Establishing the residency of artificial persons in cross border transactions

Master Thesis

2014

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University of Cape Town

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The basis of residence taxation is that residents enjoy protection in the state where they contribute towards the costs of government. In tax treaties residence is used for purposes of allocating income and taxing rights between contracting states. For treaty purposes residence is determined on a day to day basis, hence a person can be resident in two countries at concurrent time periods. It is important to determine the residence of a corporation in a specific jurisdiction for purposes of ascertaining the treaty benefits that the entity can enjoy and the allocation of income between contracting states in a treaty. Usually a company’s tax residence is considered to create a sufficient connection with the country that has jurisdiction over it. The recognition of the residence status of natural and juristic persons is the cornerstone of international taxation. Residence is also used as an antiavoidance tax measure in international tax.
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