BUEC342 Lecture Notes - Lecture 11: Legal Personality, Withholding Tax, Tax Treaty
11 Jan 2017
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Topic 11 international taxation: source, all countries tax income earned within their terriroty regardless of where earner resides, residence, countries tax residents based on their worldwide income, nationality, the u. s and eritrea tax citizens based on worldwide income. Overlapping tax jurisdictions creates possibility of double taxation. Tax on foreign business depends on type of legal entity: branch: not separate from parent, subsidiary: separate legal entity in foreign country. Taxes are applied to dividends: rules for taxing dividends depend on degree of ownership, type of income, country where income originates. Your worldwide income: yw = yh + yf. Your worldwide tax payments: tw = th + tf. Some/all foreign income is excluded from tax at home. Canada exempts active business income from treaty countries. Let (cid:271)e the share that is excluded. In this case, home tax bill is: foreign tax credits. Home country allows deduction based on tax paid abroad: Canada allows tax credits for other foreign income (passive/non-treaty).
