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International Taxation Issues - Essay Example
An Australian individual wants to commence manufacturing operations of prefabricated birdcages that come in kit assembly form, from overseas in Iberica. Australia does not have a tax treaty with Iberica. The following information is relevant:
1) Manufactured birdcages are constructed from materials purchased in Iberica on arms' length terms by the Iberican branch or subsidiary (the investment vehicle)…
3) Advise what taxation consideration need to be given if the purchase from the Iberican operations by an Australian company were not for arms' length prices. Explain the reason and the rational of this concept requiring to be addressed for Australian Taxation purposes.
In Australia, companies and individuals can be taxable persons. They are tax on income derived inside Australia and/or from outside sources and the tax treatment depends whether or not they are residents or non-residents of Australia.
A resident individual is taxable on its assessable income derived from any source, whereas a non-resident individual is taxable only on the assessable income derived in Australia. Taxes imposed may come from business income, or in the payment of interests, dividends, royalties, rent, or capital gains. Taxes can be further classified as withholding tax or taxes on the sale of goods or render of service.
A company is resident in Australia for tax purposes if: 1) It is incorporated in Australia (irrespective of where central management and control is exercised). ...