2-YEAR M.A. (INTERNATIONAL TAXATION)

SEMESTER-III TAX TREATIES-PART II

2.3.7 INCOME FROM EQUITY AND DEBT INVESTMENT

Module I Dividends (Art.10)- Definition (Art. 10, Paragraph 3)- Allocation Rule (Art. 10 and 1)- concept of ‘paid’ , ‘may be taxed’ and ‘beneficial owner’ - Taxing rights of source country (Art. 10, Paragraph 2) Reduced treaty withholding tax on outbound dividends-Beneficial owner of dividends,- Definition of ‘dividends’ (Art. 10, paragraph 3)- Characterization of dividends based on the domestic laws of the Source Country- Force of attraction on outbound dividends effectively connected to a PE (Art. 10, paragraph 4)- Prohibition of extra-territorial taxation of dividends (Art. 10, paragraph 5)-Interplay of Art. 10 and Art. 5, Special rule for undistributed dividends of a CFC

Module II Interest (Art.11)- Scope and accrual of interest - allocation rule for interest (Art. 11, paragraph 1)- Interest ‘paid’- Scope of Art. 11- Withholding tax clause (Art. 11, paragraph 2)- Definition of ‘interest’ (Art. 11, paragraph 3)- - Force of attraction on outbound interest effectively connected to a PE (Art. 11, paragraph 4)- Interest effectively connected to, and borne by, a PE (Art. 11, paragraph  5) - Arm’s length rule for interest (Art. 11, paragraph 6), Specific situations and hybrid instruments, Penalty charges –Sec.9(1)(v) under the Income-tax Act, 1961, Withholding tax under Sec. 194LC

2.3.8 ROYALTIES AND FEES FOR TECHNICAL SERVICES

Module I Royalties Scope of Art 12- Source Rule Allocation Rule (Art.12, paragraph 1)- Scope of Art 12- ‘Use of rights’ difference between copyright and copyrighted articles, Royalty and Payments for embedded software - Royalty and business profits - Royalty and software-related payments-Royalty and Payments for know-how- Definition of ‘know-how’, Know-how vs provision of services-Payments for mixed contracts, Payments for embedded software- Payments for digital products (images, sounds or text)- Force of attraction on outbound royalties effectively connected to a PE (Art.12, paragraph 3)-Arm’s length rule for royalties (Art.12, paragraph 4) Royalty income under Sec. 9(1)(vi)- Definition of Royalties under the Income-tax Act, 1961.

Module II Fee for technical services – Scope of Fees for Technical Services under the DTAA- Definition of FTS- FTS and business profits – FTS and DTAA- make available concept - Income from Fees for Technical Services under Sec. 9(1)(vii)- Definition of Fees for Technical Services under the Income-tax Act, 1961- Withholding tax on FTS and Royalty under Sec. 194J

2.3.9 METHODS OF ELIMINATION OF DOUBLE TAXATION AND MOST FAVOURED NATION CLAUSE

Module I General Three cases of juridical double taxation- Dual residence, Residence-source, Source-source- Double non-taxation -The methods for elimination of double taxation- Exemption (full and with progression) and credit (full and ordinary), Operation and effects of the methods-Conflicts of qualifications vs conflicting treaty interpretations-

Module II Exemption method (Art.23A)- Exemption relief (Art. 23A, paragraph 1), ‘may tax’ (‘subject to tax’ and ‘effectively taxed’), how relief is provided, Switch-over to credit for dividends and interest (Art. 23A, paragraph 2), Exemption with progression (Art. 23A, paragraph 3), Double non-taxation (Art. 23A, paragraph  4)

Module III Credit method (Art.23B)- Methods (ordinary FTC) (Art. 23B, paragraph 1)- General issues, FTC and domestic rules, Features of the FTC as regulated by domestic laws - Principle of progression (Art. 23B, paragraph 2), Tax sparing- Concept and rationale of tax sparing provisions, Income-tax Act provisions on unilateral relief

Module IV Non-Discrimination- Concept of non-discrimination- Meaning of expressions used in non-discrimination clauses- criteria to infer discrimination- Prohibition of discrimination based on nationality- (Art.24, paragraph 1)- discrimination in respect of stateless persons (Art. 24, paragraph 2)- discrimination based on situs of enterprise (Art.24, paragraph 3) discrimination in allowing certain deduction (Art 24, paragraph 4) ownership non-discrimination clause (Art.24, paragraph 5)- Scope of non-discrimination clauses (Art 24 Paragraph 6)- reverse discrimination-differentiation and discrimination