Tax residency: how it is actually decided, and why groups get it wrong

Residency decides everything downstream

Where an entity or a person is resident determines which country taxes worldwide income, which treaty applies, and what withholding a payer must deduct. Almost every cross-border dispute we see starts with a residency assumption nobody tested.

Company residency

Incorporation is only one test. The United States taxes by place of incorporation, but the United Kingdom, Canada, India, Singapore and Australia all look additionally or instead at where central management and control is exercised — in practice, where the board genuinely decides.

The failure pattern is consistent: a company is registered in a low-tax jurisdiction, the directors are resident somewhere else, and the board minutes are signed wherever the founder happens to be. India's place of effective management rules and the UK's central management and control test both reach the same conclusion, which is that the company is resident where the decisions are actually taken.

Individual residency

• **United States** — the substantial presence test, plus citizenship-based taxation regardless of where a citizen lives.
• **United Kingdom** — the statutory residence test, combining day counts with ties such as accommodation, work and family.
• **Canada** — residential ties first, with a 183-day deemed residence rule behind it.
• **India** — day-count thresholds, plus the deemed residence and "resident but not ordinarily resident" categories that catch high-income non-residents.
• **UAE** — a 183-day rule and a 90-day rule for those with a permanent home or employment there.
• **Singapore and Australia** — day counts and, in Australia, the ordinary-residence and domicile tests.

Two countries can each reach a valid conclusion that the same person is resident. That is not an error; it is what treaties exist to resolve.

Treaty tie-breakers

For individuals, the OECD model applies a sequence: permanent home, then centre of vital interests, then habitual abode, then nationality, then mutual agreement. For companies, the 2017 model moved from place of effective management to a competent authority determination, which means dual-resident companies may wait for two tax authorities to agree.

Claiming a tie-break requires evidence prepared in advance: home ownership or lease records, family location, banking and professional ties, and a residency certificate from the country claimed.

What to do before the year turns

Fix the board's meeting location and keep genuine minutes. Track days per person per country during the year rather than reconstructing them later. Obtain residency certificates before payments that rely on treaty rates. And test residency again whenever a director, a founder or an operating base moves, because the answer changes with the facts.