Is liability to business taxation based upon a concepts of fiscal residence or registration?

Tax

Cyprus Small Flag Cyprus

Liability to Cyprus tax is based on residence. For individuals this is a matter of physical presence in Cyprus for 183 days or more in the tax year. For companies it is based on the locus of management and control. Mere registration in Cyprus is not sufficient to establish residence: the principal decisions affecting the company must be made in Cyprus. The application form for the issue of a certificate of tax residency gives an indication of the criteria that the Tax Department considers, including where directors’ and shareholders’ meetings are held, where the directors are resident, and where minutes and statutory and other records are kept.

Greece Small Flag Greece

Primarily it depends on registration but essentially on both. More specifically, even entities that are not registered in the country are subject to tax for their operations inside the country according to the rules for permanent establishments and the GAARs.

Turkey Small Flag Turkey

In principle, in order to do business, it is required to be registered both to tax office and trade registries by declaring its residence in Turkey.

United Kingdom Small Flag United Kingdom

Yes. The UK observes the principle of territoriality: it taxes the worldwide profits of its residents and the UK profits of non-residents. There are two tests for determining whether a company is resident for tax purposes in the UK: (1) the incorporation test (the process is also referred to broadly as company registration), or (2) the central management and control test. A company will automatically be resident in the UK for tax purposes if it is incorporated in the UK, unless it has to be treated as resident in another country under the tie breaker provisions of a double tax treaty. For companies incorporated outside the UK, they will be deemed UK tax resident if they are centrally managed and controlled in the UK.

Mexico Small Flag Mexico

As mentioned above, the Mexican income tax system is mainly built around the concepts of residence and source. In this regard, whilst Mexican resident legal entities are required to pay income tax on a worldwide basis, foreign tax residents could be required to pay income tax on all income attributable to permanent establishments located in Mexico, or any and all income perceived by them that is deemed to be Mexican-sourced in terms of the applicable laws.

Gibraltar Small Flag Gibraltar

Yes. Ordinary residence.

Japan Small Flag Japan

In taxing business profits of a corporation, whether or not a corporation is a Japanese corporation or a foreign corporation for tax purposes is determined by reference to the jurisdiction of incorporation or registration. That is, so long as the taxpayer is a Japanese corporation for Japanese corporate law purposes such as a KK or a GK, even if the place of effective management of that corporation is outside Japan, it is treated as a Japanese corporation for Japanese tax purposes.

Similarly, so long as a corporation is incorporated and registered in jurisdictions other than Japan for corporate law purposes, the corporation is a foreign corporation for tax purposes even if the place of effective management is within Japan. However, in that case, the foreign corporation is very likely deemed to have a permanent establishment in Japan, and the business profits are taxed in Japan so long as the profits are attributable to the permanent establishment in Japan.

United States Small Flag United States

The U.S. taxes the worldwide income of U.S. companies. A company is a U.S. company if it is incorporated in the U.S. Foreign corporations are subject to tax in the United States on its income that is effectively connected with a U.S. trade or business and on certain of its income from U.S. sources.

Individual citizens of the U.S. generally are taxed on their worldwide income regardless of their country of residency.

Hong Kong Small Flag Hong Kong

Generally, residence is not particularly relevant from a Hong Kong tax perspective and rather the basic test for taxation purposes is whether or not a person carries on a trade profession or business in Hong Kong.

Nevertheless, to the extent that residence is relevant (say, for the offshore funds profits tax exemption or for tax treaty purposes), Hong Kong would apply the traditional common law test of central management and control. Under that test, a company (or other entity) will be considered resident in Hong Kong if it is effectively managed and controlled from Hong Kong.

Also, Hong Kong’s tax arrangements usually refer to ‘a company incorporated in Hong Kong’ as being a resident of Hong Kong for the purposes of the arrangements but, in practice, the IRD will expect that a company incorporated in Hong Kong has substance in Hong Kong before it will issue to it a Certificate of Residency for the purposes of its tax agreements. Substance is usually understood as referring to staff and premises in Hong Kong.

Spain Small Flag Spain

As a general principle, it is based on fiscal residence of the entity. However, a company will be typically considered as Spanish tax resident if, among other circumstances, has been incorporated under Spanish Law or has its place of seat in Spain.

Austria Small Flag Austria

Business taxation is based upon a concept of fiscal residence. A corporation is resident if it is incorporated in Austria or managed and controlled in Austria. An individual is resident if he/she is domiciled or has a habitual abode in Austria.

Germany Small Flag Germany

German tax law distinguishes between unlimited resident taxation and limited non-resident taxation. A corporation is subject to “unlimited” resident taxation, if it has its statutory seat or place of effective management in Germany. Individuals are in turn liable to unlimited resident taxation in Germany, if they have a residence or their place of habitual abode in Germany. German resident taxpayers have to tax their worldwide income in Germany, except to the extent certain parts of income are exempt from German taxation, for example on the basis of a double taxation treaty. Non-resident taxpayers are only taxed on their income from German sources, for example business income derived through a permanent establishment maintained in Germany.

Belgium Small Flag Belgium

Only legal entities resident in Belgium are subject to corporate income tax. A legal entity is a resident of Belgium (called a ‘resident company’) if it has its legal seat, main establishment or place of effective management in Belgium, regardless of its place of incorporation.

Non-resident companies are subject to the income tax on non-residents regarding their Belgian-sourced income and their foreign-sourced income to the extent that it is connected with a Belgian permanent establishment.

Italy Small Flag Italy

Yes, in principle taxation depends on the fiscal residence in Italy of the taxpayer.
A company is deemed to be resident in Italy if it has: (i) its registered office; (ii) its administrative office; or (iii) the main purpose of its business in Italy for the majority of the tax year (i.e. at least 183 days). Italian resident companies are taxed according to the worldwide income taxation.

Business income of non-Italian resident companies is taxed in Italy only in case income is produced through an Italian permanent establishment of the foreign company. Italian resident individuals are taxed in Italy on the basis of the worldwide taxation principle. Business income generated by non-Italian resident individuals is subject to taxation in Italy only if attributable to an Italian fixed basis.

Individuals are deemed to be resident in Italy, if for the majority of the tax year, they are registered to the Italian Civil Registry or they maintain in Italy their domicile or civil residence.

Malaysia Small Flag Malaysia

It can be the combination of both as the domestic tax law examines whether the effective management and control of the business are in Malaysia.

Ireland Small Flag Ireland

Ireland changed its corporate tax rules with effect from 1 January 2015. All companies incorporated after that date are tax resident in Ireland, and therefore subject to tax in Ireland on their worldwide income, unless they are deemed to be tax resident in another country under the terms of a double tax treaty between Ireland and that other country. In addition, any company (wherever incorporated) is treated as Irish resident if its central management and control is exercised in Ireland.

France Small Flag France

French corporate income tax is not based on fiscal residence or registration but on the principle of territoriality: only profits derived from activities carried out in France are taxable in France. As a consequence, an entity, be it French or not, is to be considered to be carrying out activity in France if:

  • it has an establishment in France: the notion of establishment provided for in the FTC is close to that of permanent establishment provided for in international tax treaties;
  • it has in France a representative with a dependent professional status. This notion is also close to that of dependent agent provided for in international tax treaties; or
  • it performs in France a complete cycle of business (“cycle commercial complet”) separate from the company’s other domestic business.

As the case may be, these criteria could be superseded by the stipulations of a tax treaty.

In addition, passive income (dividends, interest and royalties) received by a French entity are taxed in France.

Australia Small Flag Australia

Fiscal residence.

Switzerland Small Flag Switzerland

A company is liable for Swiss federal/cantonal corporate income tax and cantonal capital tax on its worldwide profit (excluding profit/capital allocated to permanent establishments and real-estate located abroad) if either its statutory domicile or it effective place of management is located in Switzerland.

Updated: March 10, 2017