International Taxation

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“International taxation” refers to interplay of tax laws of involved countries in respect of same cross border transactions and their understanding of taxing such transactions. In pursuit of becoming global both outbound and inbound investments are taking off at a fast pace. Non-residents becomes more important when business expand into different jurisdictions due to the conflict between the source rule and residence rule. With a view to provide a detailed statutory framework that can lead to computation of reasonable, fair and equitable profits and tax in respective countries, governments usually limit the scope of their income taxation in some manner territorially or provide for offsets to taxation relating to extraterritorial income. The manner of limitation generally takes the form of a territorial, residency, or exclusionary system. These variations create the potential for double taxation. Generally, where worldwide income is taxed, reductions of tax or foreign credits are provided for taxes paid to other jurisdictions. However, with any system of taxation, it is possible to shift or re-characterize income in a manner that reduces taxation by creating different means including creation of entities in tax heavens. Through Double Taxation Avoidance Agreements (DTAA) or commonly known as Tax Treaties, governments of different jurisdictions often attempt to determine who should be entitled to tax what. For the purpose of widening the tax base and to reduce erosion of profits, OECD has also come up with an action plan as Base Erosion and Profit Shifting (BEPS) which is being revised from time to time.

In respect of income, which is earned by a tax resident of a country, from business operations, rendering of services, employment, capital gain, dividend, interest or any other income, in other country, both the country where the income is arises, as well as the country where the person earning the income is a tax resident, seek to levy and recover tax. The tax advisors worldwide interpret rules of international taxation in a manner that, ensure that such income is taxed only in one of the countries or in case it is taxed in both the countries, then the overall tax burden should not be more than, the higher of the tax rate, applicable in either of the countries.

How Can MNRS Help?

MNRS is well poised to serve as an efficient and effective source for providing international tax advice and solutions. Being a specialist and having experience of more than two decades, we are well equipped to provide following services:

  • Advisory on cross-border structuring.
  • Tax planning in order to minimise tax incidence on income subject to tax in different jurisdictions.
  • Advising on inbound and outbound investments.
  • Advising on taxability of foreign companies and expatriates in India.
  • Drafting of various agreements including shareholders agreement etc. which are important and has to preserved while entering into international transactions.
  • Vetting of Contracts, Collaboration Agreements or other similar agreements entered into between parties of different tax jurisdictions.
  • Advising on BEPS operations.
  • Certification work including the issuance of various certificates including applicable Withholding Tax.
  • Representation before various authorities to resolve disputes and gain tax certainty.