Case study 3 Mr. Danotaro lives with his family in Country A where the average income tax rate is 20% for income below EUR 210.000 and 30% for income between 210.000 and 230.000 and 40% above that limit. In 2021 he performs the following activities/receives the following income: • • • Business income (EUR 200.000) from online sales to customers living in Country B. Please note that he maintains a large warehouse in Country B where a significant number of employees work for the purpose of storing and delivering goods owned by Mr. Danotaro's enterprise. According to Country B's tax legislation, non-resident tax payers are subject to a 25% tax rate. Dividends (25.000) from his 30% shareholding in InvestmentCo, a company resident in state C. Dividends are taxed in country C at a 10% rate. Interests (15.000) from his bank account in State D. Please note that the bank charges in connection with his bank account amount to EUR 100. According to Country D's tax legislation interests are subject to a 15% withholding tax rate. To alleviate double taxation, Country A has in principle agreed in all double tax treaty concluded with other countries to apply the credit method. However, please note that the treaty concluded between Country A and C foresees the application of the exemption with progression method with regard to income within the meaning of Article 10. Also, the treaty concluded between Country A and D provides for the full exemption with regard to interest payments. What is the tax base and tax due in State A, B, C and D? Please explain your calculations.
Case study 3 Mr. Danotaro lives with his family in Country A where the average income tax rate is 20% for income below EUR 210.000 and 30% for income between 210.000 and 230.000 and 40% above that limit. In 2021 he performs the following activities/receives the following income: • • • Business income (EUR 200.000) from online sales to customers living in Country B. Please note that he maintains a large warehouse in Country B where a significant number of employees work for the purpose of storing and delivering goods owned by Mr. Danotaro's enterprise. According to Country B's tax legislation, non-resident tax payers are subject to a 25% tax rate. Dividends (25.000) from his 30% shareholding in InvestmentCo, a company resident in state C. Dividends are taxed in country C at a 10% rate. Interests (15.000) from his bank account in State D. Please note that the bank charges in connection with his bank account amount to EUR 100. According to Country D's tax legislation interests are subject to a 15% withholding tax rate. To alleviate double taxation, Country A has in principle agreed in all double tax treaty concluded with other countries to apply the credit method. However, please note that the treaty concluded between Country A and C foresees the application of the exemption with progression method with regard to income within the meaning of Article 10. Also, the treaty concluded between Country A and D provides for the full exemption with regard to interest payments. What is the tax base and tax due in State A, B, C and D? Please explain your calculations.
Chapter5: Gross Income: Exclusions
Section: Chapter Questions
Problem 6BCRQ
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Transcribed Image Text:Case study 3
Mr. Danotaro lives with his family in Country A where the average income tax rate is 20% for
income below EUR 210.000 and 30% for income between 210.000 and 230.000 and 40%
above that limit.
In 2021 he performs the following activities/receives the following income:
Business income (EUR 200.000) from online sales to customers living in Country B.
Please note that he maintains a large warehouse in Country B where a significant
number of employees work for the purpose of storing and delivering goods owned by
Mr. Danotaro's enterprise. According to Country B's tax legislation, non-resident tax
payers are subject to a 25% tax rate.
• Dividends (25.000) from his 30% shareholding in InvestmentCo, a company resident
in state C. Dividends are taxed in country C at a 10% rate.
Interests (15.000) from his bank account in State D. Please note that the bank charges
in connection with his bank account amount to EUR 100. According to Country D's tax
legislation interests are subject to a 15% withholding tax rate.
To alleviate double taxation, Country A has in principle agreed in all double tax treaty
concluded with other countries to apply the credit method. However, please note that the
treaty concluded between Country A and C foresees the application of the exemption with
progression method with regard to income within the meaning of Article 10. Also, the treaty
concluded between Country A and D provides for the full exemption with regard to interest
payments.
What is the tax base and tax due in State A, B, C and D? Piease explain your calculations.
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