Exercises International tax PDF

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Exercises International taxationWeek 4. How do you know which tax rate applies? When is the 0% tariff allowed to be used for deliveries by a company? How do we call a purchase transaction between two companies in the Netherlands and Germany when it concerns VAT? John Waterman is a student. He lives ...

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Exercises International taxation Week 4.2 1. How do you know which tax rate applies? 2. When is the 0% tariff allowed to be used for deliveries by a company? 3. How do we call a purchase transaction between two companies in the Netherlands and Germany when it concerns VAT? 4. John Waterman is a student. He lives in Enschede and buys a mountain bike in a shop (Citybike Enschede). John paid € 1.200 for his bike. Calculate how much VAT is included in the price. 5. A Dutch company in Leerdam, who produces wineglasses and vases sells glasses and vases to a French company in Lyon. The Dutch company does the transport itself and delivers the goods in Lyon. 5a. Mention the consequences for the VAT in the Netherlands. 1. Entrepreneur is in the Netherlands. 2. It is supply of goods. 3. Place of transaction  the location of the goods at the time when dispatch or transport for the customer begins, so the Netherlands. So it is a taxable fact in the Netherlands 4. It is not an exemption 5. Taxable amount is unknown 6. Tax rate is 0% in the Netherlands, because it’s an intra EU acquisition. The company selling doesn’t have to pay tax. So there is no tax to be paid for the Dutch company. 5b. Mention the consequences for the VAT in France. 1. Entrepreneur is in the France, the company in Lyon. 2. There is a taxable transaction, a intra EU acquisition 3. Place of transaction is where the transport of goods ends, so France 4. No exemption 5. Taxable amount unknown 6. Tax rate is around 20% 7. Company from Lyon 8. . 9. . 10. The French company has the right to deduct the VAT it has paid itself. Because of the fact that it’s a intra EU acquisition the company from France has to pay VAT. 6. GLP B.V. in Amsterdam purchases goods from China to the Netherlands. The goods were stored in a warehouse and packed for the Dutch market. GLP sells the goods to Dutch companies. Mention the consequences for the VAT. The Netherlands 1. It is in the Netherlands 2. Supply of goods 3. Place of transaction is in the Netherlands 4. There is no exemption 5. Sales price 6. Tax rate 21% 7. Dutch company 8. . 9. .

10. There is a deduction The Dutch company has to pay VAT with deduction 7. What happens when a Dutch entrepreneur doesn’t want to mention his VAT code if he buys goods in one of the EU member states? The transaction can’t happen. 8. A wholesaler in Peru sells clothes to a Dutch company in Amsterdam. The manager of this Dutch company visits the company in Peru three times a year. The clothes are packed in containers and transported by ship to Amsterdam. The Dutch company is the importer. 8a. What is the place of delivery? The Netherlands 8b. Does the importer has to pay import duties? Yes 9. A Jeweler in Maastricht (NL) needs roll-down shutters as a protection against theft. The jeweler bought the shutters in Germany. The German seller did the delivery plus the assembly of the shutters in Maastricht. 9a. What is the place of the delivery? 9b. Who has to pay the VAT to the Tax Department?

Week 4.3 1. Who is liable to personal income tax? Individuals who are residents of the Netherlands. Individuals who are non-residents with income from sources in the Netherlands. 2. What is the relation between personal income tax and tax on wages? Wage tax is a withholding tax. Which means that on wages the tax has already been withheld by the employer. It is an advance payment on income tax. 3. How do you know if someone lives in the Netherlands? Residence is determined according to the factual circumstances. Relevant circumstances are availability of a permanent home, the place where the spouse and children live and the place of personal and economic relations. 4. Sandra works at Siemens. Her salary is € 55,000 per year. She owns a house with a value of €275.000 and paid € 12.000 interest on the mortgage loan in 2021. Calculate how much personal income tax Sandra has to pay. Income from employment = $55,000 Income from dwelling = 275,000 * 0.6% = $1,650 Income from dwelling = $1,650 - $12,000 = $-10,350 Taxable income = $55,000 - $10,350 = $44,650 Tax = $44,650 * 37.1% = $16,565.15 5. Kenda buys in 2006 2% of the shares in Lomax ltd. for € 20,000. In 2007 she buys 1% of the shares for € 12,000. In 2008 she buys 6% of the shares in Lomax for € 72,000. In 2009 she buys another 3% of the shares but now for € 45,000. In 2021 she sells 5% of the shares in Lomax Ltd. for the amount of € 100.000.

5a. In which tax box does Kenda has to declare the shares in Lomax ltd. in 2007?

2% + 1% = 3% 3% < 5% Therefore box 3 5b. In which year does Kenda have a substantial shareholding? 3% + 6% = 9%, so in 2008 5c. Calculate Kenda’s sales profit/loss in 2021. Sale price – purchase price = profit  income in box 2 Sales price = $100,000 Total percentage = 2 + 1 + 6 + 3 = 12% Total value shares = 20,000 + 12,000 + 72,000 + 45,000 = $149,000 Value 1% = 149,000 / 12 * 5 = $62,083 Profit = 100,000 – 62,083 = $37,917 37, 917 * 26.9% = $10,200 6. Which of the following companies are paying corporate income tax? a. A firm b. Garage Huft Ltd. c. Sports club Havanna (fitness studio) d. Building association Vestia 7. Company Basis solutions Ltd made a commercial profit of € 90.000. The commercial profit exists of:  Dividends € 30.000  Profit fees for managers and other employees € 15.000  Corporate tax reserve € 35.000  Fee for clients 10,000 What is the taxable amount for the corporate income tax 90,000 + 30,000 + 35,000 = 155,000 8. Which advantage brings the fiscal unity for a company? One entity for corporate income tax purposes, therefore less tax 9. Company A owns 100% of the shares of company B and C. Company B owns 50% of the shares in company D and company C owns 46% of the shares in company D. Which of these companies can be part of a fiscal unity? A, B and C, because shares owned >95% A and B A and C A and D 10. AkzoNobel Plc. has bought 50% of the shares of Young international Ltd. For € 375.000. Young doesn’t perform well. This company is loss-making and becomes decomposed. Akzo gets a liquidation fee of € 100.000. What is the fiscal consequence for Akzo? 11. Boval Plc. realized a commercial profit of €43.500. The board wants to divide this profit as follows:  dividends € 30.000  fee for the director € 2.500  fee for the employees € 5.000  fee for the founder of the company € 1.000  profit reserve € 5.000

11a. Calculate the taxable income of Boval Plc. 11b. How much corporate income tax has to be paid?

Week 4.4 1. Credit and exemption 2 3 4 In case of double non taxation 5 yes 6. Hop lives in country A and works in country A and B. a. Which country is the residence state and which country is the source state? Residence = A, Source = B Hop’s income is country A is € 36.000. Hop’s income in country B is € 14.000. Country B has a flat tax rate of 30%. Country A has a progressive tax rate: 0-20.000= 10% 20.000- 60.000= 20% >60.000= 30% The residence state exempts the income from the source state by an exemption with progression. b. Calculate the tax burden in country A and country B. A  residence principle  worldwide income B  source principle  income from country B So double taxation from the income from country B. Tax  20,000 * 10% + 30,000 * 20% = $8,000 Exempt  14,000 / 50,000 * 8,000 = $2,240 Tax burden A = 8,000 – 2,240 = 5,760 Tax burden B = 14,000 * 30% = $4,200 7. Peter lives in country A. He receives a royalty of €10.000 from country B. The tax rate in country A is 40%, the tax rate in country B is 30%. Country A gives an ordinary credit. Calculate the ordinary credit A  residence principle B  source principle Tax B = 10,000 * 30% = $3,000 Tax A = 10,000 * 40% - 3,000 = $1,000 8. Joost is born in Germany, but lives and works in the Netherlands. In the last few years Joost worked a lot abroad. In year 1 Joost was 7 months for his job in Chili (Salary € 70.000) and in year 2 he was 5 months in the USA for his job. His employer in the Netherlands pays his salary, also when he is abroad. His total income was in year 1 and year 2 € 100.000. The personal income tax rate in the Netherlands was in these two years as following: 0- € 20.000: 30% € 20.000 - € 40.000: 40% > € 40.000: 50% Calculate how much tax Joost has to pay in the Netherlands in year 1 and year 2. Explain your answer. Netherlands  residency principle  worldwide income Chili  source principle  70,000

Art. 15 Income from employment. Art. 15 (1)  Chili can levy. Art. 15 (2)  (a) is not met, because Joost lives more than 183 days in Chili. So Chili can levy taxes. There is double taxation. Art. 23 (1) OECD Model  exemption method. Netherlands year 1  20,000 * 30% + 20,000 * 40% + 60,000 * 50% = 44,000 Chili year 1 70,000 / 100,000 * 44,000 = 30,800 Netherland year 1  44,000 – 30,800 = $13,200 Netherlands year 2  $44,000 Netherlands  residence principle USA  source principle Art. 15 Income from employments. Art. 15 (1)  USA can levy. Art 15 (2)  all criteria is met  The Netherlands can levy. Netherlands year 2  20,000 * 30% + 20,000 * 40% + 60,000 * 50% = 44,000

Week 4.6 1. What does the ‘arm’s length principle’ mean? Prices charged within multinationals must be comparable to those that would be charged between independent enterprises. 2. What does ‘fair share’ mean when we are talking about transfer pricing? Every country wants to levy tax on the amount it is entitled to. Fair distribution of taxes 3. What is an APA? Explain. What are the advantages? Advanced Pricing Agreements 4. Give your own example of transfer pricing and decide where the key value drivers and least complex entity are located. 5. Johnsons is a company that makes and sells clothes. The designers and the selling points are located in The Netherlands. The factory is located in China. The CFO of Johnsons is a little bit concerned about possible transfer pricing problems. He is looking for the best transfer pricing method for his company and asks your help. Which method would be the best in this situation: Cost plus or Resale price method? Explain your answer. Johnson is Key Value Driver, Factory in China is least complex entity. So the cost plus method. Because the factory is the least complex entity, the cost price is pretty easy to pick. 6. Fashionistas is a multinational group in the field of shoes. A lot of people like the shoes of Fashionistas because of the perfect fit. All shoes are made by a special factory in Italy. Their shoes are sold in shops all over the world. Fashionistas does not need a marketing campaign, because their brand is well known and people buy the shoes already because of the perfect fit.

Which transfer pricing method would be the best in this situation: Cost plus or Resale price method? Explain your answer. Fashionistas is Key Value Driver. Selling points is least complex entity. So you therefore use the Resale Price Method....