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The International Person
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Inevitably, international and offshore tax planning extends to the world of the
“international person” every bit as much as it does to the corporation. Indeed,
much offshore business involves the affairs of entrepreneurs who have effective
control over their activities.
While many similar tax considerations come into operation, the combination of tax
and non-tax factors applying to individuals focuses essentially on residence, domicile,
and citizenship. Offshore solutions to individual tax planning problems can be achieved
only if the offshore component succeeds in breaking or modifying connecting factors
between the individual and the relevant high tax jurisdictions.
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Residence
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One’s residence is where one lives. But more important from some points of view
is where one has the right to live.
As a general rule one can live in a country where one is a citizen. But one can
normally also live in many other countries as well—sometimes casually, sometimes
by virtue of a residence permit or merely a visa.
In most countries resident individuals are subject to income and other taxes on
worldwide income and assets, wherever situated. In some countries, like the United
States, Denmark, and Germany, tax can follow an emigrant for a number of years after
he or she leaves the territory.
Despite its importance, the meaning of residence is not comprehensively defined
in most countries for either legal or tax purposes. Criteria for determining residence
are generally based on practical considerations and derived largely from court cases,
although many countries use as a test the number of days of presence in the country
in some stipulated period. In the case of the United States, days in the current
year as well as days in the previous two years are taken into account for determining
residence for tax purposes.
If there is a double taxation treaty between two countries, there will usually be
“tie-breaker” rules under which a dually resident individual’s residence status
is resolved.
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Next - Emigration
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