Foreign non-resident business entities may have business activities in a variety of ways. In its simplest form this can take the form of individual transactions in the nature of exports or import of goods, lending or borrowing of money, sale of technical know how to an Indian enterprise, a foreign air-liner touching an Indian airport and booking cargo or passengers, etc. various tax issues arise on accounts of such activities. The government wants to encourage foreign enterprises to engage in certain types of business activities in India, which in its opinion its desirable for achieving a balanced economic growth. This takes us to the last aspect of activities which enjoy tax incentives in India. The related issues about the taxation Continue reading
Business Taxation
Objectives of International Taxation
The main objectives of International Taxation are the Neutrality and Equity. Tax Neutrality A neutral tax is one that would not influence any aspect of the investment decision such as the location of the investment or the nationality or the investor. The basis justification for tax neutrality is economy efficiency. World welfare will be increase if capital is free to move from countries were the rate of return is low to those where it is high. Therefore, if the tax system distorts the after-tax profitability between two investments or between two investor leading to a different set of investments being undertaken, then gross world product will be reduced. Tax neutrality can be separated into domestic and foreign neutrality. Domestic neutrality Continue reading
Double Taxation Relief
One of the major risk in the International Business is the payment of taxes in both the countries i.e. the country in which the business is actually effected and in the country where the MNC is having its head office. This type of double taxation will definitely impede the growth and development of the MNCs in multiple ways. So the provisions are made to avoid the double taxation (Double Taxation Relief) between the two countries through two types of relief namely Bilateral Relief and Unilateral Relief. Bilateral Relief Under this scheme, relief against the burden of double taxation is worked out on the basis of mutual agreement between two countries. There are two types of agreements. In one type, the Continue reading
Five Reasons that Contribute to Non Compliance with Tax Laws
Non compliance of tax laws can be said to be a failure, intentional or unintentional, of taxpayers to meet their tax obligations. This lack of compliance can be as a result of different factors as indicated below: A Rising or High Tax Burden: Individuals and organizations will tend to be non compliant to tax laws when the taxes are deemed to be high as compared with the cost of living. In such a case taxpayers will tend to avoid payment of taxes so as to have a sizeable amount of money to be used in the purchase of different commodities. Lack of Knowledge on Tax Laws: This point focuses on the unintentional failure of a taxpayer to comply to tax Continue reading
Primary Purpose of Taxation
Taxation is a means by which governments finance their expenditure by imposing charges on citizens and corporate entities. The main purpose of taxation is to accumulate funds for the functioning of the government machineries. All governments in the world cannot run its administrative office without funds and it has no such system incorporated in itself to generate profit from its functioning. In other words, a government can run its administrative set up only through public funding which is collected in the form of tax. Therefore, it can be well understood that the purpose of taxation is very simple and obvious for proper functioning of a state. Taxes are charges levied against a citizen’s personal income or on property or for Continue reading
Residential status and Tax liability
The scope of total income is determined on the basis of residential status of the assessee. For the purposes of this Act, there can be three residential status. Residential status is determined on the basis Basic conditions and Additional conditions Resident and ordinarily resident Resident but not ordinarily resident Non resident. RESIDENTIAL STATUS OF AN INDIVIDUAL Resident and Ordinarily Resident [ROR] An individual is said to be resident in India if he satisfies anyone of the basic conditions and both of the additional conditions. Resident but Not Ordinarily Resident [RNR] Continue reading