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    Unit 4

    Uploaded by

    Neha Krishnani
    This document discusses several topics related to international finance: 1. Double taxation occurs when the same income is taxed twice, both at the corporate and personal levels or in two different countries. Double Taxation Avoidance Agreements help relieve this burden. 2. Transfer pricing is when a company sets prices for goods and services exchanged between its divisions. While it can increase efficiency, companies sometimes misuse it to artificially shift profits between high and low tax jurisdictions to reduce overall taxes. 3. Money laundering involves disguising illegally obtained money through a series of transactions to obscure its source. It proceeds in stages of placement, layering, and integration. Common methods include cash purchases, shell companies, and casinos

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    Unit 4

    Uploaded by

    Neha Krishnani
    7 views2 pages
    This document discusses several topics related to international finance: 1. Double taxation occurs when the same income is taxed twice, both at the corporate and personal levels or in two different countries. Double Taxation Avoidance Agreements help relieve this burden. 2. Transfer pricing is when a company sets prices for goods and services exchanged between its divisions. While it can increase efficiency, companies sometimes misuse it to artificially shift profits between high and low tax jurisdictions to reduce overall taxes. 3. Money laundering involves disguising illegally obtained money through a series of transactions to obscure its source. It proceeds in stages of placement, layering, and integration. Common methods include cash purchases, shell companies, and casinos

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    This document discusses several topics related to international finance: 1. Double taxation occurs when the same income is taxed twice, both at the corporate and personal levels or in two different countries. Double Taxation Avoidance Agreements help relieve this burden. 2. Transfer pricing is when a company sets prices for goods and services exchanged between its divisions. While it can increase efficiency, companies sometimes misuse it to artificially shift profits between high and low tax jurisdictions to reduce overall taxes. 3. Money laundering involves disguising illegally obtained money through a series of transactions to obscure its source. It proceeds in stages of placement, layering, and integration. Common methods include cash purchases, shell companies, and casinos

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    7 views2 pages

    Unit 4

    Uploaded by

    Neha Krishnani
    This document discusses several topics related to international finance: 1. Double taxation occurs when the same income is taxed twice, both at the corporate and personal levels or in two different countries. Double Taxation Avoidance Agreements help relieve this burden. 2. Transfer pricing is when a company sets prices for goods and services exchanged between its divisions. While it can increase efficiency, companies sometimes misuse it to artificially shift profits between high and low tax jurisdictions to reduce overall taxes. 3. Money laundering involves disguising illegally obtained money through a series of transactions to obscure its source. It proceeds in stages of placement, layering, and integration. Common methods include cash purchases, shell companies, and casinos

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    © All Rights Reserved
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    Unit 4 IF

    1. What is double taxation?


    2. Advantages and disadvantages of double taxation.
    3. Short note on tax evasion.
    4. Short note on transfer pricing.
    5. Short note on money laundering.
    6. Stages of money laundering.
    7. Methods of money laundering.
    8. Short note on SWIFT
    9. Short note on IFRS
    Q.1 What is double taxation
    Double taxation is a tax principle referring to income taxes paid twice on the same
    source of income. It can occur when income is taxed at both the corporate level and
    personal level. Double taxation also occurs in international trade or investment when
    the same income is taxed in two different countries
    Double taxation is often an unintended consequence of tax legislation. It is generally
    seen as a negative element of a tax system, and tax authorities attempt to avoid it
    whenever possible
    International businesses are often faced with issues of double taxation. Income may be
    taxed in the country where it is earned, and then taxed again when it is repatriated in
    the business' home country. In some cases, the total tax rate is so high, it makes
    international business too expensive to pursue.
    Double Tax Avoidance Agreement (DTAA) is an agreement or treaty which is signed
    between two countries to relieve taxpayers from paying double taxes in both, the
    source country and the origin country.
    Advantages and disadvantage of double taxation
    Q.2 What is Transfer Pricing
    Transfer pricing is an accounting practice that represents the price that one division in a
    company charges another division for goods and services provided. Transfer pricing
    enables improvements in pricing, brings in efficiency, and helps simplification of the
    process of accounting. It also enables savings in costs of manpower by streamlining
    processes and methods. Transfer pricing helps in achieving higher profitability and also
    focusses on strategizing business operations.
    Transfer pricing helps in maintaining a market for the goods manufactured by a
    subsidiary with steady margins. It also helps in securing a steady supply of raw materials
    or components to the parent and facilitates continuous production. The prices fixed for
    transferring goods is generally closer to the fair market price for such goods in the
    market
    Multinational corporations (MNC) are legally allowed to use the transfer pricing method
    for allocating earnings among their various subsidiary and affiliate companies that are
    part of the parent organization. However, companies at times can also use (or misuse)
    this practice by altering their taxable income, thus reducing their overall taxes. The
    transfer pricing mechanism is a way that companies can shift tax liabilities to low-cost
    tax jurisdictions.
    A few prominent cases continue to be a matter of contention between tax authorities
    and the companies involved.
    Coca-Cola
    Because the production, marketing, and sales of Coca-Cola Co. (KO) are concentrated in
    various overseas markets, the company continues to defend its $3.3 billion transfer
    pricing of a royalty agreement. The company transferred IP value to subsidiaries in
    Africa, Europe, and South America between 2007 and 2009. The IRS and Coca-Cola
    continue to battle through litigation and the case has yet to be resolved.
    Conclusion
    Transfer pricing of goods or services deals with the arm’s length principles of
    determining the prices of goods and services bought and sold between related
    enterprises. The arm’s length principle essentially states that related enterprises must
    fix the transfer price in line with the price that is paid by an outsider for the same goods
    or services.

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