Question

Provide a written response to each of the following questions. Ensure that your answer includes reference to the appropriate Primary sources (that is, legislation and/or Tax Treaty). – Choose Australia

1. In which Act or Treaty are the rules to determine the residency of an individual and a corporate entity found?
2. Is it possible for an individual to be classified as a tax resident of more than one country? Why/why not?
3. Is it possible for a company to be classified as a tax resident of more than one country? Why/why not?

Answer 1

1. In which Act or Treaty are the rules to determine the residency of an individual and a corporate entity found? - The residency of an individual or a corporate entity in The United States of America is determined by OECD guidelines mainly United States - Information on residency for tax purposes.

2. Is it possible for an individual to be classified as a tax resident of more than one country? Why/why not? - Yes.

If you are a resident in the USA and another country, you are liable to tax on your worldwide income in both countries, then you have to look at the double taxation agreement between the two countries to find out where you should pay tax.

If you have dual residence with the USA and another country, then a double taxation agreement should prevent you from being taxed twice on the same income.

3. Is it possible for a company to be classified as a tax resident of more than one country? Why/why not? - Yes

– Generally a corporation is treated as a domestic corporation if it is created or organized under the laws of the United States. No other criteria related to place of management (POEM) will cause a corporation to be domestic. There are, however, specific statutory provisions that treat certain foreign corporations as domestic. Domestic corporations are U.S. tax residents, regardless of whether they are also residents of a foreign jurisdiction. If a corporation is a dual resident of the United States and a treaty jurisdiction, a tax treaty may contain a so-called tie-breaker rule to determine the sole jurisdiction of the corporation for treaty purposes.