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Mandatory Attached Reading Material Cite Reading Material Essay

¶ … mandatory attached reading material cite reading material sources. Please 200 words answer 1) How EU address interest royalty payments made companies member states? 2) What main principles EU Directive? 3) What a "beneficial owner" OECD's Article's 10, 11, & 12? 4) Describe a triangular transaction EU exemptions prove helpful a situation. How does the EU address interest and royalty payments made between associated companies of different member states?

One of the critical aims of EU statutes regarding interest and royalty payments is to avoid potentially crippling double taxation. To ensure this, a resident of one member state (state A) who receives interest income from a source based in another state (state B) is exempt from taxation from state B. (Module 10: Sources of Investment Income 2). In general, "interest will be deemed to arise in the country of residence of the payer unless the debt on which the interest arises was incurred in connection with a permanent establishment in the other country" (Module 10: Sources of Investment Income 2).

The stated purpose of Article 11 is intended to prevent excessive interest payments and facilitate the free flow of capital between member states unless "special relationship provisions expressly limit the factors to be taken into account in determining whether the interest is excessive by requiring the amount of excess to be determined with regard to the size of the debt on which the interest is paid" (Module 10: Sources of Investment Income 2). All states are specifically prohibited from withholding taxes on royalty payments and interest payments arising in a member state (Taxation of cross-border royalty payments, 2013, EU).

Q2. What are the main principles of the EU Directive?

Setting the terms for when interest can and must be paid and taxed clarifies the business agreements which take place between states and encourages interstate commerce by reducing the chance that taxation policies within one state will result in excessive or double taxation upon the entity located in another state. The EU Directive gives guidelines for when there are disputes between states or entities located in other states to minimize potential bones of contention and to reduce fears that interstate transactions will fall afoul of red tape. Specifically, the directive reads: that it "abolishes withholding tax on interest and royalty payments made between associated companies of different member states" (Module 10: Sources of Investment Income 4). It is noted that "since the objective of the proposed action, namely setting up a common system of taxation applicable to interest and royalty payments of associated companies of different Member States cannot be sufficiently achieved by the Member States and can therefore be better achieved at Community level, the Community may adopt measures" to do so (Council directive, 2003, EU).
Q3.What does it mean to be a "beneficial owner" under the OECD's Article's 10, 11, & 12?

According to the OECD, a beneficial owner of a dividend means that he or she has "the full right to use and enjoy the dividend unconstrained by a contractual or legal obligation to pass the payment received to another person" (DuMoulin, Dayan, & Steeves 2012). In other words, the…

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