International Tax Essentials: A Primer for Global Business (B2/C1)

📊 1. Vocabulary Match: Foundational Concepts

Match the **Key Term** (Blue border) to its **Official Definition** (Gray border). **(Immediate Feedback)**

⚖️ 2. Reading Text: The Challenge of Double Taxation

Residency vs. Source

International tax systems generally follow two primary principles: **residency** and **source**. The residency principle means a country taxes its residents on their worldwide income, while the Source Principle granted a country the right to tax income arising from economic activity within its borders.

This dual approach invariably leads to **juridical double taxation**, where the same income is levied by two different jurisdictions. To mitigate this detriment to global trade, nations rely on Double Taxation Conventions (DTCs). These treaties typically allocate the primary taxing right to one country, ensuring that the income is only subject to tax once, or that a credit is granted for tax paid abroad.

🧠 3. Reading Comprehension Check (Check Per Answer)

1. What is the fundamental difference between the Residency and Source principles?

Residency taxes worldwide income; Source taxes only income generated domestically.
Residency applies to individuals; Source applies only to corporations.
The Residency principle is an exception to the rule of the Source principle.

2. According to the text, why do Double Taxation Conventions (DTCs) exist?

To ensure all income is taxed at the highest possible rate.
To mitigate the negative impact of juridical double taxation on global trade.
To standardize tax rates across all signatory countries.

3. What mechanism do DTCs use to solve the double taxation issue?

They allocate primary taxing rights or grant a credit for foreign tax paid.
They require the taxpayer to pay tax only in the country of their citizenship.
They mandate that all income be entirely exempt from tax in one country.

⚖️ 4. Formal Vocabulary Prep (Match)

Match the **Gap-Fill Word** (Blue border) to its **Meaning** (Gray border) to prepare for the next activity. **(Immediate Feedback)**

📝 5. Academic Gap-Fill: Formal Language

Choose the **formal word** from the bank to complete the sentence. (Check at the end)

Word Bank:

jurisdiction mitigate stipulates deemed arising from alleviate

1. The treaty that the payment of royalties shall be taxed at 5%.

2. We must find a mechanism to the burden on multinational enterprises.

3. If a company has a Permanent Establishment, it is to have a taxable presence.

4. The court ruled that the income the digital services is taxable in this country.

5. The main objective of a Tax Treaty is to double taxation.

6. Every country has the sovereign right to exercise its tax over its citizens.

⚙️ 6. Grammar/Concept Check: Modality and Obligation

In tax and legal texts, **'shall'** is often used instead of 'must' or 'will' to express a strong legal obligation. **'May'** grants permission or a right.

Choose the Correct Modal or Phrase

1. Article 7 of the Treaty states that business profits ... only be taxed in the state of residence, unless there is a PE.

can
shall
would

2. If the foreign tax paid exceeds the domestic credit limit, the excess amount ... not be offset.

is allowing
may
must to

3. A company establishing a physical office in another country ... notify the local tax authorities.

is obligated to
has to may
would have to

🔍 7. Advanced Concept Match

Match the **Key Practice/Principle** (Blue border) to its **Associated Purpose** (Gray border). **(Immediate Feedback)**

📝 8. Advanced Collocation Gap-Fill

Choose the **Technical Collocation** from the bank to complete the sentence. (Check at the end)

Collocation Bank:

subject to statutory audit a tax haven fiscal year

1. The new entity must undergo a within six months of operation.

2. Dividends paid to non-residents are generally withholding tax.

3. The profits must be declared at the end of the company's , usually December 31st.

4. Setting up a shell corporation solely to avoid tax can be an indication of using .

🗣️ 9. Discussion & Analysis

Use these questions to discuss the practical application of International Tax concepts.

😎Why is the **Permanent Establishment (PE)** threshold so critical for global service providers?
😎In your opinion, **shall** all countries adopt the OECD's Model Convention for greater consistency?
😎What measures could a developing country take to **mitigate** tax base erosion without compromising foreign investment?

🌍 International Tax Essentials (B2/C1)