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In this case there exists a problem of double residence arising from the domestic law of each country.

In the case of Spain, the law determines that a company is tax resident in the country if at least one of the three cases meet: 1. It was incorporated under the Spanish law, 2. It has its registered office in the country, 3. The effective management of the company is carried out in the country. Therefore, the company is considered to be tax resident in Spain because it was incorporated under the Spanish law.

(https://taxsummaries.pwc.com/spain/corporate/corporate-residence)

In the case of Switzerland, the criteria for tax residency are domicile and effective management. Consequently, it is also considered tax resident under the Swiss legislation since it was domiciled in Switzerland.

(https://taxsummaries.pwc.com/switzerland/corporate/corporate-residence)

Therefore, the company would be taxed by the Spanish tax authorities on a worldwide basis, and by the Swiss authorities on a source basis, that is, on the income that is generated in the country.

According to the OECD model tax convention 2017 (paragraph 3, point 23), this case of double tax residency must be solved in a case-by-case basis and, therefore, the competent authorities of the Contracting States shall resolve that problem by mutual agreement.

Scenario 1: The company is incorporated under Spanish law domiciled in Switzerland. The Board of Directors remains in Madrid and the General manager deals with the activities in Switzerland.

In this case, although the General manager will lead the activities from Switzerland, the company will continue being managed from Spain (since the Board of Directors remains in Madrid and it is incorporated under the Spanish law). The company will have to pay taxes to the Spanish authorities but related to the income obtained in Switzerland. For this reason, there would be any difference. (According to the OECD model tax convention 2017, paragraph 3, point 22).

Scenario 2: The company is incorporated under Spanish law domiciled in Switzerland. Board members and managers have meetings in Switzerland.

Under Swiss law, a company being managed from Switzerland makes that company a Swiss resident (as mentioned above due to effective management). Therefore, by having regular Board meetings, it can be understood that the company is a Swiss company. However, as stated that the company is being incorporated under Spanish law, this means that it will also be considered a Spanish resident. Being the company then, considered a resident in two different countries, double taxation is an issue. In the case of the OECD Model Article 4 2014, the Contracting State would be Switzerland, becoming the firm Swiss tax payer. However, under OECD Model Article 4 2017, it would be studied on a case-by-case basis (23, paragraph 3).

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Starting with the first criteria, the permanent residence is not clear due to the fact that we assume that he has one residence in each country, living half of the year in each one. So, this criteria is not valid. Considering the centre of economic interest we find that there is a tradeoff between his salary which comes from France (economic reasons), but he has his wife and children in Spain (personal reasons). Therefore we cannot follow this criteria. Following the habitual abode, he spends half of the year in Spain and half in France, therefore we cannot decide upon this criteria. Finally we should consider the nationality and given that it is a French individual we believe that he could ask for the tax residency in France.

Therefore we conclude that he will be able to claim his tax residency in France.

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Taking into account that the location of the primary residence is not specified we have considered that neither Spain nor Andorra are a permanent resident for him/her. Consequently, following the second criteria regarding the centre of vital  interest, we have considered Spain because its regular activity (training) and family are in Spain. Moreover we have discarded Andorra because he does not complete the minimum number of days (183) to consider it an habitual abode, and he goes to the US exclusively to work, there are no personal relationships in the country.

He will then not be able to defend his tax residency in Andorra, it will have to be in Spain.

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First, we should look at the domestic laws to determine residency in those countries:

Spain: Yes since +183 days (and spouse and children)

Switzerland: Yes, since 10 months>6months

Since double residence, should look at convention “tie-breaker” rule:

Convention:

1. Permanent dwelling in BOTH

2. Center vital interest in Spain (spouse, children…)

Implies tax resident in Spain

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The question really is asking whether renting an apartment is considered permanent dwelling or not in France.

Further information is needed to solve the case so we will make some assumptions.

As is said in article 13 of the 2014 version, home is essential to have it available whenever it wants and not only occasionally for example for a business travel, in this case the architect by renting the apartment is securing it to have it always available.

However, in article 14 of 2014 are stated two criteria to determine where to pay taxes if there is a permanent home in both countries (here we are assuming that the architect has a permanent home in Spain since until recently she was only staying in France occasionally) which are habitual abode (where she spends more time France vs. Spain) and nationality (which we also assume that is Spanish). Also, we should consider the center of economic interests, which we do not know it since we do not know where she gets most of her income.

Moreover, in article 15 of 2014 is stated that where family and social relations happen is also relevant. In this case, Spain is the center of vital interest and it is where she should pay taxes with the exception of the taxes related with the rent.

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Under 2014 convention, the company will be taxed in Spain since it is where it has its effective management. However, with the new Convention the three countries should reach an agreement to decide whether to tax the company.

On the other hand, if there exists a double treaty following the 2017 update of article 4, then the competent authorities of Contracting States will have to determine by mutual agreement the Contracting State of which such corporation will be resident for the purposes of the convention

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To answer this question we should first analyze the criterion used by the US with respect to tax residence. In the US, an american person is taxable on their worldwide income and to be considered a US person, Paloma would have to meet one of two conditions; the first one being the possibility to apply for a green card due to the fact that she is an immigrant worker but she will likely not hold since the period is 15 months. The second condition is meeting the substantial presence test, which taking into account the formula used for the test, she will meet with total security. The formula for the test is the following:

The total of (number of days present in the tax year) + (1/3) (number of days in the year before the tax year) + (1/6) (number of days in the year two years before the tax year) > 183. Therefore, in this case, Paloma will be considered a tax resident in the US in 2021 but also in 2022, because there is a condition that considers ⅓ of the days in the year before.

Now we should analyze if there could be a double taxation situation. In the first place we have to determine the primary residence of the person considering the domestic law, because this will determine her tax residency. As stated before, as she will move to the USA either to a house rented out by the company or in a hotel, she will be considered a USA resident and her taxes will be charged according to the USA’s regulations.

Taking into account the part 1 of Article 4 of the OECD Model Tax Convention 2017, Paloma is considered as a “resident of a Contracting State” which is USA since following US laws she is subject to tax in this state because of some criteria such as domicile, residence, place of management… either she lives in a house which its company rents or in a hotel. Moreover, she rents her house in Spain, so she is not a Spanish resident anymore. Thus, she receives income coming from Spain from the house renting and therefore, she is taxed by source of income there, although she is not a Spanish resident anymore.

If we consider she is resident in both countries, Spain and the United States, looking at part 2a), Paloma should be considered to be resident of the State where her economic and personal relations are considered to be closer. In this case, it is the United States.

If you still interpret that she should still be considered a resident of both countries, looking at part 2 b), the determination of the residency will depend on its habitual abode, which in this case is the USA. In this case, following the chart seen in class, nationality isn’t needed to be looked at.

We conclude that for the tax residence purposes no matter if she lives in a hotel or in a house rented since she still lives in the USA, and according to the Double Tax Convention she should not be double taxed and must face only USA’s taxation requirements.

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It does not have any implication for tax residency purposes because the property in Palma de Mallorca does not generate any income for the company. Nonetheless, the company will have to pay to the Spanish authorities a property tax for its possession in Palma de Mallorca, specifically, the Impuesto sobre Biene Inmuebles (IBI).

The common legislation applied worldwide establishes that the company is resident of the country where it was incorporated (incorporation principle). Within this framework, Spain and Germany are not an exception. Therefore the company will not change its tax residence and will continue to pay taxes in Germany exclusively. Hence, if only the manager transfers its residency to Palma de Mallorca but not the company itself, there will be no double taxation, as the company will continue paying taxes in Germany.

Regarding the change of the residency of the director, the only implication to be considered will be the personal income tax, which will apply to his salary at the end of the year. Since the income tax and the price level may differ from country to country, perhaps the company would have to worry about a renegotiation of the salary with the worker.

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According to point  24.1 that references paragraph 3, mentions that competent authorities when dealing with a situation such as the one stated above, they should take into account various factors such as where the meetings are held as well as where “the chief executive officer and other seniors executives carry on their activities”, among others.

In the first situation, the place of effective management is still Spain as the only thing that has changed is having a Global Manager in Switzerland. According to point 22 that references paragraph 3, the company will continue paying taxes under the Spanish law as it is in Spain where the effective decisions are taken.

In the second case,  the board meetings as well as the manager’s activities are held in Switzerland, following the 2014 rules their Contracting State should shift to Switzerland from where they would become tax residents, as now the effective management decisions are being taken there. However, if we are studying the case taking into account the changes made in 2017, this situation should be dealt under a case-by-case basis.

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There is no double taxation problem because the player has tax residency in Cayman Islands which is a tax haven. He will be taxed by source income in Spain, which is the income obtained in the fiscal year, and he will be taxed on all other wealth: property… in Cayman. (if we assume that he plays in an Spanish club).

We assume that his entire income is paid by the Spanish club, so none income is received from the other countries in which he stays.

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September 1 (year 1) to May 15 (year 3)

Year 1 -> 120 days in Spain

Year 2 -> 360 days in Spain

Year 3 -> 165 days in Spain

First, we should look at the domestic laws to determine residency in those countries:

Spain: Only resident in year 2 since days > 183 days.

Families ties criteria does NOT apply, and center of economic interest? (maybe since seconded but we think it is not relevant)

Germany: Resident for sure in year 1 and 3 since > 183 days. And also in year 2 since economic interest (works for a german company)

Use convention for year 2 ONLY, since resident in both countries.

1. Permanent home: Germany for sure, and since long stay in Spain suppose also permanent residence.

2. Center of vital interest/Personal ties: Center of Vital interest GERMANY.

Implies German resident for ALL years.

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As both employees have a permanent place in both countries: Spain and Honduras, the permanent dwelling criteria cannot determine the tax residence. So, the next criteria to be studied is the center of vital interest, basically where each person has the main economic and personal links.

The married man with kids has the center of vital interest closer to Spain as it is where his family resides. So, his tax residency is in Spain.

Yet, the single employee does not have a clear center of vital interest.

For the single employee, we have to study the habitual abode, where the person stays the longest within one year. This will depend on the travelling date:

If the employee travels in February 2021, then he/she would spend more time in Honduras so the tax residency will be Honduras.

If the employee travels in August 2021, he/she would have to spend more time in Spain for the year 2021, so tax residency in Spain and in 2022, there is the possibility that the tax residency becomes Honduras (depending on how long the stay lasts).