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The International Person

 
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.
 

Residence

 
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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