Principles of International Taxation by Angharad Miller (2016): A Comprehensive Summary

Introduction
“Principles of International Taxation” by Angharad Miller (2016) is a thorough guide exploring the complex domain of international tax law. The book is designed to elucidate the principles, policies, and practices underlying international taxation, making it a pivotal resource for students, professionals, and policymakers. This summary aims to encapsulate key insights from the book along with actionable advice, intertwining the theoretical foundation with practical steps.

1. Fundamentals of International Taxation

1.1. Key Concepts
At the core of international taxation are terms like “residency,” “source,” and “double taxation.” Residency determines the tax obligations in various jurisdictions, while the source delineates where the income is generated. Double taxation occurs when two jurisdictions impose taxes on the same income.

Actionable Advice:
– To minimize double taxation, an individual should understand their residency status in each country they have ties to, consulting tax treaties if applicable.

Concrete Example:
Miller describes a scenario where a U.S. citizen resides in France and earns income both domestically and internationally. The double taxation treaty between the U.S. and France provides relief by allowing credits or exemptions.

2. Double Taxation and its Relief

2.1. Tax Treaties and Conventions
Double Taxation Conventions (DTCs) are agreements between countries to mitigate double taxation effects through methods such as tax credits, exemptions, or reduced tax rates.

Actionable Advice:
– Review tax treaties between countries of interest to leverage reduced withholding tax rates or exemptions on dividends, interest, and royalties.

Concrete Example:
A company receiving dividends from a subsidiary in Germany may benefit from the DTC between the UK and Germany, reducing withholding tax on dividends from 26.375% to 5%.

2.2. Tax Credit Mechanisms
Countries offer tax credit mechanisms, where taxes paid in a foreign country can be credited against domestic tax liabilities.

Actionable Advice:
– Maintain thorough records of foreign taxes paid and ensure they are claimed as credits to avoid overpayment.

Concrete Example:
An Australian resident working temporarily in Japan should keep all records of Japanese taxes paid to claim them as a foreign tax credit on their Australian tax return.

3. Transfer Pricing

3.1. Arm’s Length Principle
The Arm’s Length Principle ensures that transactions between related entities are conducted as if they were between independent entities, preventing profit shifting.

Actionable Advice:
– Conduct detailed transfer pricing analyses and documentation to justify intercompany transactions and prevent disputes.

Concrete Example:
Miller illustrates a case where a U.S. parent company sells goods to its French subsidiary. The prices must reflect what would be charged between unrelated companies, considering market comparisons.

3.2. Advance Pricing Agreements (APAs)
APAs are pre-emptive agreements between taxpayers and tax administrations to set transfer pricing methodologies for future transactions.

Actionable Advice:
– Seek APAs with tax authorities to gain certainty on transfer pricing and avoid future disputes.

Concrete Example:
A multinational enterprise (MNE) in the tech industry might enter into an APA with the U.S. IRS to fix the pricing of intellectual property licenses used by its European branches.

4. Controlled Foreign Corporations (CFCs)

4.1. Anti-Deferral Rules
CFC rules prevent deferral of taxes on a resident’s income by scrutinizing earnings in controlled foreign subsidiaries, typically taxing passive income immediately.

Actionable Advice:
– Periodically review CFC structures and evaluate how local anti-deferral rules impact overall tax obligations.

Concrete Example:
A UK corporation with a subsidiary in a low-tax jurisdiction may be subject to CFC rules, requiring it to include the subsidiary’s passive income in its current income.

5. Tax Avoidance and Evasion

5.1. General Anti-Avoidance Rules (GAAR)
GAAR aims to counteract aggressive tax planning strategies that go against the spirit of the law.

Actionable Advice:
– Ensure compliance with the substance and intent of tax laws, avoiding aggressive tax minimization strategies that could trigger GAAR penalties.

Concrete Example:
An MNE creating a complex structure solely for tax benefits without serving a legitimate business purpose may be targeted under GAAR provisions in countries like Canada or Australia.

5.2. Base Erosion and Profit Shifting (BEPS)
The OECD’s BEPS project aims to address gaps and mismatches in international tax rules that allow corporate profit shifting and base erosion.

Actionable Advice:
– Monitor and adapt to local implementations of BEPS action plans, like country-by-country reporting requirements, to comply with changing international standards.

Concrete Example:
An enterprise must disclose its economic activities across all jurisdictions under BEPS Action 13, ensuring proper allocation of taxing rights.

6. Cross-Border Tax Administration

6.1. Exchange of Information
Jurisdictions increasingly collaborate through information exchange agreements to improve tax compliance and transparency.

Actionable Advice:
– Report financial accounts and transactions in compliance with information exchange agreements like FATCA and CRS to avoid penalties.

Concrete Example:
Under the Common Reporting Standard (CRS), a bank in Switzerland must report foreign account holdings to the tax authorities, which are then shared with the account holder’s resident country.

6.2. Dispute Resolution Mechanisms
These mechanisms, such as mutual agreement procedures (MAP), address conflicts arising from Double Taxation Agreements and relief provisions.

Actionable Advice:
– Utilize MAP to resolve international tax disputes, enabling tax authorities to agree on relief from double taxation.

Concrete Example:
A Canadian firm facing double taxation on its U.S. sourced income can initiate a MAP request for resolution between Canadian and U.S. tax authorities.

7. Indirect Taxes

7.1. Value-Added Tax (VAT) in Cross-Border Transactions
International transactions involving VAT require understanding of place of supply rules to determine tax obligations.

Actionable Advice:
– Correctly apply VAT rates based on the place of supply rules to avoid penalties and ensure proper tax accruals.

Concrete Example:
When a UK company supplies digital services to EU customers, it must comply with the EU VAT MOSS scheme to report and remit VAT in respective member states.

Conclusion
Angharad Miller’s “Principles of International Taxation” offers an extensive and detailed overview of international tax frameworks, principles, and strategies. The actionable advice provided alongside concrete examples empowers readers to navigate the complexities of global taxation confidently and legally. Whether dealing with double taxation, transfer pricing, or cross-border VAT, understanding these principles is crucial for tax compliance and optimization in an increasingly globalized economy.