Tax Residency

What it is

Tax residency is the legal connection between a taxpayer and a state that gives that state the right to tax. For companies, residency is usually established by place of incorporation, place of effective management (POEM), or both. For individuals, the most common tests are physical presence (often 183 days), domicile, centre of vital interests, or habitual abode.

Why it matters for companies

A company that is tax-resident in a country is generally taxed there on its worldwide income (subject to territorial regimes). Many jurisdictions, including the UK, Singapore, and India, apply place-of-effective-management tests to prevent companies from being incorporated in low-tax jurisdictions while being managed from a high-tax country. Dual residency is resolved by the residency tie-breaker article in tax treaties (typically POEM, though the OECD now uses competent-authority resolution).

Why it matters for founders

Founders who travel frequently can become unintentionally resident in a country and trigger personal-tax obligations. Holding-company residency also affects participation exemption, treaty access, withholding tax, and CFC rules. A tax residency certificate (TRC) is the standard documentary proof.

You will deal with tax residency when incorporating a holding company (where is it managed?), when relocating personally, when claiming treaty benefits (which requires a TRC), when defending permanent-establishment risk, and when structuring board meetings and key decisions to support a chosen residency position.