Article 4 - Resident - International Taxation - Income Tax

Article 4 - Resident As per OECD Model Tax Convention Meaning of Resident of a Contracting State Means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature, and also Includes that State and any political subdivision or local authority thereof as well as a recognised pension fund of that State. Exclude any person who is liable to tax in that State in respect only of income from sources in that State or capital situated therein. [ Para 1 of Article 4 ] Article 4 Individual also include in Resident if he is resident of both contracting state An individual is a resident of both Contracting States, then his status shall be determined as follows: a) he shall be deemed to be a resident only of the State in which he has a permanent home available to him ; if he has a permanent home available to him in both States , he shall be deemed to be a resident only of the State with which his personal and economic relations are closer ( centre of vital interests ) ; b) if the State in which he has his centre of vital interests cannot be determined , or if he has not a permanent home available to him in either State, he shall be deemed to be a resident only of the State in which he has an habitual abode ; c) if he has an habitual abode in both States or in neither of them , he shall be deemed to be a resident only of the State of which he is a national ; d) if he is a national of both States or of neither of them , the competent authorities of the Contracting States shall settle the question by mutual agreement. [ Para 2 of Article 4 ] Article 4 also include other than Individual is a resident of both Contracting States A person other than an individual is a resident of both Contracting States, In case of Mutual Agreement between Contracting State the competent authorities of the Contracting States shall endeavour to determine by mutual agreement the Contracting State of which such person shall be deemed to be a resident for the purposes of the Convention, having regard to its place of effective management, the place where it is incorporated or otherwise constituted and any other relevant factors. In the Absence of Mutual Agreement between Contracting State such person shall not be entitled to any relief or exemption from tax provided by this Convention except to the extent and in such manner as may be agreed upon by the competent authorities of the Contracting States. [ Para 3 of Article 4 ] This will not prevent the taxpayer from being considered a resident of each Contracting State for purpose other than granting treaty reliefs or exemptions to that person. Note The situation of Dual residence may arise in case of companies in case where one Contracting State attaches importance to the place of incorporation and the other state to the place of effective management. The tie breaker rule traditionally has been place of effective management . As per UN Model Tax Convention Article 4 of the United Nations Model Convention reproduces Article 4 of the OECD Model Convention. As per Income Tax Act, 1961 As per Indian Law Income Tax Act, 1961 Deal with the provision of Resident Status Section 6 . [ For More details refer this chapter ]