Page 17 - Strategic Tax Planning for Global Commerce & Investment

Strategic Tax Planning for Global Commerce and Investment

All income derived from sources outside of its jurisdiction is
disregarded for tax purposes.

Jurisdictions – Taxation Systems

Taxation Applicable to Examples
System
Australia, Canada,
Territorial Taxation only of in-country income France, Germany,
Japan, Spain, U.K.
Taxation of all income of residents. Greece, Ireland, South
Worldwide Residents on worldwide income and Korea, Mexico
non-residents on in-country income

3. Resident versus Non-Resident

The concept of residence for tax purposes becomes crucial in a
system of worldwide taxation, although it is also relevant in the
in the case of territorial taxation. With regards to companies,
countries generally use two sets of criteria to determine the
residence of a company:

 Formal criteria - such as incorporation, legal
residence, registration in the commercial
register, etc. and
 Factual criteria – such as place of effective

management, administrative residence,
principal business location, etc.

While incorporation of a company can be compared to
citizenship of individuals, in many countries the corporate
equivalent of an individual’s residence is the place where the
company is effectively managed.

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