For the Press
Cross-border taxation involves sourcing and nexus rules and often depends upon the existence of a permanent establishment (PE), sometimes called a fixed establishment, in a foreign jurisdiction, although efforts to address the digital or virtual economy have led to various attempts at taxing on the basis of virtual PE.
Most countries’ international taxes are based on a territorial system, but the United States uses a worldwide system based on citizenship rather than residency. Foreign taxes on foreign-source income are generally either deducted or credited to avoid double taxation, although double nontaxation (i.e., stateless income) may result. Treaties often play a role in determining which country has jurisdiction to tax income, and when double taxation occurs, it may be resolved through the countries’ competent authority procedures.
Two prominent efforts to address base erosion and profit shifting (BEPS), in which income is earned in one jurisdiction but taxed in another, are the United Kingdom’s diverted profits tax and the Organization for Economic Coordination and Development’s BEPS project.
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