Assignment Task :

Question 1  

On 1 October 2018 Edwin disposed of his tax consultancy practice (‘the practice’) for a significant capital gain. Edwin had owned the practice since July 2005. The practice was sold for $4 million. The 2017/208 tax year was a Edwin also owns 45% of the shares in Edwin Pty Ltd (‘EPL’), a bookkeeping company. The other shares are held by Thomas Cross (45%) and Pamela Conti (10%). The assets of EPL are valued at $1 million.

During the 2017/208 tax year, the turnover of EPL was $200,000. Edwin’sshares in EPL are valued at $450,000. Edwin borrowed $250,000 to purchasehis shares in EPL.

Edwin also owns a large piece of vacant land in Byron Bay on which heintends to construct a holiday house for him and his wife. The value of the land at the date Edwin disposed of the practice was $1.2m.

 

Required: Is Edwin entitled to any concessions in respect of the significant gain made on the disposal of his consultancy practice.

 

QUESTION 2  

ACO, a company resident in country A, carries on a video streaming business. In return for monthly subscription fees, customers are able to watch videos online, and are able to download copies of videos on to their mobile devices in order to watch the videos offline (for a limited period).

ACO is the owner or licensee of the copyright in its library of videos. ACO has many individual customers in country B. These individual customers enter into subscription contracts with ACO on ACO's website. Monthly subscription payments are made to ACO by the charging of customers' credit cards (evidenced by invoices which ACO sends to customers' email addresses).

ACO has no physical presence in country B. However, ACO is registered for goods and services tax (known as VAT) in country B, and has appointed an unrelated accounting firm (BCO) in country B to act as its VAT agent.

In accordance with country B law, ACO charges VAT on its invoices to country B customers. Country A and Country B have concluded a double tax treaty in identical terms to the 2017 OECD Model Tax Convention (MTC).

 

Required: 

Discuss whether country B is allowed to tax the income received by ACO from its customers in country B under the A/B treaty?

 

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  • Posted on : September 17th, 2018

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