Tax Treaties (double taxation agreements or DTAs) are international agreements or conventions concluded with the object of eliminating double taxation by the contracting states. To succeed in international tax planning, it is essential to engage in deep and far-reaching calculations. Tax treaties themselves and the OECD Commentary on the Model Convention give you practical hands-on guidance on international tax planning issues.

Treaty Shopping under the Albania – Bulgaria Tax Treaty

Treaty shopping is the use of a tax treaty by a person resident in a country that is not a party to the treaty, i.e. in the present instance by someone who is a resident of neither Albania nor Bulgaria. However, it is becoming more and more difficult to use provisions, which were intended to prevent double taxation, in such a way that they result, for the purposes of an international tax plan.

Tax Treaty news from the OECD

The OECD has released two reports submitted to its Committee on Fiscal Affairs by an Informal Consultative Group of business and government representatives. The Reports address, respectively:

(a) Technical issues relating to granting treaty benefits with respect to income of collective investment vehicles; and
(b) Procedural barriers to claims for treaty benefits that affect portfolio investors more generally.

These are issues which may impact on international tax planning transactions.

Know your Offshore Terms:

Risk Shifting and Risk Distribution

Before an insurance payment can be classified as a premium, two essential factors must be present: risk shifting and risk distribution. To shift the risk, the insured must transfer it to another who has the financial capacity to make good the losses.

Transfer Pricing Calculations

Alternative methods, recommended by the Revenue or prescribed by the law, include: (a) the comparable uncontrolled price (CUP) method; (b) the resale price method; (c) the cost-plus method; (d) the mixture of basic methods; (e) the profit comparison; (f) the return on capital invested method; (g) the profit split method; and (h) the unitary method.

Choice of Law in International Tax Planning

Choice of law is a conflict of laws (private international law) issue, and the rules are part of the domestic law of each country. Choice of law problems frequently arise with respect to entities that are not known to, or do not enjoy legal personality in, a foreign system. The determination of the applicable law for the purpose of characterising such entities varies from one legal system to another, a point to be watched in the design of an international tax plan.

Transfer Pricing Four-Step Methodology

The Australian Revenue has set out a four-step transfer pricing approach and encourages taxpayers to make use of this functional analysis, as a tool for taxpayers to develop the methodology and useful documentation needed to support the evaluation of their transfer prices. There is general worldwide approval of the Australian approach to transfer pricing.

Terms & Conditions

Tax Treaty Between Albania and Bulgaria

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Introductory note on Tax Treaty Planning