Comparative Corporate Tax Residency : The United Kingdom, India and Tanzania Perspective

In determine Corporate Residency most advanced countries use the place of effective management, sometimes along with the place of incorporation, as the criterion for defining the residence of a company, the United States uses the place of incorporation as the sole criterion. This formalistic and objective criterion provides taxpayers with predictability. However, in interacting with different criteria in other countries this criterion may also permit manipulation, including the creation of companies that technically are not resident anywhere. Using the place of effective management (POEM) criterion can also lead to dual residence as opposed to no residence which was the only problem that was considered when the rules of international taxation were originally created. This was then to be dealt with under bilateral treaties and tie-breaking rules, with the OECD Model Treaty, for example, expecting that dual residence issues would be solved by means of mutual agreement procedures on a case-by-case basis. It can be helpful, if not dispositive, for tax authorities to provide guidance on how the place of effective management criterion will apply. The aim of this paper, therefore, is to analyze the tests that are used to determine corporate tax residency and whether they succeed in giving clarity and certainty to taxpayers also to examine how this test may end up being used as a loophole for tax avoidance