Tax Law Summary 25 pages only INCLUDING PRACTICE Questions + Answers!
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Course
Tax Law
Institution
Tilburg University (UVT)
Tax Law Summary of all the lectures in ONLY 25 pages! Included practice questions and answers from previous exams and mock exams.
Everything you need for last minute revision!
Tax Law
What is tax law and taxable income?
- Aim of the government to generate income to pay for expenses, debts and other
deficits (Why do we need tax law? Need to cover government expenses in
everyday life)
- Everyone is supposed to pay tax because you are using the facility of the
country, the public road, the lightning, you need to contribute back to the
government
- End goal of a government is always the distribution of wealth, other than
generating income. A government is justified and can levy taxes as long as it is
done so within certain reasonable limits in order to not breach any human rights
- Right to levy taxes is based on the Constitution. It allows taxes to be imposed
only on the basis of an act of parliament
- Income as the value of assets at the end of the year, minus the value of assets at
the end of the year corrected for consumption
- Netherlands, PITA defines income as the aggregate flows of income from certain
sources
- Tax income is always defined. E.g. PITA defined it as…. In every jurisdiction you
will find the definition of taxes
- In the UK it’s not defined in a relevant act but they have case law
Global and Scheduler systems
- How the jurisdiction approaches the concept of taxing people
➢ Global System (e.g. the US)
The starting point is that everything is taxed, everything you gained, from your job, from
money in the bank in principle is supposed to be taxed! But then credits and exemptions
can apply to decrease what is taxed(everything is taxed -- gross income and then you
deduct from that)
However, the amount can be deducted, e.g. if your salary is less than a certain
amount then we won’t tax you!
- The starting point for calculating the tax is gross income, which is defined
broadly, and then after deducting exceptions and credits, the final tax amount to
be paid is determined
➢ Schedular system
E.g. the UK
If a type of income is not defined in the relevant acts, then it is not taxed.
,Taxes are hard to impose, because it is up to the tax authorities to prove that someone
is eligible for tax because their assets are defined as taxable income under an Act.
Netherlands
- Open norms
- Close to the UK system, if not defined in PITA and CITA, in principal it’s not
supposed to be taxed
- It is up to the tax authorities to prove that someone is eligible for tax because
their assets are defined as taxable income under an act
Dutch Personal income Tax (PITA)
- Apply to individual person, not legal entities
- Divides taxable incomes in three categories
Box 1: Income from Work and Home
- Within this category, any income earned from work and home can be taxed. The
kind of income that it covers is:
- Business income
- Salaries
- Income from other independent performed services (e.g. I work a Deliveroo, I am
performing independent work_
- From a dwelling (think of B&B, renting your house)
- From periodical payments (e.g. someone owes you money, and they periodically
pay you back, if it’s of a certain amount, it’s taxed under box 1)
The rate of the tax changes depending on the amount, the higher the income the higher
the percentage is.
, Box 2: Income from a substantial interest
- Defined as the participation in a legal entity of 5% or more. If you have shares in
a company, 5% or more, the profit you generate from there is taxed under box 2.
- This box also covers dividends, capital gains by selling shares, if you are
involved in some kind of bonds, as long as you have 5% or more, you are taxed
under box 2!
Box 3: Income from savings and investments
Money saved in a bank or investments made are taxed under this box. The reason for
this is that they are considered to be fictional income based on some value of savings
and investments
** It’s important for you to know what type of income each box taxes! **
Corporation income tax act (CITA)
- Applies to companies, all legal entities, whether they are public or private
corporations
- Regulated by the Corporate Income Tax Act 1969 (CITA)
Classification of companies
Domestic entities can either be public or private.
The public companies can be divided into two types: Direct and indirect public
companies
- Direct companies is a part of a government body
- Indirect company is a part of a limited partnership of which a Dutch government
body holds all the shares or a foundation of which the board of directors is
appointed by a government body.
There are two types of private companies: (1) with an unlimited tax liability and those
with a (2) limited liability
Unlimited tax liability is based on art. 2,5 CITA, that holds the fiction that all assets
and liabilities form one enterprise
- Limited partnerships NV/ BV
- Cooperative societies
- Mutual insurance companies
Limited subjects must carry out an enterprise, some criteria need to be taken into
account
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