Tax Concepts

Tax Concepts

Tax concepts
Tax residency status
Where you pay taxes (usually, where you live 183+ days a year)
Tax domicile
Legal home (by law, often differs from residency)
Permanent establishment (PE)
Tax presence (office, employees) = must pay taxes
Beneficial ownership
Who really owns (hidden ownership through structures)
Substance requirements
Actual activity in the country (not just on paper)
Transfer pricing
Prices between related companies (must be fair, otherwise penalty)
Thin capitalization
Limitation on company debt (so that profit is not withdrawn through interest)
CFC rules (Controlled Foreign Corporation)
Taxes on income of foreign companies under control (GILTI in the USA)
GAAR (General Anti-Avoidance Rule)
Rule against tax planning schemes (if not for business purposes = penalty)
Tax treaty
Agreement between countries so as not to pay taxes twice
Double taxation agreement (DTA)
Same as above
Tax credit
Credit for tax paid in another country
Tax deduction
Income deduction (expenses, charity, etc.)
Tax deferral
Deferral of tax to the future
Tax loss harvesting
Sale of loss-making assets to offset profit
Wash sale rule
Cannot sell at a loss and immediately buy back (30 days before/after)
Step-up in basis
Basis value increases to market value upon inheritance (US benefit)