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Tax Residency

It is a common misconception that both a company and an individual may only be tax resident in one jurisdiction at any one time. Most countries will tax an individual who spends six months within their borders. By simple example an individual who spends six months in the UK and the other six months in the US may be considered tax resident in both the US and the UK and subject to tax on his worldwide income in both countries. Happily, the US and UK have signed a tax treaty which is designed to eliminate double taxation so credit would be given for tax paid in one country against the tax due on the same income in the other country but the individual would still be subject to the highest level of taxation applicable in either country.

A similar position can arise in respect of companies. Most countries consider any company that is incorporated within their jurisdiction to be tax resident there.

Most countries also consider any company that is managed and controlled within their jurisdiction, to be tax resident even if incorporated abroad. A company is generally considered to be managed and controlled wherever its directors habitually meet and reside. Thus a company incorporated in the US which has a board of

directors who meet and reside in the UK, could be deemed subject to both US and UK tax on its worldwide income. This "management and control" test means that it will rarely be the case that an individual residing onshore can safely act as the director of an offshore company without making that company liable to tax in his home jurisdiction. For this reason UJ often provides directors who manage the affairs of the offshore company from offshore.

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