Exam questions

Question 1

Explain why double taxation arises. In relation to the taxable event of the tax, what reasons can motivate double taxation?

Answer 1

Double taxation occur more after the increase in international transactions due to the interaction between different tax systems. It also occurs when taxes are paid on both corporate and personal level.

Taxes occur when we have a taxable event, such as when we earn income, sell something, purchase something etc. Having income in different countries with different tax jurisdictions is an example of how double taxation can occur.

1. The subjective element of a taxable event is the same in two different states.
2. The objective element of a taxable event is subsumed into the broader objective element of another taxable event.
3. When the subjective element of the taxable event is different. This is the case when one State uses nationality to determine taxability to those taxes, while another uses the criterion of residence.
4. Double taxation also occurs when two States apply territoriality criteria to tax specific incomes and, in addition, use different connection points to ascribe the income to their territories
5. Double taxation may also occur because of discrepancies in the definition of the taxable amount.

Question 2

Detail the two criteria for avoiding double taxation that can be used by different countries

Answer 2

The personalist criterion, under which taxes are required of persons linked to a state by nationality or residence. States require their subjects or persons residing there to be taxes levied on their income or personal wealth.

The territorial criterion, by virtue of which taxes are required from those persons who obtain income, own property or are holders of rights of economic content that they can exercise in the territory of the State.

Question 3

What means BEPS, why this appears and which is its target.

Answer 3

BEPS is created by OECD and means Base Erosion and Profit Shifting.

It appears because there is a lack of mechanisms between the different national tax systems. This is something the multinational enterprises can use in their advantage to avoid taxes by shifting the profits between different locations to reduce their tax payments as much as possible. This results in little income from companies.

BEPS is created to reduce this problem, and make sure companies don’t exploit the national differences in taxation to create a fair and transparent tax policy.

Question 4

In the event that you produce an international double taxation situation for the income received from a subsidiary abroad, indicate whether the taxpayer will be able to deduct any amount in his declaration and, if so, what amount he could deduct.

Answer 4

Article 7p

• live in one country but travel and work all the time
• 60,100 euros exempt every year from their labor income (abroad)

Beckham law

• living abroad more than 10 years
• 2 years + 1 year of arrival
• 24% flat percentage

The Beckham law in Spain is a special tax regime that enables foreigners who move to the Spanish territory to pay a flat fee of 24% only on the incomes they obtain in Spain instead of a progressive tax on their worldwide incomes (19-45%).

OR

• total exemption
• progressive exempt
• total imputation
• partial imputation

Question 5

A natural person will be a resident if these conditions are met:

Answer 5

• more than 6 moths resident
• personal interest
• economic interest

Question 6

Explain briefly the key issues of amending VaT legislation relating to e-commerce

Answer 6

• 22 euro loophole
• common 10 000 threshold for distance sales
• IOSS and OSS