funds should consider when investing in private funds. Design/methodology/approach Discusses various tax-related structuring, operational, risk-allocation, and economic matters that private funds, sovereign wealth funds and other non-US institutional investors should consider a series when evaluating potential private fund investments. Findings Despite the market disruption caused by the COVID-19 pandemic, sovereign wealth funds continued to make significant capital commitments to private funds in 2020 and, as the world emerges from the pandemic, are expected to make similar or greater commitments in 2021 and beyond. Originality/value Practical guidance from lawyers with wide experience in international tax planning and investment fund structuring.

International Tax Planning: Subsection 15(2) and Partnerships in the Foreign Affiliate Context: Interpretive Arguments in the Absence of Legislative Amendments

The purpose of subsection 15(2) is to include in a shareholder's income amounts received from a corporation, either by the shareholder directly or by certain non-arm's-length persons and partnerships, in the guise of loans or other indebtedness. Specific exceptions exist for amounts owing by certain foreign affiliates, as well as for indebtedness between non-resident persons. Unfortunately, the broad language used in the relevant provisions can lead to anomalous results if those provisions are read and applied literally, without appropriate consideration being given to context and purpose. In particular, the manner in which partnerships have been incorporated into the shareholder loan rule can bring into question the potential application of subsection 15(2) in the foreign affiliate context. This article explores three examples of situations involving partnerships and foreign affiliates where a literal interpretation of the shareholder loan rule could lead to anomalous results. The article then outlines why it is reasonable to conclude, when considering the text, context, and purpose of subsection 15(2) and its related provisions, along with their legislative history, that the shareholder loan rule does not apply in the circumstances described in the examples.

The Use of International Tax Planning in Subsidiaries from the Financial and ICT Sectors in the Czech Republic

Tax avoidance is an important element of management in the global economy. Managers use tax havens for reducing a company’s effective tax rate. The most common practices in international tax planning can be divided into three groups: loans and their related interest, royalties, and transfer pricing. The aim of this article is to find the determinants of the tax burden faced by foreign-owned subsidiaries. Therefore, a model was created for the tax burden, focusing on the special position of subsidiaries within international tax planning. For this purpose, taxes/outcomes was established as a new dependent variable. The panel data used include Czech companies that are owned by parent companies located in other EU countries. The model distinguishes EU tax havens from regular member states; sector dummy variables are also included. The regression model that was created did not confirm the assumed dependencies. Rather, it indicated other important determinants: profitability, the share of intangible assets, size, and the dummy variable for the ICT sector. Based on the regression results, the independent variables connected with known tax planning schemes have relatively low importance. The significance of these results can be seen in the subsequent conclusions. First of all, there is no difference between the subsidiaries’ tax burdens based on the parent company’s location. Corporations use international tax planning whether or not they are owned from a tax haven. The second significant conclusion indicates the importance of certain sectors and their attributes concerning the tax burden. Companies from the ICT sector are linked to a lower tax burden. On the other hand, the dependencies within the financial sector are not statistically significant. From the perspective of further research, it would be constructive to incorporate the subsidiary’s position within the group.