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Advanced Introduction to International Tax Law, Second Edition

Reuven S. Avi-Yonah

This second edition of the Advanced Introduction to International Tax Law provides an updated and succinct, yet highly informative overview of the key issues surrounding taxation and international law from Reuven Avi-Yonah, a leading authority on international tax. This small but powerful book surveys the nuances of the varying taxation systems, offering expert insight into the scope, reach and nature of international tax regimes, as well as providing an excellent platform for understanding how the principles of jurisdiction apply to tax and the connected tools that are used by countries in imposing taxes.
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Jurisdiction to tax and definitions

Reuven S. Avi-Yonah

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In international law there are two generally accepted bases for jurisdiction, nationality and territoriality. A country has jurisdiction over its citizens regardless of where they are located because they have a personal link or allegiance to it. A country also has jurisdiction over persons or things within its territory.

In international tax law these two bases of jurisdiction have been transformed into residence and source jurisdiction. A country has the right to tax its residents (defined below) on their worldwide income. The reason that tax residence rather than nationality is used in this context is that otherwise it would be too easy for rich people to obtain a passport from a tax haven but live permanently in another country without being subject to worldwide tax anywhere.

A country also has the right to tax income that arises from sources within it. The concept of the source of income is difficult and will be discussed in the next chapter. Fundamentally, source is a legal rather than an economic concept, and is defined by source rules that are widely accepted for most types of income.

In theory, it could be possible to base taxation either purely on residence or purely on source. In a pure residence-based regime, each country would tax its residents on worldwide income, and no country would tax non-residents. However, most countries would like to tax non-residents, and in the case of corporations residence is not a meaningful enough concept on which to...

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