What does applicable taxes mean

The mechanism is essentially one of adjusting payments, profits, gains, taxable income brackets, tax allowances, etc. INPUT TAX -- Term used in connection with VAT to denote the tax embodied in purchases made by a trader or entrepreneur who will usually be able to obtain a credit for the tax that his suppliers have paid on the goods supplied to him which form his "inputs".

Instruments include contracts, notes, and leases e. Intangible property is usually transferred by way of a licensing agreement, and payments for the intangible are made in the form of royalties. All corporate-source income, whether retained or distributed, is taxed at the appropriate marginal rate in the hands of ultimate shareholders. The IRM guidelines do not confer any rights on taxpayers. The purposes of the IMF are, inter alia, to promote international monetary cooperation, facilitate the expansion and balance growth of international trade and promote stability in foreign exchange.

In broader terms, in includes domestic legislation covering foreign income of residents worldwide income and domestic income of non-residents. The cost of general services such as management, administrative and similar services may be often allocated among the various members of the group without any profit mark-up, whereas services performed in the ordinary course of business are subject to arm's length conditions. It adds a certain percentage of the asset's initial cost to the full depreciation write-off and is usually given in the year of acquisition or as soon as possible thereafter.

The deductions in this part are individually listed, item by item. The shareholders are generally liable only to the extent of the nominal value of their shares. This can be either an incorporated venture or an unincorporated venture. The income is taxed at the parent's highest rate of tax. KNOW-HOW -- All undivulged technical information, whether or not capable of being patented, that is necessary for the industrial reproduction of a product or process, i.

Payments for know-how may be taxed as royalties in many cases. LANDED COST -- Term used in relation to the importation of goods which means the sum total of the cost of the goods concerned, the amount of customs duties levied on those goods and the expense incurred in unloading them.

Conversely, for tax purposes a partnership is often not regarded as a separate legal entity, its profits being taxed in the hands of the individual partners. What constitutes a legal entity for tax purposes may or may not coincide with what constitutes a legal entity for general law purposes.

Tax law does not allow a deduction for such a reserve. The actual commercial activities are carried out in another country. Royalties are generally paid for the right to use the technology or know-how. LIEN -- A charge against property, making it security for the payment of a debt, judgment, mortgage, or taxes.

LIFO -- Method "last in, first out" of valuing inventory or stock-in-trade whereby the goods or materials purchased last are regarded as those which are sold first. An LLC may be taxed as a partnership or a corporation depending on the nature of the status under which it is organized. A general partner is involved in the management and day-to-day operation of the partnership and is jointly and severally liable for all obligations of the partnership.

A limited partner only makes a financial contribution to the partnership and shares in the profits; he is liable for partnership obligations only to the extent of his investment. Limited partners are usually restricted from taking an active part in the management of the business of the partnership or from allowing their name to be used in the conduct of the business.

Location of immovable property in a country means, in most countries, that the country taxes the income derived therefrom and possibly the value and capital gains realized on alienation, even if the owner is not a resident of that country.

Long-term capital gains may be taxed at reduced rates. LOSSES -- The term may broadly be defined as the excess of expenses over revenues for a period, or the excess of the cost of assets over the proceeds when the assets are sold or otherwise disposed of, or abandoned or destroyed.

LOSS RELIEF -- Most income tax laws provide some form of relief for losses incurred, either by carrying over the loss to offset it against profits in previous years carry-back or in future years carry-forward or by setting off the loss against other income of the same taxpayer in the year in which the loss was incurred. Expenses incurred by a taxpayer to provide for his family, former spouse or other relatives.

Expenses for the upkeep or preservation of a building or equipment. In the case of a group of companies it may be important to decide how far the general expenses of management of the group should be charged out to and recovered from the members of the group.

MARK-UP -- An increase in the price of something, especially from the price a trader pays for something to the price he sells it for. In the context of transfer pricing, one method to estimate an arm's length price for transactions between affiliated companies is to increase the supplier's cost by an appropriate profit mark-up Cost-plus method. Usually this does not have treaty status, but the status depends on the document itself.

The mixer company receives income both from countries with a higher tax rate than that of the destination country and from countries with a lower tax rate, which it then pays out as a dividend. This structure has the effect of averaging out the rate of foreign tax paid. For example, the rules may provide that certain consequences will follow if the sole, main or principal purpose of certain transaction is the reduction of tax.

This procedure, described and authorized by Article 25 of the OECD Model Tax Convention, can be used to eliminate double taxation that could arise from a transfer pricing adjustment.

Or portfolio of securities held by an investment company on behalf of investors. Low-income person or family would receive a direct subsidy, called a negative income tax. Many countries levy income tax on this basis. A trader's operating losses constitute broadly the excess of his operating expenditure over receipts from his operations.

The taxable base for resident taxpayers is normally the taxpayer's worldwide net worth, i. In US, the taxable income of a multistate corporation may be apportioned to a specific state only if the corporation has a sufficient nexus in the state. Usually, a certain minimum amount of nominal capital is required to establish a legal entity. The spread is taxed as ordinary income. For example, a lender may take the property pledged as collateral to satisfy a debt, but has no recourse to other assets of the borrower.

Non-residents are usually taxed on income derived from sources within the taxing jurisdiction whereas residents may be taxed on worldwide income. Founded in , the OECD provides a forum for representatives of countries to discuss and attempt to coordinate economic and social policies.

It has an especially significant role in international tax matters. Its website is www. OFFICE -- For purpose of the application of a tax treaty, the office of an enterprise normally forms a permanent establishment if the business of that enterprise is wholly or partly carried on through that office. A number of countries have special regime for the taxation of offshore banks.

An offshore or non-resident owned company is commonly used for captive insurance, marketing abroad, international shipping and tax shelter schemes. Widely adopted principle in tax law, for example, where the taxpayer has the basic responsibility of declaring his taxable income or transactions.

Finance Lease OPTION -- Derivative financial instrument consisting of a firm agreement granting one party the right but not the obligation to buy or sell commodities, securities or currencies at a specified future date at a specified price.

ORDINARY SHARES -- Ordinary shares also known as common stock are generally shares with an equal par value and bear equal rights and obligations such as the right to participate in the management of the company by voting at the shareholders' meeting and the right to receive dividends.

The rights of ordinary shareholders to receive dividends are generally subordinate to the rights of bond holders and preference shareholders.

The most extreme version of an OID is a zero-coupon bond, which is originally sold far below par value and pays no interest until it matures. A partnership can be a general partnership or a limited partnership depending on the extent of each party's liability. A general partnership is characterized by the unlimited liability of the general partners for partnership debts. Also see: Limited partnership.

Some countries treat a partnership as a separate taxpayer and may subject it to tax on its income and losses as a corporation. Other countries do not consider a partnership to be a separate legal entity and the partnership is treated as tax transparent, with each individual partner being taxed on his share of the profits according to his interest in the partnership.

Face value. Generally, the income or expense is passed to the underlying owner. The inventor of a new article or process usually registers his invention with a government department which confers on him the sole right known as a patent right to use the invention for a limited period of time. They take the form of additions to the tax and are assessed as part of the tax.

Criminal penalties, on the other hand, are enforceable only by prosecution. A prison sentence may be imposed for serious tax fraud. There is usually a deduction for the individual himself, spouse, children and other dependents. The test determines that in such cases the company would, for treaty purposes, be resident in the state in which its place of effective management is situated.

The term "place of management" as such is not defined in the OECD model tax treaty, but may be defined in national tax law. For example, all depreciable assets of a similar kind are effectively treated as a single asset for depreciation purposes. The portfolio interest exemption does not apply to bank loans made in the ordinary course of business. Portfolio investors may receive different tax relief or other treatment in respect of their dividends under tax treaties from those accorded to other direct investors.

PRECEDENT -- The doctrine of precedent in Anglo-American legal system obliges courts to adhere to principles enunciated in previously decided cases when making adjudications in cases involving the same material facts and legal issues.

In the context of a bond or other debt instrument, it is the amount paid in excess of the face amount. It is a contribution to capital and not taxed as profits. Normally the ruling can be relied upon only by the taxpayer to whom it is issued, not by other taxpayers, and is binding upon the tax authority provided all relevant facts have been disclosed.

Many tax treaties include a clause that the right to tax income arising from outside the state is reserved to the sending state.

A sales tax is a consumption tax imposed by the government on the sale of goods and services. A conventional sales tax is levied at the point of sale , collected by the retailer, and passed on to the government.

A business is liable for sales taxes in a given jurisdiction if it has a nexus there, which can be a brick-and-mortar location, an employee, an affiliate, or some other presence, depending on the laws in that jurisdiction. Conventional or retail sales taxes are only charged to the end user of a good or service.

Because the majority of goods in modern economies pass through a number of stages of manufacturing, often handled by different entities, a significant amount of documentation is necessary to prove who is ultimately liable for sales tax. For example, say a sheep farmer sells wool to a company that manufactures yarn. To avoid paying the sales tax, the yarn maker must obtain a resale certificate from the government saying that it is not the end user.

The yarn maker then sells its product on to a garment maker, which must also obtain a resale certificate. Finally, the garment maker sells fuzzy socks to a retail store, which will charge the customer sales tax along with the price of said socks.

Different jurisdictions charge different sales taxes, which often overlap, as when states, counties, and municipalities each levy their own sales taxes. Sales taxes are closely related to use taxes , which applies to residents who have purchased items from outside their jurisdiction. These are generally set at the same rate as sales taxes but are difficult to enforce, meaning they are in practice only applied to large purchases of tangible goods.

An example would be a Georgia resident who purchases a car in Florida; she would be required to pay the local sales tax, as though she had bought it at home. Whether a business owes sales taxes to a particular government depends on the way that government defines nexus. A nexus is generally defined as a physical presence, but this "presence" is not limited to having an office or a warehouse; having an employee in a state can constitute a nexus, as can having an affiliate , such as a partner website that directs traffic to your business' page in exchange for a share of profits.

This scenario is an example of the tensions between ecommerce and sales taxes. For example, New York has passed "Amazon laws" requiring internet retailers such as Amazon. AMZN to pay sales taxes despite their lack of physical presence in the state. Sample 3. Applicable Taxes means any applicable HST and any other applicable sales or use taxes. Applicable Taxes means any and all present or future taxes including documentary taxes , levies , assessments , imposts , duties , deductions , fees , withholdings or similar charges , and all liabilities with respect thereto imposed by a Governmental Authority relating to any Loan Document , including any liabilities imposed on amounts paid by Borrower to indemnify or reimburse any Person for such amounts, excluding Bank Taxes.

If an entity receives a refund at tax time, this can be a type of reimbursement for taxes already withheld. In general, individuals and businesses usually seek to take advantage of as many tax deductions and credits as possible to reduce the total taxes paid and increase their annual net of tax value. Internal Revenue Service. Accessed Nov. Tax Policy Center. Income Tax. Retirement Planning. Roth IRA.

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These choices will be signaled globally to our partners and will not affect browsing data. We and our partners process data to: Actively scan device characteristics for identification. I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Personal Finance Taxes. What Is Net of Tax? Key Takeaways Net of tax is the amount left after adjusting for the effects of taxes. Net of tax analysis can be important to consider in all situations where taxes may be involved.

Some scenarios where the net of tax can be especially important include large asset purchases with sales tax, before and after-tax contributions, and income taxes for individuals or businesses.

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