Resident Companies

A legal entity is considered to be resident for tax purposes in a jurisdiction in which it is registered and is directly managed. The residency status influences on an applicable taxation system. The residency requirement can be different in certain jurisdictions, but in common it is defined by control and management criteria. “Control and management” is making decisions on developing policies and strategies and it is usually where the management is actually exercised. Typically, the management includes board of directors and other executive meetings. For an instance, a branch of a foreign company is usually not considered as a resident for tax purposes. Though it should be noted that a place of incorporation is not necessarily indicative of the tax residence.

Usually, a resident company gets many fiscal benefits derived from double taxation treaties, tax exemption on certain foreign-sourced incomes (dividends, branch profits and service income). Thus, a tax advisor usually considers residency of a company in order to develop the most efficient tax scheme for a company.