Abstract: Taxation plays a vital role in international operation of firms. It is the core of various financial decisions, such as international investment decisions, international working capital decisions, funds raising decisions concerning dividend and other payments. It is true that the tax issue is relevant to such decisions also in respect of domestic firms. But, the management of taxation is a highly complex issue for international corporations. There are two types of foreign investment, namely foreign direct investment and foreign portfolio investment. Pursuing the objectives of utilizing the firms’ cash resources most efficiently and minimizing the firms’ global tax liability requires the firm to be able to transfer funds from one location to another around the global. International businesses use a number of techniques to transfer liquid funds across borders. These include dividend remittances, royalty payments and fees, transfer prices and fronting loan. The investors are interested in real rates of return net of taxes. The international tax system should be neutral that is it should not affect economic efficiency. At the same time, it has to be equitable ensuring equal sacrifice by different tax payers. Besides, a firm should not be taxed twice for the same income. Some firms use tax havens to minimize their tax liability. The OECD has published a list of 35 tax havens. So, the OECD is very much concerned to remove the loopholes in the tax system and other obstacles in cross border trade and investment.