3.3. Preferential Low Taxation
The third prerequisite for the prohibition of deduction of business expenses stipulates…
One could question whether the preferential tax regime may relate exclusively to…
Preferential taxation is considered low within the meaning of Sec. 4j(2) ITA if it…
The following example demonstrates how the licensor’s tax burden is calculated pursuant…
Example:…
A licensor, resident in country A, receives license fees of 100 from its subsidiary resident in Germany. The licensor incurs expenses of 20 in connection with the licensed assets. The applicable tax rate in country A is 30%. The licensor’s tax burden is therefore 24 (80 × 30%, effective tax rate of 24%, i.e. low tax rate). However, Sec. 4j(2) sentence 1 ITA is based on the tax burden of the gross income. As a result, the burden from income taxes remains at 30%. The license fees, therefore, do not qualify as low-taxed within the meaning of Sec. 4j(2) sentence 1 ITA.…
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