Source jurisdiction and resident jurisdiction

International tax law

We must participate to pay taxes: we must pay taxes in order to ability to pay. Taxes is neutral. Stampare OECD Model Convention e gli altri required readings. Don’t study with examples.

Two types of taxes

• Direct taxes are generally imposed on:
  • Profits and capital of businesses.
  • Income and net worth of individuals.
• Indirect taxes are levied on consumption, but also on the registration tax if you have an agreement.

Value Added Tax (VAT)

When we speak about VAT, we have to consider:

• Subject element: Definition of taxpayers: is related to the subject. If I haven't the ability to pay, I am not a taxpayer.
• Object element: Determining taxable base: You haven't the ability to pay if you don't cover your primary needs.
• Territoriality: Defining tax jurisdiction: there must be a connection with the State.

The taxpayer is the person liable for tax. The term taxpayer doesn’t necessarily identify a person who is obliged to pay tax in a particular tax period (indeed the payer’s liability may be also satisfied by a person other than the taxpayer itself e.g., withholding tax). A taxpayer may also be required to fulfill certain administrative requirements, such as filing a tax return or providing information to the tax authorities.

Source jurisdiction

Income may be taxable under the tax laws of a country because of a link between that country and the activities which generated the income (objectively linked). We have two links: subject and object jurisdictions: objectively connected to the territory or the taxpayers is subjectively connected to the territoriality.

Residence jurisdiction

A country may also impose a tax because of a nexus between the country and the person earning the income. Persons subject to the residence jurisdiction of a country generally are taxable on their worldwide income.

Pay taxes on the base of worldwide income: If I work in the UK and I have residence in Italy, I have to pay in Italy tax, because I am subjectively linked to Italy. Because there is a connection where you have residence. The same thing is in China. But China can ask me tax because my activities are using the service of China.

(I residenti sono tassati sui redditi ovunque prodotti, sia sul territorio dello Stato che all'estero (worldwide taxation), mentre quelli non residenti sono tassati solo sui redditi prodotti in Italia (source taxation).

So subjectly link is that the taxpayers is linked with a territory where he has the residence. Object link is the activity that I use in a territory.

Defining residence

Individuals:

• Formal criteria (registration in the registry of resident population; citizenship).
• Mechanical test (d...)