This course concerns the clash of different countries’ income tax systems that arises from international commercial transactions. An initial objective of this course is to discuss how these clashes arise and to consider the types of laws and international obligations that may have an impact. The primary method used to resolve international income tax issues is double tax treaties based on the OECD Model (although the UN and other models will be considered at various points during the course). Therefore, a primary objective of this course is to study the policy and scope of the OECD Model with reference to international commercial transactions. Within the EU, aspects of the scope and principles of international taxation (as reflected in domestic law and tax treaties concluded between Member States) are being challenged before the ECJ as contrary to the fundamental freedoms in the FEU Treaty. Another primary objective of this course is to consider the decisions of the ECJ insofar as they affect the levy of income taxes on international commercial transactions within the EU. These two reference points (the OECD Model and EU law) are compared in order to gain a deeper understanding of each body of rules.

The OECD Model does not comprehensively regulate many important issues and has not been adopted by countries on a uniform basis. So a further objective is to analyse the limitations inherent in the OECD Model, how treaties diverge from the Model in practice, how these limitations and divergence give rise to international tax planning opportunities (and potential double taxation) and whether and how EU law resolves these issues in an EU context. Gaps in the OECD Model are filled by domestic legislation. A further objective is to study the types of domestic rules that fill these gaps and how they integrate (or not) with double tax treaties and EU law. Where domestic legislation is relevant, reference will be made to UK tax legislation but discussion may cover and participants will be encouraged to elaborate on any experience they have with other countries’ income tax systems.

PART I: Introduction

1. Overview and Sources of Law: Domestic Legislation, Double Tax Treaties, EU Law (specified aspects).
2. Interpretation: Approaches to Treaty Interpretation and the Jurisprudence of the ECJ.
3. Competing Jurisdictions to Tax: Source vs. Residence.
4. Principles Governing Relief from International Double Taxation.

PART II: Source Country Taxation

1. Source Country Entitlement and Non-Discrimination vs. Tax Competition.
2. Taxation of Business Profits.
3. Taxation of Dividends, Interest and Royalties.
4. Taxation of Capital Gains and Employment.
5. Quantification, Characterisation and Reconciliation Issues: Transfer Pricing and Thin Capitalisation.

PART III: Residence Country Taxation

1. Relief from International Double Taxation: Exemption vs. Foreign Tax Credits.
2. Deferral by and Economic Double Taxation of Companies: Controlled Foreign Companies and Underlying Foreign Tax Relief.
3. Relief for Foreign Losses.

PART IV: The Limited Scope of Treaties and Basic International Tax Planning

1. Mismatches in Characterisation of Entities and Income, Quantification and Timing.
2. Triangular Problems: Base Companies, Limitation of Benefits, Dual Residence, Double Dipping Deductions and Tax Havens.

PART V: Bilateral Administrative Issues

1. Exchange of Information.
2. Mutual Agreement Procedure.