Tax residence

Legal residence is the principle that each legal person (natural or corporate) has a single location of primary residence. This is of relevance with respect to taxation and other state-imposed obligations, but is also important with respect to the determination of citizenship or nationality.

Usually legal residence and tax residence are defined differently in law in that one can be an illegal alien and resident for tax purposes in the same country. Also, it is possible to be resident, for tax purposes, in more than one country at a time.

Domicile is, in many countries, a different legal concept toresidence.

In the face of growth in the scope of governmental regulation, and an increasing burden of taxation, corporations and individuals not surprisingly have sought to avoid, or at least to minimise, the effects of state intervention. [ [http://www.fsforum.org/Reports/RepOFC.pdf Financial Stability Forum] , Report of the Working Group on Offshore Centers, Financial Stability Forum, Basel, 2000. p 11; available at (as at 17 July 2002).] This was particularly important with respect to taxation, [J Prebble, "Criminal Law, Tax Evasion, Shams, and Tax Avoidance: Part 1 – Tax Evasion and General Doctrines of Criminal Law" (1996) 2 NZJTLP 3; J Prebble, "Criminal Law, Tax Evasion, Shams, and Tax Avoidance: Part II – Criminal Law Consequences of Categories of Evasion and Avoidance" (1996) 2 NZJTLP 59; R McIntosh and J Veal, "Tax Evasion and New Zealanders’ Attitudes Towards It" (2001) 7 NZJTLP 80.] both from the perspective of governments – which would lose revenue – and that of corporations or individuals who sought to avoid payment of taxes.

Tax residence by country

Different countries set different standards to determine tax residence, but broadly, one becomes resident in a country if one is in that country for more than a certain number of days. The following list specifies the number of days (or months) in a variety of countries:
* France: 180 days
* Germany: 6 months
* South Africa: 91 days
* United Kingdom: 91 days
* United States: 122 days

Tax residence in Germany

Reference needed

Tax haven

One option that became available in this respect was the tax haven – a country that attracted overseas companies and individuals to register or otherwise obtain legal residence, in return for paying minimal tax. As states alone levied taxation, so states alone could offer taxation incentives to investors. There was a significant rise in the number of tax havens in the course of the 20th century. This has continued into the 21st century, [R Palan, "Tax Havens and the Commercialization of State Sovereignty" (2002) 56 Int Organization 151.] even though tax burdens have in many cases eased. Possibly half of all money in circulation throughout the world either resides in or passes through tax havens. [M Cassard, The Role of Offshore Centers in International Financial Intermediation, Washington, IMF, 1994, IMF Working Paper WP/94/107; N Kochen, "Cleaning up by Cleaning up" (April 1991) Euromoney 73.] In very few of these cases do the investors actually physically reside in the tax havens. It is generally sufficient if their legal residence is within the haven. If companies or individuals were required to relocate completely from one jurisdiction to another to take advantage of a tax haven, interest in tax havens would perhaps have remained relatively insignificant. Use of a tax haven usually requires only a legal move, the management of most companies – and private investors – remaining physically located elsewhere. [R Palan, "Tax Havens and the Commercialization of State Sovereignty" (2002) 56 Int Organization 151, 163; W Diamond and D Diamond, Tax Havens of the World, New York, Matthew Bender Books, 1998.]

ee also

*Tax exile
*International taxation

Notes and references