Question

Jovanni P/L is a manufacturer of shoes, whose directors reside in Italy and conduct most of director meetings in Italy. Jovanni P/L was incorporated in Italy and 80% of its shareholders are Italian. It exports its shoes around the world. Jerrrabomberah P/L is an Australian primary producer and manufacturing company that raises young cattle, pigs and goats to make sales of meat, but also to tan the hides of the animals and supply them to Julius P/L to make shoes in Italy. While in Australia, the directors of Julius P/L enter into a contract with an unrelated company, Jolimont P/L that distributes shoes nationally to stores around Australia. Jovanni P/L has the following receipts in 2019-20 1. Interest income Jovanni P/L has an Australian bank account where all of its Australian business receipts are deposited and derives interest from that account. 2. Contract business income Jovanni P/L receives income from the sale of shoes to Jolimont P/L. Required For the 2019-2020 year of tax, based on source rules/residency, what receipts need to be included in Jovanni P/L’s assessable income regarding: a) interest income 3 marks, and b) contract business income 2 marks

Answer 1

sol:

First we tend to understands what's supply base taxation & residance base taxation:-

(1) supply BASE TAXATION :- within the supply primarily based taxation principal importance is to be the supply (country) wherever imcome is genrated. There square measure indiviauals /entites whose residence is in one country however their business is truly carried on in another country & their financial gain is attained within the latter country.

In such cases the principal of residence primarily based taxation would be inappropriate . so the country that provides the chance and facilities to genrate financial gain or profit ought to even have the proper to tax identical.

(2) RESIDENCE primarily based TAXATION :- This rule states that the ability to tax ought to rest on the country during which you resides.There square measure individuals/ entities whose residence is in one country however their business is truly carried thereon in another country & their financial gain is attained within the latter country.

In such cases people / firms ought to pay taxes for his or her international financial gain. so the principal of residence primarily based taxation of financial gain states the taxation of world financial gain.

(a) intrest financial gain :- As per the question , Jovani P/L has AN a/c in austrailain bank & interest arrived from this a/c is treated as per the supply base taxation. thus as per this rule jovani P/L shouldn't includes this financial gain for tax purpose because the austrailan govertment has the proper to tax this financial gain.

(b) contract business financial gain :- As per the supply rule this financial gain ought to be treat in jovanis statement for the aim of taxation as this financial gain is arrived from his business.so this financial gain can treat as per residance base revenue enhancement.

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