Tax(see attachment) Essay Example | Topics and Well Written Essays - 3000 words

Tax(see attachment) - Essay Example Manufacturing parts in UK and then exporting to third world countries is not viable due to various financial factors. Hence the company has decided to set up a manufacturing unit in any of the third world country. This will help the company to maximize its profits, and at the same time give an opportunity to expand and explore new markets. The following report addresses the various issues that have to be considered from international tax perspective while expanding operations offshore. While setting up an overseas operation there are certain very important tax related issues that need to be considered before choosing an appropriate location. The issue might seem to be too complicated initially given the numerous nations and their individual legal and political systems but there appears to be abroad consensus among all the nations of the world regarding tax matters. And, this is surely a matter of utmost relief to companies that intend to operate across political boundaries as tax matters indeed create problems in estimating income earned by a subsidiary, more so what portion of it can be rightly considered as income of the consolidated entity. However, with the phenomenal rise of multinational corporations, the vexatious issue of which state should rightfully tax which portion of the income of a multinational business entity still poses certain questions for which unambiguous answers are hard to come by. Legally speaking, every state has the jurisdiction to impose tax, irrespective of whether the tax is generated within the domestic territory of the state (source country) or it is generated outside the domestic territory but by a legal entity that is normally resident of the state (residence country). In the international taxation regime that is adhered to by almost all the countries of the world, the country where the tax is generated has the first right to tax