This document summarizes the key topics covered in an international taxation course, including: 1) Defining tax residence and the tests used to determine a corporate residence, including place of control and incorporation. 2) The OECD model tax convention and its role in establishing international standards for preventing double taxation. 3) Withholding taxes and how countries tax income earned within their borders by foreign individuals and corporations. 4) Methods for relieving double taxation through exemption, tax credit, and deduction in double taxation treaties.

1. Pannasastra University of Cambodia
Topic: International Taxation
Course: Fiscal Legislation & Cambodia Taxation
Prof. PEN Sophara
Period: 7:00 – 8:30 PM (Monday & Thursday)
Group 7:
1) THON Pheakdey
2) SENG Sobunna
3) PRAK Sopheavina

2. 1
Contents:
I. Objective
II. The Organization for Economic Co-operation and Development (OECD) – model tax convention
III. The concept of corporate residence
IV. The OECD Article of the model convention with respect to taxes on income and on capital
V. Withholding Tax
VI. Underlying Tax
VII. Means of establishing a taxable presence in another country
VIII. Double Taxation treaties
a. The OECD model tax convention
b. Principles of relief for foreign taxes
IX. Conclusion

3. I. OBJECTIVES
 Define term “residence”
 Withholding taxes and different ways of an enterprise establishing a
taxable presence
 Double taxation treaties and the methods used to relieve foreign tax

4. II. The Organization for Economic Co-operation and Development (OECD) –
model tax convention
 OECD published a model tax – a treaty that can be used by countries
when drafting their double tax treaties.

5. 1III. The concept of corporate residence
A residence-based tax, whether corporate income tax will be charged depends on the
residence
The followings are the test for establishing residence of an enterprise:
 Place of control and central management of an enterprise – the place where
directors’ meetings are held is usually an important criterion when examine the
exercise of control
 Place of incorporation
 Place of control and place of incorporation

6. IV. The OECD Article of the model convention with respect to taxes on income and on
capital
 The OECD – Articles of the model convention with respect to taxes on income and on capital defines the
meaning of residence in Article 4, paragraph 1
 Article 4, paragraph 3, gives the preference to the concept of place of control and central management
• Contracting States – countries that are party to the treaty
• The changes on May 2003 of the OECD model is to strengthen the application of the effective
management concept
• Place of effective management – the key management and commercial decisions that are necessary
for the conduct of the entity’s business
• Place of effective management – ordinary place where the most senior person or group of person
makes its decisions which normally corresponds to where it meets
 OECD can be applied when there is no clear place of effective management or the place of effective management
 OECD model based tax treaty, residence due to place of incorporation will only apply if effective management and
primary economics activity do not resolve the problem

7. V. Withholding tax
The general withholding tax shall be determined as follows:
The rate of 15 percent on:
Income received by a physical person from the performance of services including management,
consulting, and similar services.
Royalties for intangibles and interest in mineral, and interest paid by a resident taxpayer carrying
on business other than domestic banks and saving institutions to a resident taxpayer
On the income from rental of movable and immovable
The rate of 10 percent
 On the income from rental of movable and immovable
The rate of 6 percent
 On interest paid by a domestic bank or saving institution taxpayer having fixed term deposit
account
The rate of 4 percent
On interest paid by a domestic bank or saving institution taxpayer having non-fixed term saving
account

8.  The type of payment normally subject to withholding tax include:
• Interest
• Royalties
• Rents
• Dividend
• Capital gain

9. VI. Underlying tax
 Is the calculated as a gross among of dividend receive by the enterprise as
a proportion of the after tax profit of the foreign enterprise times the tax
paid on those profits.

10. VII.Means of establishing a taxable presence
in another country
 Enterprises with trading interests abroad have to make is whether to run an
overseas operation.
 The main taxation considerations in the decision between the two options:
 Subsidiary
 Branch
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11. VIII. Double Taxation treaties
 The territorial approach to taxation: each country has the right to tax income
earned inside it borders.
 The worldwide approach: claims the right to tax income arising outside its
border if that income is received by a corporation deemed resident within the
country.
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12. a. The OECD model tax convention
 Business profit of an enterprise of a contracting state shall be taxable only in
that state unless the enterprise carries on a business in the other contracting
state through a permanent establishment in that state.
 The term permanent establishment includes especially:
A place of management
A branch
An office
A factory
A workshop
A mine, an oil or gas well, a quarry or any other place of extraction of
natural resources.(The OECD model in Article 5)
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13. b. Principles of relief for foreign taxes
 Exemption
 Tax credit
 Deduction
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14. IX. Conclusion 14

15. Thank you for your attention!
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