Taxation in a Global Digital Economy

1. S. 84The Concept of Corporate Tax Residence

1.1. Relevance of Corporate Tax Residence

Residence is a decisive criterion on two different levels in the field of taxation. First, entities are generally subject to tax on their worldwide profits under the domestic law of the country where they are resident. Secondly, being resident of at least one of the contracting States is crucial for the access to tax treaties. Problems can arise when two countries apply different residence criteria in their domestic law. As a result of such a mismatch, a company may be resident in both countries and face double taxation or be a resident in neither country leading to double non-taxation. The case of Apple Inc. (US) is an example of double non-taxation. For Irish tax purposes, a company is resident where it is managed and controlled; for US tax purposes, a company is resident where it is incorporated. Hence, Apple Inc. established a company which was incorporated in Ireland but managed and controlled from the US in order to be a non-resident for income tax purposes in both countries.

Additionally, from a tax administration point of view, unintended results may occur where companies attempt to artificiall...