0 Porus Kaka Senior Advocate and President,

Transcript:0 Porus Kaka Senior Advocate and President,:
0 Porus Kaka Senior Advocate and President, International Fiscal Association January 16, 2016 Interpretation of International Tax Law and Transfer Pricing History of Tax Treaty (1/2) 1 Earliest Treaty was adopted by Prussia around the start of the Twentieth Century First Treaty was with Austria signed in 1899 In 1920 League of Nations began to play a leadership role 1928 published the first internationally important Model Tax Conventions After World War I, Germany signed a treaty with Czechoslovakia in 1921 and with Austria in 1922 The League of Nations began publication on tax treaties in 1923 The OCED becomes the Organization for Economic Cooperation and Development History of Tax Treaty (2/2) 2 OCED first draft model treaty in 1963 United Nation published a manual for the negotiations of Bilateral Tax Treaties between developed and developing countries in 1979 In 1980 United Nations published a manual for the negotiations of Bilateral Tax Treaties between developed and developing countries OCED made some amendments published in loose lease form in 1990’s UN Model Tax Convention 2001 OCED started amending the publication every 2 to 3 years New UN Model on Tax Convention 2011 International Tax 3 Determination of tax on an individual or entity, subject to laws in different jurisdictions Tax systems vary from country to country Taxation systems can be classified on the basis of Residency Territory Citizenship Issues faced in global tax scenario Double Taxation Fiscal Evasion Transfer Pricing Tax Avoidance Double non – taxation Tax competition by states Sources of International Tax Law 4 Domestic Statutes Tax Treaties and Model Commentaries Circulars Judgments & Precedents Domestic Statute Law 5 Principle sections within the Income Tax Act, 1961 in which the basic principles of international tax law are enshrined under S.5. Scope of income S.9. Income deemed to be accrued or arise in India S.90. Double Taxation Relief; power to enter into treaties S.92. Computation of income from financial transactions having regard to arm’s length price, commonly referred to as ‘Transfer Pricing.’ What is a tax treaty? 6 Contract between countries governing issues of allocation of taxing rights on the basis of residence and/or source Undertaken with a view to grant relief for Avoidance of double taxation Prevention of fiscal evasion Promotion of mutual economic relations, trade and investment. Facilitates exchange of information and mutual agreements among Contracting States Object of Tax Treaties 7 Treaties cannot levy tax but can give