bab 11

TRANSFER PRICING AND TAXATION INTERNATIONAL

Indonesia as a sovereign state has the right to make provisions on taxation. Function of the tax was withdrawn by the government primarily to finance government activities in order to provide public goods and services needed by all people of Indonesia. In addition, the tax also serves to regulate the behavior of citizens of the State to do or not do something. Indonesia is also part of the international world is definitely in the running wheels of government to international relations. International relations can be cooperation in defense security, cooperation in the social, economic, cultural and other, but the discussion is limited to the export and import (International Trade Transactions) related to international tax.

Any cooperation by all countries must be agreed in advance by the parties to reach a mutual commitment contained in a treaty, not the exception agreement in the field of taxation. Trade transactions between the two countries or countries potentially aspects of taxation, it is certainly to be regulated by the state or the international community in general to boost the economy and trade to countries such cooperation. This is important so as not to impede the flow of investment funds due to burdensome taxation Taxpayers bekedudukan in both countries that perform the transaction.

For that we need the international tax policy in terms of set the tax applicable in a country, assuming that each country could certainly have been set up in the tax provisions into its sovereign territory. But every country is free to regulate the taxation of the entity or a foreign national, international taxation is a form of international law, in which each state must submit to the international agreement known as the Vienna Convention.

Purpose of the International Tax Policy Each policy would have a specific purpose to be achieved, as well as international tax policy also has the objective to be achieved, namely to promote trade between countries, pushing the pace of investment in each country, the government tried to minimize the taxes that inhibit trade and investment. One attempt to minimize the burden is by doing penghindaraan international double taxation.

The principles that must be understood in international taxation Doernberg (1989) mention three elements that must be met netraliats in international taxation policy:

1. Capital Export Neutrality (Domestic Market Neutrality): Wherever we invest, the burden of taxes paid should be the same. So it makes no difference if we invest in domestic or foreign. So do not get when investing abroad, a greater tax burden because of the two countries bear the tax. This will underpin Income Tax Act Art 24 governing foreign tax credits.
2. Capital Import Neutrality (International Market Neutrality): investment from wherever derived, subject to the same tax. So that investors from both domestic or overseas will be subject to the same tax rate when investing in a country. It is the right of taxation of the same underlying denagn taxpayer of the Interior (WPDN) of the permanent establishment (PE) or Fixed Uasah Agency (BUT), which can be a branch of the company or service activities through the time-test of the regulations.
3. National Neutrality: Every country has the same tax on income. So if any foreign taxes that can not be deducted as an expense credited earnings deduction.

BASIC CONCEPTS OF INTERNATIONAL TAXATION

• The concept of juridical double taxation and economic double taxation

In a narrow sense, double taxation occurs in all cases considered taxation a few times on a subject and / or objects in a single tax the same tax administration. Double taxation can be caused by taxation by a single ruler (singular power) or by various (layer) single, for example, can occur in the taxation of the buildings on the resale value (land and building tax) and income (income tax on rent or profit transfer). Double taxation is often called economic double taxation (economic double taxation). Double taxation in a broad sense, according to the state (jurisdiction) the tax collector, can be grouped into double taxation (1) internal (domestic) and (2) International.

Knechtle, in the book “Basic Problems in International Fiscal Law”, to name a few types of PBI (1) factual and potential, (2) juridical and economical, and (3) direct and indirect. Taxation if the claim is actually implemented by some State jurisdictions there will be a holder of PBI factual. If the two (or more) State tax claim holders, only one country who carry the claim that there will be taxation of potential PBI.

• The concept of the Avoidance of Double Taxation

Taxation on an income simultaneously by applying state of residence and source countries that apply the principle cause of international double taxation (international double taxation). By investors and entrepreneurs, double taxation shall be deemed to lack the mobility to facilitate the flow of investment, business and international trade. therefore, need to be removed or granted waivers. In addition to the provisions stipulated in domestic tax, double tax relief is generally well organized in P3B. International Taxation (hereinafter in this module is called PBI) appears when there is a conflict of jurisdiction of taxation, both attached to the central government (state) and local governments (provinces, cities and counties), and are attached to each state (overlapping of tax jurisdiction in the international sphere). PBI with respect to income tax, in case of conflict of taxation rights between the countries have economic ties, applying the principle of division of the right of taxation is not the same. Definition and purpose of avoidance of double taxation (P3B) In connection with the notion of double taxation (double taxation), Knechtle in his book entitled “Basic Problems in International Fiscal Law” (1979) provide a detailed discussion. . Knechtle distinguish the notion of double taxation, namely:

1. By Area, Double taxation is a form of taxation and other levies more than once, which can double or more over a fiscal fact.
2. In Narrow, Double taxation occurs in all cases considered taxation a few times on a subject and / or objects in a single tax the same tax administration, which ruled out the imposition of taxes by local governments.

Furthermore, in accordance with State taxation (jurisdiction) the tax collector, double taxation can be grouped into:

• Internal (domestic)
• The International

RELATIONSHIP WITH THE CONCEPT OF TAX INCOME FROM ABROAD

Each country claims to impose taxes on income generated within its borders. However, the national philosophy on the taxation of resources from abroad is different and this is important from the perspective of a tax planner.

Based on the principle of worldwide taxation, foreign earned income of a domestic company is taxable in full fine imposed in the host country or countries of origin. To avoid the reluctance of businesses to expand abroad and to maintain the concept of neutralization abroad, the domicile of the parent company (country seat) may elect to treat dbayarkan foreign tax credit against tax liability as a domestic parent company or deduction as a deduction on income taxable.

REASONS FOR FOREIGN TAX CREDIT

Creditors of foreign tax can be calculated as a direct credit on income tax paid on earnings branch or subsidiary and any tax withheld at source, such as dividends, interest, and royalties are sent back to domestic investors. The tax credit can also be estimated if the amount of foreign income tax paid is not too obvious (when the foreign subsidiary sent most profits come from overseas to domestic holding company).

Dividends are reported in the parent company’s tax return should be calculated gross (gross – up) to cover the amount of tax levy taxes plus all applicable overseas. This means that the domestic parent companies receiving dividends which includes taxes owed to foreign governments and then pay the tax. Indirect Tax Credit that allowed foreign (foreign income taxes deemed paid) is determined as follows: Payment of dividends (including the entire tax levy) / Profit after income tax of foreign X

foreign tax can be credited.

Foreign tax credit limitation

Some states impose a tax on its source with a tax credit for foreign taxes are the source of a maximum of a related domestic tax on the profits that can be imposed. The maximum tax liability is where the higher the tax rate in the host country or countries of origin. To prevent foreign tax credit can eliminate the tax on domestic income, many states set limits on the amount of general foreign tax can be credited each year. Foreign credit is calculated as follows: Foreign tax credit limitation = taxable income / tax worldwide income before taxes X credit.

Foreign tax credit

limitation applies separately to U.S. tax on foreign source income tax for each of the following types of income:

• Passive income (example: income from investments)
• Revenues of financial services
• levy a high tax revenues
• Revenue of transport
• Dividends from each of the foreign company with a share of ownership by 10% to 50% of its own foreign policies for the U.S. tax on

Tax Treaty

Although the foreign tax credit to protect the sources of foreign tax of double taxation (in some cases), tax treaties can do more than that. Tax treaties usually contain how taxes and tax incentives will be subject to, respected, shared, or else written off against revenues generated by residents of States of other countries in the tax jurisdictions. Tax treaties also affect the tax levy on dividends, interest, royalties paid by companies in the country to foreign shareholders.

Consideration of Foreign Currencies

Gain or Loss on transactions in currencies other than the functional currency is generally recorded at the point of view Duan transaction. Under this approach, any gain or loss requires that security be qualified as a protector of the transaction value of certain foreign currency can be integrated with the underlying transaction.

INTERNATIONAL TAX PLANNING IN MULTINATIONAL COMPANIES

In the tax planning of multinational companies have certain advantages over a purely domestic firm because it has greater flexibility in determining the geographic location of production and distribution systems. This flexibility provides the opportunity to utilize their own national tax ataryuridis differences so as to lower the overall corporate tax burden.

The observation of these tax planning issues at the start with two basic things:

• tax considerations should never mengandalikan business strategy
• Changes in tax laws are constantly limit the benefits of tax planning in the long term.

VARIABLES IN THE INTERNATIONAL TRANSFER PRICING

Transfer prices set a monetary value on the exchange between firms that take place between the operating unit and is a substitute for market prices. In general, the transfer price is recorded as revenue by one unit and the unit cost by others. Cross-border transactions of multinational corporations are also open to a number of environmental influences that created the same time destroying the opportunity to increase profits through transfer pricing. A number of variables separti tax rate competition infalsi rates, currency values, limitations on the transfer of funds, political risk and the interests of joint venture partners are very complicated transfer pricing decisions.

FUNDAMENTAL PROBLEM IN THE METHOD OF TRANSFER PRICE

tax factor

Reasonable transaction price is the price to be received by a party unrelated to the particular item the same or similar in the same or similar circumstances is appropriate. Reasonable method to determine the transaction price can be received are:

• method of determining the comparable uncontrolled price.
• method of determining the resale price.
• plus the cost price determination methods and
• Other methods of assessment levels

factor Tariff

Tariffs for imported goods also affect transfer pricing policies of multinational corporations. In addition to the identification of equilibrium, multinational companies must consider the costs and benefits, both internal an external. High tax rates paid by the importer will generate the income tax base is lower.

Competitiveness Factors

Similarly, lower transfer rates can be used to protect the ongoing operation of the influence of foreign competition is increasingly tied to the local market or other markets. Consideration must be balanced against the loss of competitiveness was much the opposite effect. Transfer rates for competitive reasons may invite anti-trust action by the government.

Performance Evaluation Factors

Transfer pricing policy is also influenced by their influence on behavior management and is often a major determinant of corporate performance.

source :

http://wartawarga.gunadarma.ac.id/2012/04/eva-lestari-21208448-4eb11-tugas-softskill-akuntansi-internasional-bab-11/