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Tax residence

The criteria for residence for tax purposes vary considerably from jurisdiction to jurisdiction, and "residence" can be different for other, non-tax purposes. For individuals, physical presence in a jurisdiction is the main test. Some jurisdictions also determine residency of an individual by reference to a variety of other factors, such as the ownership of a home or availability of accommodation, family, and financial interests. For companies, some jurisdictions determine the residence of a corporation based on its place of incorporation. Other jurisdictions determine the residence of a corporation by reference to its place of management. Some jurisdictions use both a place-of-incorporation test and a place-of-management test.

Domicile is, in common law jurisdictions, a different legal concept to residence, though the two may lead to the same result.

The criteria for residence in double taxation treaties may be different from those of domestic law. Residency in domestic law allows a country to create a tax claim based on the residence over a person, whereas in a double taxation treaty it has the effect of restricting such tax claim in order to avoid double taxation. Residency or citizenship taxation systems are typically linked with worldwide taxation, as opposed to territorial taxation. Therefore, it is particularly relevant when two countries simultaneously claim a person to be resident within their jurisdiction.

Double taxation treaties generally follow the OECD Model Convention. Other relevant models are the UN Model Convention, in the case of treaties with developing countries and the US Model Convention, in the case of treaties negotiated by the United States.

The OECD Model Convention and the UN Model Convention are identical. They first provide for a definition of "resident of a Contracting State":

1. For the purposes of this Convention, the term "resident of a Contracting State" means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature, and also includes that State and any political subdivision or local authority thereof. This term, however, does not include any person who is liable to tax in that State in respect only of income from sources in that State or capital situated therein.

The definition is followed by "tie-breaker" rules for individuals and non-individuals, which result in the person being considered resident in only one of the countries:

a) he shall be deemed to be a resident only of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident only of the State with which his personal and economic relations are closer (centre of vital interests);
b) if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident only of the State in which he has an habitual abode;
c) if he has a habitual abode in both States or in neither of them, he shall be deemed to be a resident only of the State of which he is a national;
d) if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.
The words "resident in the United Kingdom", "... guide the subject remarkably little as to the limits within which he must pay and beyond which he is free. .. The Legislature has, however, left the language of the Acts substantially as it was in [1801], nor can I confidently say that the decided cases have always illuminated matters. In substance persons are chargeable or exempt, as the case may be, according as they are deemed by this body of Commissioners or that to be resident or the reverse, whatever resident may mean in the particular circumstances of each case. The tribunal thus provided is neither bound by the findings of other similar tribunals in other cases nor is it open to review, so long as it commits no palpable error of law, and the Legislature practically transfers to it the function of imposing taxes on individuals, since it empowers them in terms so general that no one can be certainly advised in advance whether he must pay or can escape payment.
an enquirer can only be told that the question whether he is resident or not is a question of fact for the Commissioners but that by the study of the effect of a large body of case law he may [emphasis added] be able to make an intelligent forecast of their decision.
the law determining whether an individual is resident in the UK is a mess.
  • they have a home (foyer) or their principal place of physical presence in France,
  • they have their professional activity in France, unless such activity is only ancillary, or
  • they have the centre of their economic interests in France.


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