Module 2

Income tax: residence and source, kinds of income, income against capital, timing, deductions, rates, credits and withholding

Income tax is the tax most people meet first and think they understand. It takes a share of what a person earns. But the questions that arise are subtle. A person who lives in one country and earns in another may be taxed by both. A gain on selling a house may be taxed as income, as a capital gain or not at all. A payment for work may be a salary, with tax withheld and benefits attached, or a fee, with the worker responsible for paying the tax. This module sets out the structure: who can be taxed and where, what counts as income, when it is taxed, what can be deducted, how the rate is applied and how the tax is collected. It uses invented figures throughout, because real rates and thresholds change.

General education on taxation law, using invented people, businesses and figures. It states common principles in simplified form and does not describe any one country’s law, which differs and changes; tax rules, rates, thresholds and deadlines are strict and local. It is not tax or legal advice. Consult a qualified adviser in the place that matters.