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Which of the following Correctly Explains the Meaning of Tax Incidence

LANDING COSTS – a term used in connection with the importation of goods, i.e. the sum of the cost of the goods in question, the amount of customs duties levied on those goods and the cost of unloading them. LAST IN, FIRST OUT — See: LIFO LEASE — Generally, a lease is a contract for real estate or personal property in which the owner of the property grants another person the right to own, use and enjoy the property for a period of time in exchange for regular payments. LEASEBACK — See: Sale and leaseback LEGAL ENTITY — In general, corporations, corporations and limited liability companies for tax purposes are considered to exist separately from their shareholders. Conversely, a partnership is often not considered a separate legal entity for tax purposes because its profits are taxed in the hands of individual partners. What a legal entity represents for tax purposes may coincide with what a legal entity represents for general legal purposes. LEGAL RESERVE – Under the civil law of some countries, companies are required to maintain a legal reserve for all needs that may arise in connection with the business. Tax law does not allow such a reserve to be deducted. SHELL COMPANY – A paper company, shell company or piggy bank, i.e. a company that has gathered only what is strictly necessary for organization and registration in a particular country. The actual business activities are carried out in another country. DECISION LETTER– See: Advance ruling, LEVEL PLAYING FIELD — This term means using tax policy to reduce tax differentials for internationally mobile businesses or transactions that allow countries to compete fairly on non-tax factors. LEVERAGE — See: Gearing LIBOR — The London interbank issue rate is the rate at which London banks lend money to each other.

ROYALTY FEE (OR FEE) – Annual fee payable for the privilege of engaging in a particular business. LICENSE – A license is an agreement whereby a licensor transfers the right to use its technology and/or know-how to a licensee for the production or manufacture of a product in the licensee`s country. The right to use the technology or know-how is generally subject to royalties. LIEN – A charge on property that makes it a guarantee for the payment of a debt, judgment, mortgage or tax. LIFE INTEREST – Assets may be given to a person for lifetime use or utility, provided that the property passes to another beneficiary after life (the Life Tenant). LIFETIME TENANCY – At common law, a right of possession under which the individual beneficiary is entitled to income from a trust or arrangement until death. LIFO — a method (“last in, first out”) for valuing inventories or exchanging inventories, where the most recently purchased goods or materials are considered to be those sold first. LIMITATION OF PERFORMANCE DETERMINATION — Tax treaty provisions that limit the ability to purchase treaties by limiting the benefits of the agreement to individuals who meet one of the many listed criteria that may require minimum qualifications, such as local ownership.

LIMITATION PERIOD, LIMITATION PERIOD OF — See: Limitation period ADVANCE PRICING AGREEMENT (AP) — An agreement that establishes an appropriate set of criteria (e.g., methodology, comparability and appropriate adjustments, critical assumptions about future events) for determining transfer pricing for these transactions over a period of time. The advance price agreement may be unilateral, involving one tax administration and one taxpayer, or multilateral with the agreement of two or more tax administrations. PRELIMINARY RULING — Written statement issued to a taxpayer by the tax authorities interpreting tax law and applying it to a specific situation AFFILIATED ENTERPRISES — General term used to describe the relationship between two or more companies linked by a common interest AFFILIATION PRIVILEGE — Tax reduction or exemption for dividend distributions made by a resident subsidiary of its parent company which holds a certain minimum percentage shares to reduce the double taxation of these dividends. AGENCY – A company that provides a specific service to a company (located outside the country where the agency is located). The dependent agency is a permanent establishment for the other company and the income generated by the agency is taxed on the income of the country in which the agency is located, whereas an independent agency is not. Aggregation – A term used to refer to the addition of the taxpayer`s income from all sources to determine the applicable tax rate for income tax purposes. FOREIGNERS, TAX TREATMENT OF — A person who is not a citizen of the country in which he or she lives. In general, most countries do not make a tax distinction between nationals and foreigners; Rather, the tax liability depends on the domicile and/or domicile. DISPOSITION OF INCOME – A term generally used to describe the transfer of entitlement to income from a source without necessarily transferring ownership of that source to the same person.

ALLOCATION – The division or allocation of income or expenditure for various tax purposes, for example between permanent establishments in different jurisdictions ALLOCATION – A deduction or exemption generally made in the calculation of income tax, inheritance and gift tax, and certain forms of sales tax. DEPRECIATION – the process of amortizing the cost of an intangible asset over its useful life. DEPRECIATION METHOD – a method of calculating a credit entry under a VAT scheme by which capital goods that have a useful life in the business for a period of more than one year are purchased. The tax included in the price paid for the assets can be credited to the contractor over a period of years equal to the life of the assets. APA — See: Pre-pricing arrangement ALLOCATION METHOD — One of the methods used to allocate revenues and expenses among affiliates using a formula consisted of a few factors such as sales, real estate or payroll. ARBITRAGE – the process of buying a commodity (which may include money or securities) and simultaneously selling it in another market to take advantage of price differences. ARBITRATION, TAXATION – the process of concluding a tax-motivated transaction (i.e. to generate profits from the application of tax regulations). ARBITRATION — Term for the resolution of a dispute by judgment of one or more persons, called arbitrators, chosen by the parties and not normally belonging to a court of normal jurisdiction ARM`S LENGTH PRINCIPLE — The international standard stating that if conditions between associated enterprises differ from those between independent companies, the profits incurred as a result of those conditions: may be included in that entity`s profits and taxed accordingly ARM`S LENGTH MARGIN – A term used in transfer pricing to describe a range of values that can be defined to select an appropriate arm`s length price from comparable transactions.

NON-MARKET COMPARISON TRANSACTION – A transaction between parties, each acting in its own interest.