International Taxation


International taxation refers to the comparative analysis of international tax treaties and implication / livability of domestic tax laws on overseas bodies / foreigners, i.e. study of the interaction of different countries' tax laws, as they affect individuals and companies with income and assets in more than one country.


With globalization and expanded technology access, the movement of capital has gone free and the Trans National Corporations (TNCs) have experienced a colossal rise. Consequently, questions such as Taxability Criteria for various income generated in more than one state, taxation of Joint venture company / wholly owned subsidiary of a Foreign Company or its Branch Office / Liaison Office / project Office; Double Taxation; Withholding Tax, Transfer Pricing issues, Fees for technical service / know-how, taxation on repatriation of Foreign Direct Investment/dividend income/capital gains gereated therefrom, taxation of not for profit entites (NGO) direct tax rates, etc. have assumed great significance and have warranted a great deal of attention.


Every State has the sovereign right to impose tax, whether where the income is generated or where the taxpayer resides. In tax parlance, former is called as the ‘source country’ while latter as the ‘residence country’.


Ultimately, the allocation of income is determined by the Double Taxation Avoidance Agreement (DTAA) / tax treaties between the Contracting States. Such DTAA are entered to avoid hindrances to cross border investments, International trade, commerce and services. The allocation, however, is based on the principles of source jurisdiction and residence jurisdiction and distinction between passive income and active income.


India has signed Double Taxation Avoidance Agreement with more than70 countries with a view to give benefits to the Indian individuals and companies operating in / with treating countries and also to encourage Foreign Equity and Trade participation from such countries.


So far as the Indirect Taxation is concerned, on Customs Duty, India has adopted Harmonised Classification (HSN) and GATT based valuation system. Further, India also has WTO complaint Anti-dumping Duty / Safeguard Duty policyThe other Indirect Taxes in India include Excise Duty, Service Tax and Value Added Tax (VAT)

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