ch2jurisdictiontotax税收管辖权.ppt

(2) The other pattern is that the PE rules are used as a threshold requirement for taxation of nonresidents but explicit source rules are used for defining the extent of source taxation. The U.S. is the most prominent exemplar of the source rule approach. But most countries lack sophisticated source rules with respect to income and deductions. School of Public Finance and Taxation,SLUC * 3. Investment Income Generally, investment income derived by nonresidents, such as dividends, interest and royalties, is taxable through a withholding tax imposed by the source country. Capital gains typically are no subject to withholding tax. Q: Is withholding tax an independent tax? School of Public Finance and Taxation,SLUC * Withholding tax is income tax withheld from payee’s income and paid directly to the government by the payer, which is levied on passive investment income, such as dividend, interest, royalty. School of Public Finance and Taxation,SLUC * (1) interest and dividend the residence country of the payer (2) royalty the country where the royalties arise There is no source rule for royalties in the OECD Model Treaty because exclusive jurisdiction to tax royalty is given to the residence country. School of Public Finance and Taxation,SLUC * (3) rent derived from the use of movable propertythe country where the property is used (4)capital gains: under article 13 of the OECD Model Treaty, capital gains are sourced in the country of residence of the seller unless the gains arise from the sale of business property or immovable property. School of Public Finance and Taxation,SLUC * Most countries entering into tax treaties agree to some limitations on the withholding tax rates in order to provide for some sharing of tax revenue between the source country and the residence country. For instance, according to the tax treaties between China and many countries, the withholding tax rate is 10%. School of Public Finance and Taxation,SLUC * Some tax treaties go so far as t