Welcome back to ADITextra – the theme for this week’s blog for ADIT International Tax candidates is expertise. The ADIT certification is an excellent way to increase and showcase your international tax expertise.
The Advanced Diploma in International Tax is a practical qualification, with the exam questions mainly focused on applying your knowledge to real-world scenarios. We’ve now reached the half-way point with our live tuition classes for Principles of International Tax, Transfer Pricing and UK Taxation. As a result, the students can see more clearly how different topics on the syllabus blend together to build their overall understanding and improve their expertise.
Read on to learn about the areas of expertise covered in this week’s online ADIT International Tax classes. As our US Tax course launched on Thursday, the spotlight for this edition of ADITextra is Introduction to US Taxation.
1. Transfer Pricing
In Tuesday’s session, James (Jimmy) Ryan looked at specific types of transactions:
Chapter VII of the OECD Transfer Pricing Guidelines (TPG) on intra-group services concentrates on two issues:
• Has a service actually been rendered?
• If so, what is the charge in accordance with the arm’s length principle?
When considering whether a service has actually been rendered, you can reach the conclusion by asking:
• Would a 3rd party business in similar circumstances have been willing to pay for the service, or
• Would the entity have performed the activity itself?
Section D of Chapter 7 offers specific guidance on a particular category of intra-group services, known as low value-adding intra-group services, where a simplified approach may be used. Paragraph 7.49 provides examples of services likely to meet the definition of low value-adding services. However, it is important to remember that the services listed in this paragraph do not automatically fall within the definition. For instance, these types of services must not be part of the core business of the multinational group (see Paragraph 7.45).
Loans and Other Financial Transactions
The OECD released ‘Transfer Pricing Guidance on Financial Transactions‘ in February 2020. Sections A to E became included in Chapter X of the OECD Transfer Pricing Guidelines. While Section F was added to Section D.1.2.1 in Chapter 1 of the TPG.
You are allowed to take a bound copy of the OECD Transfer Pricing Guidelines into your ADIT Transfer Pricing paper as a permitted book. However, if you are using an older copy of the TPG or the 2020/21 version of the Kees Van Raad ‘Materials on International & EU Tax Law‘, the new Chapter 10 will not be included.
If you want to use a self-printed version of the OECD’s report on ‘Transfer Pricing Guidance on Financial Transactions‘ as your permitted text, you must obtain individual, written dispensation from the CIOT for each exam. Therefore, you should contact the CIOT at firstname.lastname@example.org for further advice and instructions. You can find further guidance on self-printed books here.
Sharing ADIT International Tax Expertise
Maintaining your international tax expertise requires continuous effort, particularly in the fast-paced area of Transfer Pricing. Jimmy participated in an advanced transfer pricing programme earlier this year to deepen his knowledge. He enthusiastically shares his expertise with his students to develop their skills, both for the ADIT exams and their international tax careers.
We’re no longer accepting bookings for this semester’s Transfer Pricing course. If you would like to express your interest in joining us for the December 2021 course, please use the contact form below or email email@example.com.
2. Principles of International Tax
In Wednesday’s Principles of International Tax class, Jimmy continued the detailed review of the OECD Model Tax Convention. If you missed it, check out this edition of ADITextra to watch Jimmy’s introduction to the OECD Model Tax Convention.
This week, he guided the students through the following articles:
Methods of Elimination of Double Taxation – Articles 23A and 23B
Non Discrimination – Article 24
Mutual Agreement Procedure (MAP) – Article 25
Exchange of Information – Article 26
Assistance in the Collection of Taxes – Article 27
As part of the discussion on non-discrimination under Article 24, Jimmy used his expertise to summarise the UK Court of Appeal’s judgment in HMRC v FCE Bank plc, which distinguished the same court’s decision in Boake Allen on its facts. You should be able to compare and contrast these cases in the context of an essay on the non-discrimination article in double tax treaties.
Building ADIT International Tax Expertise
To build the expertise to pass the ADIT exams, you have to gain the knowledge and learn how to apply it by practicing past paper questions. By running live classes with small numbers, we make this skillset a focus of our study programmes.
For the weekly assignment, the Principles of International Tax class are submitting two past paper questions for Jimmy’s feedback:
- An essay question on non-discrimination:
A non-discrimination article can be found in most Double Taxation Conventions.
You are required to explore the function of the non-discrimination article. Your answer should, at the very least, include a consideration of the types of discrimination Article 24 does and does not contemplate, who benefits from the article, and non-discrimination in relation to permanent establishments.
- A scenario-based question on assistance in the collection of taxes
Would you feel comfortable working on these questions at this stage in your studies? We’re only 12 weeks away from the June exams. The time will pass quickly and, if you haven’t already done so, now is the time to get serious! For more help getting prepared, check out our recent article for the CIOT’s Study Advance newsletter.
We’re no longer accepting bookings for this semester’s Principles of International Taxation course. If you would like to express your interest in joining us for the December 2021 course, please use the contact form below or email firstname.lastname@example.org.
3. UK Tax
UK Permanent Establishment – Chapter 2 of Part 24 Corporation Tax Act 2010
Entity Classification for UK Tax Purposes:
Transfer Pricing – Part 4 Taxation (International & Other Provisions) Act [TIOPA] 2010
You’ll note that the legal references above are to UK legislation and case law. When you’re sitting the UK ADIT paper (or another jurisdiction module), it’s important to always refer to the domestic legislation before moving on to consider the impact of international tax provisions.
For instance, the focus for a transfer pricing question on the Module 2.09 paper will be the UK’s legislation in Part 4 TIOPA 2010. You’ll need to understand and discuss if, why and how the UK legislation applies before considering the application of the OECD Transfer Pricing Guidelines.
Similarly, when considering if a non-resident company has a permanent establishment in the UK, the starting point is the UK’s domestic legislation. If the UK activities do not create a PE under CTA 2010, then you are not required to look at the definition in Article 5 of the OECD Model Tax Convention. However, if there is a permanent establishment under UK domestic law, you’ll move on to evaluate the impact of any double tax treaty provisions which could override it.
Improving ADIT International Tax Expertise
Although we’re no longer accepting bookings for this semester’s United Kingdom Taxation course, you can still benefit from our expertise. We have compiled a comprehensive set of online study materials for the ADIT UK paper. We’re launching a limited edition beta-testing version of these materials in the next couple of weeks.
The UK study materials were written by Catriona Loughran FCA CTA ADIT and other international tax specialists, including:
- Lorraine Nelson, International Tax Director at Grant Thornton
- James Heathcote, Private Client Director at Lancaster Knox
- Jane Lee, Head of Employer Solutions at Grant Thornton
- Hannah Hurley, Corporate Tax at Blick Rothenberg
- Ciaran McGee, VAT Specialist and Founder at CJM Chartered Tax Advisers
If you are interested in obtaining a set of the UK study materials for the June 2021 exam, please email email@example.com.
4. US Tax
Thursday was the first live tuition class for the US Taxation (Module 2.10) course with Ishali Patel. Ishali welcomed students from as far afield as Kiev, Ukraine and Chicago, USA.
As most of the participants are new to US tax, Ishali started with the fundamentals, discussing:
Who is a US person for tax purposes?
US residency test for individuals
Source of income rules
Exemptions from US tax
Source rules for expenses
Withholding tax principles
Check out the spotlight section below for an excerpt from Ishali’s class.
The good news is that you are not too late to join us for the US Tax option. Plus, we’re offering you the opportunity to book for June 2021 at a special introductory rate to celebrate adding Module 2.10 to our portfolio.
5. Spotlight on Introduction to US Tax
Each week, we’ll put the spotlight on a topic covered in one of our classes. This time, let’s look at the introduction to US tax provided by Ishali in this week’s first class.
Who is a US person for tax purposes?
- US citizens:
- born in the US
- one or both parents a US citizen
- Resident alien individuals
- green card test – lawful permanent residence
- substantial presence test
- Domestic corporation (organized under U.S. law)
Residency test for individuals
- Greencard test – An alien individual is a US resident for a calendar year if, at any time during the calendar year, the alien is a lawful permanent resident of the US (i.e. has a greencard that he has not formally revoked).
- Substantial Presence Test – To meet this test, an alien individual must be physically present in the US on at least:
- 31 days during 2020 and
- 183 days during the 3-year period that includes 2020, 2019 & 2018 counting:
- All the days you were present in 2020 and
- 1/3 of the days you were present in 2019
- 1/6 of the days you were present in 2018
Watch & Learn
Watch part of this week’s United States Taxation class for an introduction to US tax.
There’s still time to join our US Taxation course and grow your ADIT International Tax expertise – Book now and let us guide you to ADIT success.
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