Tag Archives: tax residency

Of all the different kinds of residency, the one that matters most is your “tax residency”

Introduction

In a world of information exchange (FATCA and CRS), fiscally challenged governments (United States and other Western Democracies) and expanding notions of taxation (GILTI, France Digital Tax, etc.), your “tax residency” matters. In fact, in the 21st Century the most interesting thing about a person is his tax residency (or residencies).

At the same time, we are living in a world of increased Global Mobility. There are more and more opportunities for residency and citizenship. As people and capital have become more global, tax authorities have worried more and more about how human migration impacts their their tax bases. For example, people are severing tax residency with high tax states like New York and California. The level of (and form) of taxation impacts investment and migration decisions.

Taxation matters. Tax residency matters. People must keep track of both their “citizenship” and “tax residency” portfolios. It’s important to understand how the concepts of “citizenship”, “nationality”, “domicile”, “deemed residency”, “actual residency” and “tax residency” relate.

I recently came across the following article that explores these concepts. Please note that the article uses the term “fiscal residency” as synonymous with “tax residency”.

The following post was authored by Marios S. Kalochoritis, Managing Partner of Loggerhead Partners. We are reproducing this with the full permission of Loggerhead Partners.

Loggerhead Partners is a provider of “multi-family office” services including, estate planning, transaction advisory, corporate structuring and tax planning.

Loggerhead Corporate Services is the Dubai-based specialized entity of Loggerhead Partners that optimizes tax and preserves the wealth of its clients, through tailor-made, corporate structuring solutions with a focus in the UAE

Enjoy …

John Richardson – Follow me on Twitter

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Presumptions, tax residency and presumptions of tax residency: Nonresident alien status in a FATCA world

Introduction – All The World Is A Multiple Choice Test
Q.1 – A tax resident of the United States is taxable on his worldwide income. According to the Internal Revenue Code of the United States, which one of the following is NOT a tax resident of the United States of America?
(A) A Congresswoman “Born In The USA”, head of her household, who does not and has never had a U.S. Passport
(B) An unmarried Green Card Holder who has never filed an FBAR who lives in El Paso Texas
(C) A fifty year old U.S. citizen who is divorced has never set foot in the United States, doesn’t have a U.S. Social Security Number and lives in and pays full taxes in Germany
(D) A citizen of only Canada who lives four months a year in Florida with his U.S. citizen wife, in a house he owns where he parks a car he owns with Florida license plates
(E) A citizen of Grenada who lives full time in the USA with an E1 visa operating a fast food franchise
For help in finding the answer see …
https://www.law.cornell.edu/uscode/text/26/1
https://www.law.cornell.edu/uscode/text/26/2
Q. 2 – A tax resident of Canada is taxable on his worldwide income. According to the Income Tax Act Of Canada, which one of the following is a tax resident of Canada?
(A) A Canadian citizen who lives in the United States but has no business, family, social or residential ties to Canada
(B) An individual with a house and family living in Toronto who works and lives in the banking industry in the Middle East
(C) A Massachusetts resident with a summer home in Ontario, Canada in which he visits 180 days every year
(D) An individual who is a legal permanent resident of Canada but actually lives in Hong Kong
(E) A rich Canadian who buys permanent residency in Portugal and uses a tax treaty tie breaker provision to deem himself to be a tax resident of Portugal
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"Tax residence" for US Estate and Gift and "tax treaty tiebreakers with overlapping domicile

Introduction – Two kinds of tax systems – Two kinds of “tax residency”
Title 26, the Internal Revenue Code of the United States is composed of twelve subtitles. Subtitle A deals with “Income Taxes”. Subtitle B deals with “Estate and Gift Taxes” AKA the “transfer tax regime”. The two subtitles are administered separately. They also have different definitions of “tax residence”.
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Tax residency vs. physical presence: The four questions you must ask before making a country your home

An introduction to “tax residency” …
Most people equate residency with physical presence. They assume that where you are physically presence determines where you live. They further assume that where you live is where you pay your taxes. Conclusion: The country where you live is the country where you must be “tax resident”. Not necessarily!
There is no necessary correlation between where one lives and where one is a “tax resident”. In fact, “residency for tax purposes” may be only minimally related to “residency for immigration (where you live) purposes”. It is possible for people to live in only one country and be a tax resident of multiple countries. The most obvious example is “U.S. citizens residing outside the United States”.


The concept of “tax residency” is fundamental to all systems of taxation. The fundamental question, at the root of all tax systems is:
“what kind of connection to a country is required to assume tax jurisdiction over an “individual”, over “property” or over an “entity”?”
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