You are on page 1of 13

INTRODUCTION TO THE

INTERNATIONAL TAXATION

1

IMAN SANTOSO
Partner PSS Consult – Ernst & Young Indonesia
Lecturer – University of Indonesia

AGENDA       INTRODUCTION INTERNATIONAL DOUBLE TAXATION TAX TREATY MODELS OBJECTIVES CONTENTS PROCESS 2 .

INTRODUCTION     3 GLOBALIZATION AND ITS CONSEQUENCES DTA AS A COOPERATION NETWORK BETWEEN TWO COUNTRIES IN THE AREA OF TAXATION DTA IS A BILATERAL ARRANGEMENT FOR DETERMINING TAXATION RIGHTS INCOME & NATIONAL TAX COVERED .

INTERNATIONAL DOUBLE TAXATION  YURIDICAL DOUBLE TAXATION The imposition of tax by 2 (or maybe more) tax administrators for the same subject on the similar tax object during the identical tax period.  ECONOMICAL DOUBLE TAXATION The imposition of tax by 2 (or maybe more) tax administrators for the different tax subjects on the similar tax object during the identical tax period. 4 .

both juridical and economical! .TRIGERRING FACTORS      5 Conflict of residence Dual citizenship (ius sanguinis vs ius soli) Different tax principle (domicile vs nationality principle) Source rule discrepancy Remember 3 elements of taxation that may cause international double taxation.

HOW TO AVOID? Unilateral  Double Tax Agreement (Tax Treaty): Bilateral or Multilateral  Tax Harmonization  6 .

Used as reference for OECD countries 2. Nordic Convention Model Follows OECD model with some adjustments modified in accordance with the Nordic taxation system 5. Mainly used by South Americans 7 .DTA MODELS No DTA Models Main Principles 1. US Model Used as reference for USA in dealing with other countries 4. OECD Convention Model The primary taxing rights is given to the resident country. UN Model Sharing of taxation rights between the resident and source countries 3. Andean Pact The primary taxing rights is given to the source country.

OBJECTIVES        8 TO AVOID DOUBLE TAXATION TO PREVENT TAX EVASION TO PROTECT THE TAXPAYERS TO ATTRACT FOREIGN INVESMENTS TO ENCOURAGE TRANSFER OF SKILLS. KNOWLEDGES. AND KNOW HOW TO ENHANCE ECONOMIC COOPERATION TO ASSIST TAX COLLECTION .

CONTENTS OF DTA No. Object of agreement  3. Period of application Entry into force & termination 9  Taxes covered Types of income on which the taxing rights is shared . Subject of agreement Personal scope 2. Description in DTA’s Article Contents 1. Territory Definition of tax jurisdiction where the DTA is binding 4.

Entertainer & Sportsmen 10 Article 18 : Pensions Article 19 : Government Services Article 20 : Students & Apprentices Article 21 : Teachers & Researchers Article 22 : Other Income (Income Not Expressly Mentioned) CHAPTER IV : TAXATION OF CAPITAL Article 23 : Capital CHAPTER V : METHODS FOR ELIMINATION OF DOUBLE TAXATION Article 24A : Exemption Method Article 24B : Credit Method CHAPTER VI : SPECIAL PROVISIONS Article 25 : Non-Discrimination Clause Article 26 : Mutual Agreement Procedure Article 27 : Exchange of Information Article 28 : Diplomatic Agents & Consular Officers Article 29 : Territorial Extension Article 30 : General Rule of Taxation Article 31 : Assistance In Collection CHAPTER VII : FINAL PROVISIONS Article 30 : Entry Into Force Article 31 : Termination PROTOCOL .SUMMARY OF DTA TITLE AND PREAMBLE CHAPTER I : SCOPE OF THE CONVENTION Article 1 : Personal Scope Article 2 : Taxes Covered CHAPTER II : DEFINITIONS Article 3 : General Definitions Article 4 : Resident Article 5 : Permanent establishment CHAPTER III : TAXATION OF INCOME Article 6 : Income from Immovable Property Article 7 : Business Profits Article 8 : Shipping. Inland Waterways Transport & Air Transport Article 9 : Associated Enterprises Article 10 : Dividend Article 11 : Interest Article 12 : Royalty (and Technical Services) Article 13 : Capital Gains Article 14 : Independent Personal Services Article 15 : Dependent Personal Services Article 16 : Directors’ Fees Article 17 : Artistes.

signing. planning.DTA PROCESS       Political will Common statement announced after initial meeting of the two delegations Preparation. and negotiation the draft of DTA “Negotiation rounds” Draft approval. and ratification (by issuance of Presidential Decree to the House of Representative) Exchange of instruments of ratification and determining effective date of DTA application 11 .

POST-TEST What do you know about DTA? Explain from at least 3 (three) significant aspect of it!  Summarize as to how the DTA avoids international double taxation!  12 .

ey.santoso@id.com 13 .THANK YOU Contact the following for further details: IMAN SANTOSO PSS Consult – Ernst & Young Indonesia +62 21 5289 5250 +62 811 88 4267 iman.