NEW
Font size
WorksheetsWorkshop on Advanced Tax Treaties
Total questions: 20
Worksheet time: 30mins
Which of the following statements is incorrect?
Unilateral double taxation relief is provided by the State of residence in spite of absence of mutual agreement between two states
In credit method, the State of residence allows the taxpayer the credit of the tax charged on the income earned in the State of source
In exemption method, a particular income is taxed only in one of the two states
None of the above
A person is entitled to apply tax treaties and to benefit from treaty provisions if some conditions are met. Which of the following is NOT a requirement?
The person must be a resident of one of the contracting states
The taxes must be covered by the treaty
The person must be a citizen of one of the contracting states
The treaty provisions must have come into effect
Which of the following is NOT normally stated by states to be an objective of tax treaties?
Tax treaties are intended to promote cross border trade and investments
Tax treaties are intended to eliminate economic double taxation
Tax treaties are intended to eliminate juridical double taxation
Tax treaties are intended to prevent fiscal evasion
Which of the following statement is true about the OECD Model?
Changes to the OECD Model are automatically incorporated into actual concluded treaties
The OECD Model provisions often provide less taxing rights to the source states compared with the UN Model
The OECD Model is of no relevance to developing countries
The OECD Model is the official model that must be used by OECD countries.
Which of the following statements is correct if the case occurs in Indonesia?
Tax treaty can be overriden by amending domestic tax
Tax treaty cannot be overriden by amending domestic tax
Tax treaty can be changed by a party without any agreement from the other party
A country may choose not to implement tax treaty should there is any conflict with domestic tax law
Which of the following is NOT a treaty abuse practice?
A transaction without economic substance
A transaction where its economic substance differ from its legal form
A transaction where the recipient of the income is the beneficial owner
A transactions without economic substance or its economic substance differ from its legal form
What change was effected in the OECD Model Tax Convention with regards to the treatment of leasing of industrial, commercial, and scientific equipment in 1992?
Income from leasing of ICS equipment covered by Article 21 that covers other income
The definition of royalty in Article 12(2) OECD MTC was changed and the reference to the use or right to use ICS equipment was deleted
The definition of royalty in Article 12(2) OECD MTC was not changed, however, the reference to the use or the right to use ICS equipment was deleted
The definition of royalty in Article 12(2) OECD MTC changed, however, the reference to the use or the right to use ICS equipment was not deleted
Which State may impose a withholding tax on interest which is paid by a company resident in State S to a bank in State R and which relates to the operations of a permanent establishment (PE) of the payer in State PE?
Only State S may levy an interest withholding tax
Only State PE may levy an interest withholding tax
State S and State PE may both levy withholding tax on the interest
State R has an exclusive taxing right. No withholding tax may be levied in State S and State PE
Which of the following statements is correct?
The beneficial ownership (BO) requirement of Art. 10, 11 and 12 OECD/UN Model Convention can be used to combat all forms of treaty shopping
The BO requirement of Art. 10, 11 and 12 OECD/UN Model Convention is fulfilled when the recipient unconstrained by an contractual or legal obligation to pass on the payment to another person
Although the BO requirement is mentioned explicitly only in Art. 10, 11 and 12 OECD/UN Model Convention, the BO test can also be used for other tax treaty articles
When the articles on dividends, interest and royalties in an older bilateral tax treaty do not explicitly mention BO, the BO test cannot be applied.
The 2015 Final Report of BEPS Action 3 – Designing Effective Controlled Foreign Companies Rules, although non exhaustive, recommend countries to adopt two approaches to determine CFC income.
Which of the following are the correct approaches?
Functional analysis and factual analysis
Categorical analysis and substance analysis
Substance analysis and factual analysis
Categorical analysis and functional analysis
The concept of “resident of a Contracting State” has various functions and is of importance in these cases, EXCEPT:
In solving cases where double taxation arises in consequence of double residence
In determining a tax treaty’s personal scope of application
In solving cases where double taxation arises as a consequence of taxation in the State of residence and in the State of source or situs
In determining a tax treaty’s material scope of application
Please take a look at the following cases. Assume that all treaties involved contain a Principal Purpose Test as proposed by the Multilateral Instrument. In which cases will the treaty in question be applicable?
A company decides to build a plant in a country to take advantage of lower manufacturing costs. It considers locations in different countries with similar economic and political environments. Finally, it decides for the country with the best tax treaty benefits.
A resident of State T transfers its rights to dividends in the shares of SCo (resident in a country with which T does not have a tax treaty) to RCo, a bank resident in a country that has a treaty with State S.
RCo historically hold 24 percent of the shares of SCo. After States R and S enter into a tax treaty, RCo increases its ownership in SCo to 25 percent to take advantage of treaty benefits available to 25 percent shareholders.
B and C are correct
According to BEPS Action 7 (Preventing the Artificial Avoidance of Permanent Establishment Status), which of the following statement is NOT a tax avoidance strategy that used to circumvent the existing permanent establishment definition?
Commissionaire arrangement
Fragmentation of activities
Hiring-out of labour
Splitting-up contracts
Which of the following statements is true with regards to partners’ entitlement to treaty benefits when a partnership is not considered as a resident?
The partners should be entitled to the treaty benefits to the extent that they are liable to tax on their share of the partnership income in their State of residence
The partners should be entitled to the treaty benefits without taking into account whether they are liable to tax on their share of the partnership income in their State of residence
The partners should not be entitled to the treaty benefits
The partners should not be entitled to the treaty benefits since they are not considered as residents
According to Programme of Work to Develop a Consensus Solution to the Tax Challenges Arising from the Digitalisation of the Economy modified residual profit split method would allocate to market jurisdictions a portion of an MNE group’s non-routine profit that reflects the value created in markets that is not recognised under the existing profit allocation rules. It involves these following steps, EXCEPT:
Determine total profit to be split
Remove routine profit, using either current transfer pricing rules or simplified conventions
Determine the portion of the routine profit that is within the scope of the new taxing right, using either current transfer pricing rules or simplified conventions
Allocate non-routine profit to the relevant market jurisdictions, using an allocation key
The “unified approach” is developed by the OECD to address the tax challenges arising from the digitalisation of the economy based on the commonalities between three proposals under Pillar One. Which of the following is NOT the proposal?
Profit allocation
User participation
Marketing intangibles
Significant economic presence
According to BEPS Action 6 (Prevention of Tax Treaty Abuse), which of the following is NOT the approach to address treaty shopping?
Include in a tax treaty a specific anti-abuse rule, the limitation-on-benefits rule, that limits the availability of treaty benefits to entities that meet certain conditions
Include in a tax treaty a General Anti-Avoidance Rule
Include in a tax treaty a more general anti-abuse rule, the principal purpose test
Include in a tax treaty a statement that the States that enter into a tax treaty intend to avoid non-taxation or reduced taxation through treaty shopping arrangements
Which of the following statements is true?
The Effective Tax Rate is always higher than the Natural Tax Rate
The Natural Tax Rate (NTR) is always higher than the average Statutory Tax Rate in the countries a multinational Company is having its operations
The Natural Tax Rate (NTR) of multinational companies can be used to compare how efficient they are in managing their tax affairs
The effectiveness of a tax planning activities conducted by a multinational company can be measured by looking at the Effective Tax Rate (ETR)
Which of the following statement is NOT true with regards to conflict of qualification and a conflict in the interpretation of a tax treaty provision?
An example of conflict of qualification is a conflict of qualification of entities; where entities are treated differently for tax purposes in two states
Conflict in the interpretation of a tax treaty provision occurs if the residence state and source state apply different articles in the tax treaty due to different interpretation of a tax treaty provisions
Despite undermining tax certainty, both conflict of qualification of entities and qualification of income cannot lead to double non-taxation
Conflict of qualification occurs if the residence state and source state apply different articles in the tax treaty due to differences in their domestic law
What is the tax treatment of indirect transfer of asset where a resident of a Contracting State sells her shares in a company and these shares derived more than 50% of their value from immovable properties situated in the other Contracting State (assume: the tax treaty in question follows the latest OECD or UN Model?
The State of residence has the exclusive right to tax capital gains derived from the sale of shares
The State of source has the sole taxing right to tax capital gains derived from the transfer
The capital gains derived from the alienation shares may be taxed in the State of source
The State of residence may tax the capital gains so long as the State of residence is willing to provide tax credit for tax paid in the State of source
