Kap. 03

often:

• present for more than 183 days a year

• social / economic ties in that country

-> theoretically 2 or more country can claim a tax residency -> Tie-Breaker (if DTC)

1. permanent home

2. personal or economic relations

3. habitual abode (gewöhnlicher Aufenthalt)

4. nationality

5. mutual agreement

1. legal approach:

   • tax residency determined according to country of incorporation/registry in the commercial register

2. economic approach:

   • tax residency determined according to place of management / principle business location

neutral towards the location of investment

-> capital outflow unaffected by taxes

-> tax burden depends solely on origin of investor (tax rate of his home country), not where they invest

-> worldwide tax system, (full) credit system

neutral towards the source of investment

-> companies pay taxes where business takes place independent of their country of residence

-> tax burden depends solely on tax rate in the local market

-> territorial system (source principle), exemption method

1. deduction method -> worldwide income

-> country in which taxpayer is resident treats foreign tax as expense

1. exemption method (fulfill capital import neutrality) -> source princple (worldwide income nur für avg. tax rate)

-> either exemption method or exemption with progression method (foreign income is taken into account when calculating the domestic average tax rate)

1. credit method (fulfill capital export neutrality) -> worldwide income

-> (full) credit method and limited credit method

1. economic double taxation -> taxation of business profits and taxation of dividends

2. legal double taxation -> occurs when more than one country attemps to tax the same income