What is International Taxation ?

Term International Taxation is somewhat misleading as there is no standard law defined which is governed by all Countries . International taxation is an International aspect of the income tax laws of particular countries .

Tax Treaties or Double Tax Avoidance Agreement (DTAA) between two countries are an international aspect of a country’s income tax system .It includes all domestic issues along with foreign elements .

International Taxation cover majorly two aspects :

1. Taxation of resident individuals and corporate on income arising in foreign countries (say Outside India ) and 
2. Taxation of non resident which arising domestically, Say India in case if we are looking from Indian point of view

This is about taxing rights by respective countries. 

When a USA company wants to set up business in India . They will look at all aspects. I am sharing few points in this regard: 

1. What will be the legal entity type? i.e. Pvt Ltd or other . 
2. Should we start with company form directly or we should first look at other options like liaison office/branch etc.
3. What will be taxation ?
4. What will be the Corporate tax rate in India ?
5. What will be the tax rate in the Dividend declared by the Indian company to foreign shareholders.

DTAA and Transfer Pricing provision will play a vital role in these transactions. 

One has to check withholding tax on Dividend as per domestic income tax law and DTAA and verify whichever is beneficial to the taxpayer . Accordingly they issue Dividend and withhold tax. Taxpayers can claim credit in their country as per defined treaty . 

Tax Treaties can be Bilateral or Multilateral .

Same way if Indian companies want to set up business outside India, they will check all these aspects . In any cross border transaction ,FEMA, Income tax, International and Transfer Pricing provision will play a big role . Need to review from all aspects. Business set up decision is like an irreversible decision and it involves a high cost for any change in this decision . 

One has to be very clear regarding structure and country before starting their venture . 

You can read our post related Whether PAN is mandatory for Non Resident Payment? to get idea about PAN requirement for NRI.