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Summary Tax - Financial management & Tax
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Summary part tax from Financial management & Tax
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FINANCIAL MANAGEMENTAND TAX –TAX PART
Financial management & Tax – 2022-2023
JORDI BALLART - SALOUA EL MOUSSAOUI - IBM - AUAS
, A. INTRODUCTION DOUBLE TAX
1. What is interna-onal taxa-on?
1. Interna*onal taxa*on refers to tax levied on the cross-border transac*on. à EXAM
(we need to have a situa*on of crossing boarders, you have this as from the moment 2 different taxa*on systems are
involved)
2. The transac*on may take place between 2 or more persons/en**es in 2 or more countries or tax jurisdic*ons.
3. Such a transac*on may involve a person in one country with property and income flows in another country.
(You will be considered to have an income from a property and so have to pay taxes on it. Even though you dont make profits on
it!)
DIRECT TAXES (Income taxes) INDIRE4CT TAXES
=permanent situa;on in which the person, company, … = not permanent, an occasional taxa;on. Only to the
is in. A permanent period like a financial book year, … occasion if you buy something, …
Corporate income tax = CIT (on wages, …) VAT (consump;on goods and services)
(the shop who sells phones for example), don’t has to
pay the VAT to the authority, its the people who buy
the phones that carry the VAT and so have to pay it)
Personal income tax = PIT (on profits) E (on gas, …)
Legal en;ty taxa;on = LET (it has its own legal en;ty that Inheritance tax (transfer of money from someone
can act on itself for example to buy a house, .. Its not a dead to someone alive)
person but an organiza;on that acts. VZW in Dutch.
EXAM: its non bcs its a non profit organiza;on
A non profit org can be a subject to a CIT when it makes
profits. If they make too much profits it will be
considered as profits, and will be taxed.
They CAN be subject for CIT, it is an excep;on, but they
CAN be.
Non residents tax = NRT (P or C) (tax on local income, for Registra;on tax (buying an old house, if you buy a new
non locals living in Belgium they have to pay taxes on house you pay VAT, not registra;on tax)
their Belgian income only, and on their other (non
Belgian) income they will also have to pay PIT. But on
their Belgian income only NRT
- We all carry VAT, but we don’t pay VAT. Unless we have a VAT iden*fica*on number, than we DO pay VAT. (a company, a
business, a lawyer, …)
- Examples of taxes: personal income tax (on the wage of an individual)
- Inheritance tax on the money a child gets from the person who died before the child gets it
- Double taxa*on: you want to avoid it and this course will teach us how. When you have houses all over the world you also
have to pay taxes from all over the world AND the Belgian tax too.
- The Belgian authority can only tax the local Belgian income
- There have to be clear rules. A lot of companies cheat (like Apple)
- In Belgium: progressive rate (eam)
Evalua*ng the tax policy choices made by states, par*cularly in the context of cross-border structures and the flow of capital,
income and persons;
Examining the interac*on among the various forces that shape interna*onal tax law – domes*c law, bilateral trea*es (trea*e
between 2 par*es or states), mul*na*onal agreements, inter-governmental organiza*ons and even case law (= how the law is
applied and interpreted) and academic wri*ng.
(every company must pay a fair share of taxes to the country in which it makes profits)
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, 2. Interna-onal taxa-on: types
EXAM QUESTION: 2 types:
1. Residence based taxa-on: residents of a country are taxed on their worldwide (local and foreign) income
- à Is he resident of this state à yes = subject to tekst regimeà further analysis
2. Source based taxa-on: only local income from a source inside the country is taxed. Usually non-residents are taxed only on
their local income.
- à If the swedish manager who came here to do a project for volvo in ghent, he is working here for 1y, his Belgian income
(local inc) will be taxed based on the sourced based tax, bcs the source of the income is Belgian. Only the Belgian income,
his other income will not be taxed of Belgian authority. Thhey ca only tax what is sourced in Belgium
- Voorbeeld pf a situa*on of double taxa*on: Belg die huis hee_ in Spain: both coun*es will want to levy taxes
- It implies a Belgium tax resident so the Belgium tx authority can levy taxes on their world wide income, so also his Spanish
income. So based ont eh resident based tax rules. Owning a house in Spain gives him a taxable income
- On the other hand, the resident is owner of a hosue in Spain so the spanish income has a source in Spain, so the spanish
auth can levy taxes on that spanish (and only the spanish) income of the house, but they can only use the non resident
source based (local) income
- So by appllying those 2 types of taxa*ons, both Spain and Belgium can levy taxes, so the resident has to pay taxes both
- We dont want this, there is a solu*on for this: double tax treaty, legal instrument between the span and Belgium
authori*es where they agree who will levy taxes (double tax conven*on)
3. Interna-onal taxa-on: concept of double taxa-on
- When a transac*on taking place in more than one country such may be subject to more than one tax authority or taxed
twice by same or different tax authori*es. Such taxa*on is called “double taxa*on”
àAvoidance is required (we must not avoid to be in a posi*on of double taxa*on, but we must avoid that we have to PAY two
*mes the taxa*on)
4. What to expect…
- The course examines interna*onal and European legal principles, instruments and mechanisms to cope with these
problems and challenges of double taxa*on, to enhance coopera*on between tax authori*es, to protect the private and
business interests and to prevent interna*onal tax disputes.
- Core to the course will be the OECD Model Conven*on, that inspired the more than 3000 Tax Trea*es around the world
, and the OECD ini*a*ves the “ Common Repor*ng Standard” (CRS) for tax transparency, and in the business world
the “Base erosion and profit shi_ing Ac*on Plan” ( BEPS) , endorsed by the G-20, that are currently been rolled out at
high speed. (exam ques*on)
- Another major part of the course will focus on the applica*on of the European fundamental principles of the common
market to tax mahers, on the limited number of tax direc*ves e.g. to neutralise (double) taxa*on that hinders
interna*onal business and its restructuring, and on the abundant case law of the European Court of Jus*ce in tax mahers
enforcing the fundamental EU principles.
- OECD = The Organiza*on for Economic Coopera*on and Development
5. What are the objec-ves
- Students should understand the phenomena of interna*onal double and mul*ple taxa*on, tax avoidance and evasion
and tax compe**on among states resul*ng from territorial tax sovereignty and the modest achievements of tax policy,
tax coopera*on among states and harmonisa*on in a globalising economy.
- Student should have access to the interna*onal legal instruments and mechanisms that govern the interna*onal tax
environment of business enterprises and private individuals and apply these in basic prac*cal situa*ons.
- Tax avoidance is legal, tax evasion is illegal bcs you are not paying your taxes that are due.
- EXAM = legal = Tax avoidance = you can avoid taxa*on, you may avoid taxa*on by avoiding the siu
- Illegal = evasion : in a situa*on where there is tax, but you avoid the situa*on where you have to pay the tax
hhps://youtu.be/-Q9Kv_Otd_0
2
, 6. What do we pay taxes for?
On the site of eurostad you can see what they use the money of taxes for
- For defence of the country, educa*on, healthcare, roads…
- For public benefit
- A lot of money to the social security
- Social contribu*ons/taxes = they hac 270.000 miljard euro this year, 20% pensions, 14-15% healthcare, 11% educaiton,
8% eco policy, 7% people that don’t work, 7% government, 5% public transport, 4% country, 3% police & social security,
2% research, 1.5% defense…. (eurostah)
7. From a Belgian perspec-ve
1. Tax
That our tax, where a human being, an individual is subjected to taxes, the income of an individual will be subjected to taxes
(devided in 4 groups: professional income (professional ac*vity), moveable income (capital moved - intrest dividend), imovable
income (immovable goods - a house, a terrain…), various income (rest category)
A financial contribu*on, which is due by an individual to a (federal) government (to the Belgian government)
- Contribu*on to the Government
- Support for facili*es of common intrest
o Such as?
3 Different Func*ons of Tax:
1. Financial Func)on
- Supply for government spending
- BE: Taxes = 94% of overall income for government
2. Economical Func)on
- Pricing: ex. VAT (value added tax)
- Consump*on: ex. Excise (=used to ifluence the consump*on of liquor/alcohol or sigarehes, so by increasing the excise,
the consump*on is decreasing)
- Investment: ex. Capital gains tax (if the governm wants people to invest, they need to make it favorable from a tax point
of view)
3. Social Func)on
- The more income you have => the more tax you should pay
- We don’t have a flat rate, we have a progressive rate, that means your total income will we subjected to different rates
according to the scales it is divided
3. Government
We dont pay directly to Europe.
Example, when you die it depends on living in flanders or walloon what happens
Example: environmental taxes can depend on the provinces
- Province: taxes on environmental taxes, ac*vity taxes for offices vb. Brussels
area with 19 different communi*es, the region collect a lot of taxes based
on an office surface tax, because there are a lot of headquarters so they had
to pay a taxa*on
- Region: Brussels region expensive, so outside the region to pay less taxa*on
- City tax/municipal: low city price 0%, but higher tax on second houses
Each government can levy taxes
BUT!!
=> NON BIS IN IDEM
“Not twice the same thing”
= You can not be taxed twice for the same cause of ac*on (income)
Exam: important principles that finds its origin in criminal law. If you had bad behaviour, you will be punished only one *me for
the same ac*on. Same for taxa*on on income.
Consequense of NON BIS IN IDEM for governments??
They should agree which level can levy taxes and which not.
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