AKUNTANSI INTERNASIONAL

CHAPTER XI: TRANSFER PRICING AND TAXATION INTERNATIONAL

ASEP SURYADI

20208200

4EB11

1. Basic concepts of international taxation

The complexity of the laws and rules that determine the tax for foreign companies and the profits generated abroad actually derived from some basic concepts

a. Tax neutrality is that the tax has no effect (or neutral) of the resource allocation decisions.

b. Tax equity is that taxpayers who are facing similar situations should pay similar taxes and the same thing but on disagreements between how to implement this concept.

Diversity of the National Tax System

Effective management of potential tax needs understanding of the national tax system is very different from one country to another.

Various Kinds of taxes

Five kinds of taxes, namely:

1. Corporate income tax

2. Tax levy

3. Value added tax

4. Border tax

5. Transfer tax

Tax Burden

As more and more companies are reducing the marginal corporate tax rate, many states are expanding the tax base of the company. In the real world is rarely effective tax rate equal to the nominal tax rate. Thus it is inappropriate to base the comparison between countries on tax rates must be. Besides low tax rate does not necessarily mean a lower tax burden. Internationally, the tax burden must always be determined by observing the effective tax rate.

Tax Administration System

For simplicity there are two systems, namely:

1. Classical system

2. Integrated system

Foreign tax incentives

Many states offer tax incentives to attract foreign investment. Incentives may include tax-free cash grants are used for the cost of fixed assets of new industrial processes or remission of taxes to pay for some period of time.

Tax competencies that are Hazardous

All world trends that lead to a reduction in corporate income tax rate is the direct impact of tax competition. The competition is conducted by a tax haven country would benefit if it can make government more efficient. While the harmful effects if the transfer tax revenue for governments that actually requires these revenues to provide services required by businesses.

Taxation of Income from Foreign Sources and Double Taxation

Most countries apply the principle of the world and impose taxes on profits or income of companies and citizens in it, regardless of the country. The underlying idea is that a foreign subsidiary of a local company is a local company that happens to operate overseas.

2. Connection with the tax concept of income from abroad

Each country claims the right to impose taxes on income generated within its borders. However, the national philosophy on the taxation of resources from abroad is different and this is important from the perspective of a tax planner. Most countries (including Australia, Brazil, China, Czech Republic, Germany, Japan, Mexico, Netherlands, United Kingdom, and United States) to apply the principles throughout the world and impose taxes on profits or income of the company and the citizens in it without looking at the territory of the State. The underlying idea is that a foreign subsidiary of a local company is a local company that happens to operate overseas.

3. Reason for a foreign tax credit

Foreign tax credit can be counted as a direct credit on income tax paid on earnings branch or subsidiary and any tax withheld at source such as dividends, interest, and royalties are sent back to domestic investors. The tax credit cans also estimate if the amount of foreign income tax paid is not too clear.

Tax Credit Restrictions

Foreign tax credit limitation applies separately to U.S. tax on foreign source income tax for each of the following types of income:

1. Passive income

2. Financial services revenue

3. Income levy high taxes

4. Transportation revenue

5. Dividend for each of the foreign company with a share of ownership by 10% to 50%

Tax Treaty

Tax treaties affect the tax levy on dividends, interest and royalties paid by companies in the country to foreign shareholders. These agreements typically provide a reciprocal reduction of tax levies on dividends and royalties are often exempt from taxes and interest charges.

Consideration of Foreign Currencies

Gains or losses in foreign currencies are generally located between U.S. sources and foreign sources with reference to the domicile of the taxpayer in its accounting books reflect the assets or liabilities in currencies foreign. Source gain or loss is the United States.

Dimensions Tax Planning

Observations on the issue of tax planning starts with two basic things:

1. Tax considerations should never attempt control strategic

2. Constant changes in tax laws limit the tax benefit in the long-term planning

Organizational Considerations

If the overseas operations initially predicted to cause harm may be advantageous if the taxes are organized in a branch at an early stage. If the subsidiary is organized in a tax haven country that does not tax at all, then the tax deferral will increasingly look attractive.

4. International tax planning within multinational corporations

In the tax planning of multinational companies have certain advantages over a purely domestic firm because it has greater flexibility in determining the geographic location of production and distribution systems. This flexibility provides the opportunity to utilize their own national tax yuridish differences so as to lower the overall corporate tax burden.

The observation of these tax planning issues at the start with two basic things:

a. Tax considerations should never control business strategy

b. Changes in tax laws are constantly limit the benefits of tax planning in the long term.

5. Variables in the international transfer pricing

Transfer prices set a monetary value on the exchange between firms that take place between the operating units and is a substitute for market prices. In general, the transfer price is recorded as revenue by one unit and the unit cost by others. Cross-border transactions of multinational corporations are also open to a number of environmental influences that created the same time destroying the opportunity to increase profits through transfer pricing. A number of variables is tax rate competition inflation rates, currency values, limitations on the transfer of funds, political risk and the interests of joint venture partners are very complicated transfer pricing decisions.

Transfer pricing is anything new lately arise. Transfer pricing in the United States evolved along with the decentralization movement that influenced many American businesses during the first half of the 20th century. Once the company expands internationally transfer pricing issues are also expanding rapidly. There are factors such as:

1. Tax factor

2. Factor Tariff

3. Competitiveness Factors

4. Job Evaluation factors

6. Fundamental problems in the transfer pricing method

In a world with very competitive transfer rates, it will be a big deal when they wanted to transfer pricing resources and services between firms. However, there is rarely a competitive external market for products that are transferred between related entities is special. Problem of determining these costs are felt in the international level, concept of cost accounting is different from one country to another.