Note: Unless otherwise indicated, assume that the U.S. Model Income Tax Conventi
ID: 2591225 • Letter: N
Question
Note: Unless otherwise indicated, assume that the U.S. Model Income Tax Convention of
November 15, 2006 (the “Model Treaty”).
Bill, a citizen of country F, lives in the United States. Bill is 45 years old and has not lived in country F since he left F at the age of 18. Although his parents and most of his relatives still live in F, Bill lives in the U.S. where he has owned a home for 10 years. Under the Model Treaty, Bill is a resident of:
the United States..
country F.
both the U.S. and country F.
neither the U.S nor country F.
the United States..
country F.
both the U.S. and country F.
neither the U.S nor country F.
Explanation / Answer
The OECD Model Convention and the UN Model Convention are identical.
They first provide for a definition of "resident of a Contracting State":
1. For the purposes of this Convention, the term "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. This term, however, does not include any person who is liable to tax in that State in respect only of income from sources in that State or capital situated therein.
2. Where by reason of the provisions of paragraph 1 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 .
b) if the State in which he has his center 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 a 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.
3. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident only of the State in which its place of effective management is situated.
By referring above we can conclude that,
Bill, a citizen of country F, lives in the United States. Bill is 45 years old and has not lived in country F since he left F at the age of 18. Although his parents and most of his relatives still live in F, Bill lives in the U.S. where he has owned a home for 10 years. Under the Model Treaty, Bill is a resident of the United states.
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