Taxation of Foreign Direct Investment

Transcription

1 Taxation of Foreign Direct Investment An Introduction by Professor Alex Easson Professor of Law Queen's University Canada SERIES ON INTERNATIONAL TAXATION: NO 24 KLUWER LAW INTERNATIONAL THE HAGUE-LONDON-BOSTON

2 Table of Contents Preface xi Chapter 1: Chapter 2: The Phenomenon of Foreign Direct Investment 1. Types of Foreign Investment Private Foreign Investment Portfolio Investment and Direct Investment Foreign Direct Investment 2 2. Transnational Corporations 3 3. The Growing Importance of FDI 4 4. The Perceived Benefits of FDI Global Benefits FDI from the Perspective of "Host" Countries FDI from the Perspective of "Home" Countries Determinants of FDI Firm-specific Factors Location-specific Factors Free Trade Areas and Common Markets Taxation as a Determinant of FDI Types of Taxation Home Country Taxation Host Country Taxation The Growing Importance of Taxation as a Factor in FDI Decisions Investment Incentives Financial Incentives Tax Incentives Types of Tax Incentives Targeting of Incentives 23 General Principles of International Taxation 1. Introduction: The International Tax System An International Tax System? Jurisdiction to Tax Double Taxation Tax Evasion and Avoidance 33

3 viii TAXATION OF FOREIGN DIRECT INVESTMENT - AN INTRODUCTION 1.5. Removal of Administrative Obstacles to International Business The Allocation of Tax Revenue between States Host Country Taxation Residence and Source Rules Business Profits Tax Taxes on Capital and Capital Gains Withholding Tax Personal Income Taxes, Payroll Taxes and Social Security Contributions Consumption Taxes Customs Duties and Import Taxes Other Taxes Investment Incentives Anti-Avoidance Legislation Tax Administration Home Country Taxation Taxation of Foreign-Source Income Relief from Double Taxation Anti-Avoidance Rules Third Country Taxation 80 Chapter 3: Establishing a Foreign Investment 1. Methods of Direct Investment Sole Ownership or Joint Ownership Acquisitions and Mergers Joint Ventures "Greenfield" Investment Additional Investment and Reinvestment The Investment Vehicle Resident Company (Subsidiary or Affiliate) Non-resident Company (Branch or Establishment) Branch or Subsidiary? Partnerships and Joint Ventures "Hybrids" Financing the Investment Financing Acquisitions Financing Greenfield Investments Capital Structures Wholly-owned subsidiary Jointly-owned Affiliate Third-Country Holding Companies Host-Country Taxation Third-Country Taxation ; Ill 5.3. Home-Country Taxation 113

4 CONTENTS IX Chapter 4: Chapter 5: Operating a Foreign-Invested Undertaking 1. Operational Tax Planning General Considerations Start-up Losses Technology Transfer Equipment Leasing Additional Financing Repatriation of Profits Liquidation Executive Remuneration Residence Employment Status Expatriate Relief Home-Country Taxation Tax Planning and Other Problems Transfer Pricing The Importance of Transfer Pricing Transfer Pricing Transactions Transfer Pricing Adjustments Documentation Penalties Advance Pricing Agreements Correlative Adjustments Intermediate Third-Country Affiliates General Considerations "Centres" Tax Factors in Locational Decisions 138 Taxing Foreign Investment in the Twenty-First Century 1. The International Tax Kaleidoscope Convergence and Common Trends Tax Reform Transnational Tax Law The World Trade Organisation (WTO) The Organisation for Economic Cooperation and Development (OECD) The European Union Other Regional Organisations The Challenges of Globalisation The Impact of Globalisation on Tax Policy The Competition for Tax Revenues: The Transfer Pricing Issue The Problems of Taxing Income from Capital: Avoidance and Evasion Attracting FDI: Unfair Tax Competition Tax Havens and Preferential Tax Regimes Technological Change: The Growth of Electronic Commerce 173

5 X TAXATION OF FOREIGN DIRECT INVESTMENT - AN INTRODUCTION 4. An International Tax System for the Twenty-First Century The Need for Reform Fundamental Approaches to International Tax Reform The Allocation of Taxing Jurisdiction The Problem of Low-Tax Jurisdictions 183 Bibliography 185 Index 195