A Review of Tax Residency Determination in Major Countries：Tax Implications for Cryptocurrency Allocation

1.  Introduction

Tax residents refer to individuals or entities who reside in a country (or hold its citizenship), enjoy civil rights and obligations under the law, and are subject to the jurisdiction of that country. Tax residents are obligated to pay taxes to their resident country government without any limitations, meaning that their worldwide income is subject to unlimited tax liability.

For cross-border cryptocurrency investors, tax residency status is a significant concept as it determines the method and tax rates for cryptocurrency taxation. Additionally, due to different criteria and methods used by different countries or regions to determine tax residency, it is possible for an investor to be recognized as a tax resident by multiple countries or regions, leading to the situation of dual tax residency, which means a person’s income may be taxed in more than one country or region at the same time. Therefore, understanding the recognition of tax residency and the corresponding agreements to avoid double taxation among different countries around the world is of utmost importance for investors. This article will outline the rules for determining tax residency and briefly discuss the avoidance of double taxation based on these rules.

2.  Basic Concepts

2.1 Scope of Tax Residency

Both individuals and corporate entities can be considered tax residents of a country or region. Taking mainland China as an example, the criteria for individual to be considered a tax resident is as follows: "Having a domicile within China or not having a domicile but residing in China for 183 days or more during one tax year." Specifically, having a domicile within China refers to habitual residence within China due to household registration, family, and economic interests. Residing for 183 days or more refers to residing in China for a total of 183 days during one tax year (temporary absences of no more than 30 days at a time or multiple absences totaling no more than 90 days are not deducted from the days). For corporate to be determined as tax resident is mainly based on whether it is legally established within China or established according to the laws of other countries or regions but with its actual management located within China. Specifically, actual management refers to the organization responsible for substantial and comprehensive management and control over the company's production, operation, personnel, accounts, assets, etc.

2.2 Difference Between Tax Residency and Other Concepts

Concepts that can be easily confused with tax residency include nationality, household registration, and habitual residence.

Nationality refers to the political and legal relationship between a citizen and a country and is an indication of a citizen's affiliation with a particular country. The nationality of a corporate entity is referring to corporate nationality, which may be determined based on criteria such as the place of establishment, domicile, or the nationalities of its members.

Household registration typically refers to the household registration of Chinese citizens, which represents the registered place of residence of citizens at the national household registration authority and is the legal domicile of citizens. Article 25 of the Civil Code states: " The domicile of a natural person is the residence recorded in the household or other valid identification registration system; if a natural person's habitual residence is different from his domicile, the habitual residence is deemed as his domicile. " In this case, the registered residence loses its effectiveness as the domicile.

Habitual residence refers to a place where a natural person temporarily resides for a specific purpose without the intention of long-term residence. Habitual residence does not require a specific length of stay or a permanent residence intent, only the requirement of actual residence. A natural person can have multiple habitual residence locations.

Although the determination of tax residency sometimes needs to refer to the above concepts, tax residency is not completely identical to them and may overlap or differ from them. For example:

A person may be qualified as a tax resident of multiple countries but only possess the nationality of one country.

A person may have household registration in a certain country but is not considered a tax resident of that country due to long-term work or living abroad. Similarly, they may not have household registration in a certain country but are determined as tax resident of that country considering family relationships or economic interests.

A person may have a habitual residence in a certain country but is not considered a tax resident of that country because they do not meet the country's length of stay requirements.

3. Tax Residency Determination Rules in Major Countries

Criteria for individuals or entities to be considered a tax resident is determined under domestic law or relevant tax provisions of the country. However, for common law countries such as Canada and the United Kingdom, there is no explicit provision that apply to cause an individual or entity to be considered a resident for tax purpose based on meeting certain conditions. Instead, it is determined based on a comprehensive assessment of the individual or entity's overall circumstances. The table below will provide an overview of the tax residency determination in major countries, with reference to relevant laws, regulations, and case precedents.

Continent | Countries/Regions | Criteria for individual to be considered a tax resident | Criteria for entity to be considered a tax resident

Asia | Hong Kong (China) | Individuals who meet any of the following conditions: 1. Individuals who usually reside in Hong Kong, meaning those who have a permanent home in Hong Kong for themselves or their family members, voluntarily and for the purpose of settlement, and continuously reside in Hong Kong, except for occasional or temporary absences. 2. Individuals who stay in Hong Kong for more than 180 days during a year of assessment or stay in Hong Kong for more than 300 days in two consecutive years of assessment one of which is a relevant year of assessment. | Entity who meets any of the following conditions: 1. (When referring to a company) A company registered and established in Hong Kong, or registered outside of Hong Kong but with its main management or control conducted within Hong Kong. 2. (When referring to a non-company entity) An entity established under Hong Kong law, or established under the laws of another country or region but with its main management or control conducted within Hong Kong.

Macau (China) | Although there are no explicit criteria for determining resident for tax purpose, individuals who earn income through employment or self-employment in Macau are obligated to fulfill their tax obligations and therefore will be assigned a unique taxpayer identification number (TIN). | The tax residency status of a company is determined based on its place of registration. Therefore, companies registered and established within Macau are considered tax residents of Macau.

Taiwan (China) | Individuals residing within Taiwan, including those who have a residence within Taiwan and regularly live within Taiwan, or those who do not have a residence within Taiwan but stay in Taiwan for a total of 183 days or more in a tax year. According to Article 25(2) of the "Act Governing Relations between the People of Taiwan area and the mainland Area," individuals for the mainland area who reside or stay in Taiwan for a total of 183 days or more in a year of assessment shall be subject to comprehensive income tax based on their income derived from Taiwan, in accordance with the applicable tax regulations for individuals in Taiwan. | The Tax Law in Taiwan does not provide a clear definition of resident taxpayers and non-resident taxpayers. However, based on indirect provisions and theories of its tax law, profit-seeking enterprises can be divided into two categories depending on whether their head office is located within the territory of Taiwan: 1. Resident taxpayers: These are profit-seeking enterprises whose head office is located within the territory of Taiwan, including subsidiaries registered in Taiwan by overseas companies. 2. Non-resident taxpayers: These are profit-seeking enterprises whose head office is located outside the territory of Taiwan, such as overseas companies and their branches operating in Taiwan.

Singapore | An individual is considered a tax resident of Singapore if they satisfy any of the following criteria: (a) Quantitative criteria: 1. They have resided in Singapore for more than 183 days during the preceding calendar year; 2. They have worked in Singapore for more than 183 days during the preceding calendar year (excluding individuals serving as company directors). (b) Qualitative criteria: The individual has a permanent residence in Singapore, and that their absence must be temporary and reasonable. | The tax residency status of a company or other organization is determined based on the location of its principal management. In other words, a company or social organization that operates within Singapore and has its principal management located within Singapore is considered a tax resident of Singapore. The term "principal management" refers to the entity that makes strategic operational decisions such as company policies or development strategies. In general, the key consideration is the location where the board of directors convenes to make these strategic decisions.

Malaysia | Individuals considered as tax resident are determined based on criteria such as residence and duration of residence. Specifically, an individual is considered a resident taxpayer if they meet any of the following four conditions: 1. They have resided in Malaysia for at least 182 days in a year of assessment (calendar year). 2. They have resided in Malaysia for less than 182 days in a year of assessment, but the total of their consecutive residence in Malaysia in the current and preceding years of assessment amounts to at least 182 days. 3. They have resided in Malaysia for at least 90 days in three out of four consecutive years of assessment. 4. They were resident taxpayers in the preceding three years of assessment. | According to Malaysian tax law, companies considered as tax resident refer to corporate entities where the board of directors convenes in Malaysia annually and the company's directors control the company's operations within Malaysia. "Joint Hindu Family": Joint Hindu Family is a family structure prevalent in India and other areas where multiple generations live together under one roof, sharing property and income, and managed by a designated manager or administrator. In Malaysia, it is also recognized as an entity and considered as a type of tax resident.

Japan | "Tax resident" refers to an individual who meets the following conditions: (i) Has a domicile in Japan; or (ii) Has a residence in Japan for a period of one year or more. The definition of "having a domicile in Japan": 1. An individual is considered to have a domicile in Japan if they meet any of the following conditions: (i) The individual's occupation typically requires them to continuously reside in Japan for one year or longer. (ii) In certain cases, it can be reasonably inferred that the individual will continuously reside in Japan for one year or longer, for example, if they hold Japanese nationality, have immediate family members living together in Japan, or have work and property in Japan, and so on. 2. If an individual is considered to have a domicile in Japan and has immediate family members living together in Japan, such family members are also considered to have a domicile in Japan. | For entities to be qualified as tax resident is based on Article 2 (iii) of the Corporate Tax Law, which states: "Domestic companies" are considered tax resident entities, referring to companies with headquarters or main office in Japan. Any partnership established under Japanese law or similar foreign laws is not considered a tax resident entity.

Saudi Arabia | If an individual meets either of the following conditions within a tax year, they should be considered a tax resident of Saudi Arabia: (1) They have a permanent residence in Saudi Arabia and have resided in Saudi Arabia for no less than 30 days within the year of assessment. (2) They have resided in Saudi Arabia for more than 183 days within a year of assessment. In cases where an individual resides in Saudi Arabia for less than one day, it will be counted as one day. However, this does not apply if the individual is in transit through Saudi Arabia for the purpose of traveling to or from outside the country. | If a company meets either of the following conditions within the year of assessment, it should be recognized as a tax resident entity of Saudi Arabia: (1) It is established according to Saudi Arabian corporate law. (2) Its principal management is located within Saudi Arabia. Partnership enterprises are not considered tax resident entities.

America | United States | According to the Internal Revenue Code of the United States, all U.S. citizens and U.S. residents are considered U.S. tax residents. The tax residency of non-US citizen is determined based on the following two criteria: "Green Card Test": If a foreign individual is a lawful permanent resident (LPR) of the United States at any time during a calendar year, as long as their LPR status has not been revoked or abandoned under U.S. Citizenship and Immigration Services (USCIS) regulations, they will be considered a U.S. tax resident. "Substantial Presence Test": If a foreign individual meets both of the following conditions for their time spent in the United States, they will be considered a tax resident: 1. They have been physically present in the United States for at least 31 days during the current calendar year. 2. The total number of days of presence in the United States during the current calendar year, plus one-third of the days of presence in the immediately preceding calendar year, plus one-sixth of the days of presence in the second preceding calendar year, equals or exceeds 183 days. | Companies established or organized under U.S. federal, state, or District of Columbia laws are considered domestic corporations. Domestic corporations, regardless of whether they are tax residents of other countries, are treated as U.S. tax residents. Certain foreign corporations may also be deemed domestic corporations under specific provisions of relevant laws, such as inverted corporations as defined under section 7874 of the Internal Revenue Code. For trusts, the specific circumstances of whether they are considered domestic entities are determined by sections 7701(a)(30)(E) and 7701(a)(31) of the Internal Revenue Code. It primarily depends on whether a U.S. court can exercise primary supervision authority over the administration of the trust and whether all significant decisions regarding the trust are controlled by one or more U.S. persons. If a trust is considered a domestic trust, it may be treated as a tax resident. Similarly, for estates, domestic estates, like trusts, are considered U.S. tax residents and are required to pay taxes on their worldwide income during their existence.

Canada | In Canada, determining an individual's tax residency status requires consideration of their overall situation and all relevant facts, as well as reference to Canadian tax law and court rulings. Canadian tax residents include individuals who reside in Canada on a regular, usual, or habitual basis and live there. Having residential ties to Canada, such as having a home in Canada and having social and economic interests in Canada, are important factors in determining tax residency. In addition, the "deeming provisions" in Canadian tax law are also significant in determining whether an individual is considered a Canadian resident. These "deeming provisions" apply to individuals who are not resident in Canada but have connections to Canada, for example: staying in Canada for 183 days or more in a tax year or being employed by the Canadian government or a province in Canada. | If a corporation's primary management and control is located in Canada, it should be considered a Canadian tax resident. Additionally, a corporation should be deemed a Canadian tax resident if it meets any of the following conditions: a. It was incorporated in Canada after April 26, 1965. b. It was incorporated in Canada before April 27, 1965, and in any tax year after April 26, 1965, the corporation: (i) Is a Canadian tax resident under common law principles, or (ii) Carries on business in Canada. For trusts, if the trust meets the following two conditions, it should be considered a Canadian tax resident: a. The trust is a non-exempt foreign trust. b. The trust's contributor or beneficiary resides in Canada.

Europe | United Kingdom | An individual may be considered a tax resident of the United Kingdom if they meet any of the following conditions: 1. The individual works full-time in the UK for a continuous period of 365 days (averaging at least 35 hours per week), and spends at least 75% of their working days in the UK. 2. The individual's only or main residence is in the UK, and this status lasts for at least 91 days, with at least 30 days falling within the same tax year. 3. The individual spends at least 183 days in the UK within the year of assessment. 4. The individual satisfies the UK residence test. In general, the determination of UK tax residency for individuals requires consideration of various factors. To assist individuals in determining their tax residency status, HM Revenue and Customs (HMRC) has provided an online tool called the Tax Residence Indicator. | In most cases, entities registered or managed and controlled in the United Kingdom are considered tax residents of the UK. If an entity is managed and controlled in the UK but incorporated in a jurisdiction outside the UK (or vice versa), the tax residency of that entity is determined based on the relevant bilateral tax treaty. Alternatively, the entity may be considered a "dual tax resident," meaning it is recognized as a tax resident by multiple jurisdictions.

France | An individual who permanently resides in France is considered a tax resident of France. Individuals, regardless of their nationality, are considered to have a permanent residence in France if they meet the following conditions: 1. Their home is in France. 2. Their main place of abode is in France. 3. They engage in professional work in France, with or without remuneration, unless they can prove that they are an employee seconded to France. 4. They have the center of economic interests in France. In addition, French civil servants working abroad who are not subject to local taxation on their income are also deemed to have a permanent residence in France. | Entities and permanent establishments are considered tax residents of France if they meet the following conditions: (1) Regardless of the entity's nationality, any entity "operating in France" is considered a tax resident of France. "Operating in France" refers to entities that have day-to-day business operations in France. This can include entities with autonomous decision-making authority, representative offices without independent decision-making authority, or a part of a business that forms a complete business process. (2) Partnership enterprises and trusts are always considered tax residents of France.

Germany | Individuals are considered local tax residents based on their "residence location," which refers to the place where they maintain and use a residence (Section 8 of the Tax Code). Additionally, individuals who reside continuously in Germany for more than six months are generally considered to have their habitual residence in Germany (Section 9 of the Tax Code). Furthermore, taxpayers who have limited tax obligations in Germany may be deemed to have unlimited tax obligations if they meet any of the following conditions: 1. At least 90% of their annual income is subject to German income tax, 2. Their non-taxable income earned in Germany does not exceed the basic personal exemption limit. | The following three types of entities are subject to German corporate income tax on their income: 1. Corporations, which refer to legal entities with legal capacity, particularly established corporate entities (such as publicly traded companies or limited liability companies), registered or unregistered cooperatives, and registered organizations. 2. Non-legal entities without legal personality but with typical corporate organizational forms (such as unregistered associations). 3. Asset pools, such as foundations, regardless of whether they have legal personality. According to Section 1(1) of the Income Tax Act, companies with their management or registered office in Germany are subject to unlimited tax liability for corporate tax in Germany.

Netherlands | If an individual has a permanent residence in the Netherlands, they are considered tax residents of the Netherlands. Specific criteria for determining tax residency include residing in the Netherlands for most of the time and having a job position in the Netherlands. | If the actual management of a company is located in the Netherlands, it is considered a tax resident of the Netherlands. Specific criteria for determining this include the registered office, place of establishment, and location of the board of directors.

Switzerland | If an individual has a tax-relevant residence or domicile in Switzerland, they are considered tax residents of Switzerland. A "tax-relevant residence" refers to the place where an individual resides in Switzerland and intends to stay permanently. Specifically, if an individual carries out activities that generate income in Switzerland and stays in Switzerland for a minimum of 30 days, or if they stay in Switzerland for a minimum of 90 days even without engaging in such activities, they are considered tax residents of Switzerland, regardless of temporary departures during that period. | Entities that have their legal domicile (registered address) or actual management located in Switzerland are considered tax resident entities of Switzerland. Taxable entities include legal entities, namely companies (joint stock companies, limited liability companies, joint stock companies with unlimited partners, cooperatives, associations, foundations, and investment companies with fixed capital [SICAF]). Collective investment schemes that directly invest in real estate are also considered tax resident.

Oceania | Australia | The determination of whether an individual is a tax resident of Australia is based on common law and statutory law, taking into account the specific circumstances of that individual. Under common law, an individual is considered a tax resident of Australia if they are "residing" in Australia. Generally, the concept of residency considers the overall circumstances of the individual for the relevant tax year, including the purpose of residency, family situation, social connections, etc. If an individual does not meet the common law definition of residency but satisfies any one of the three statutory law criteria outlined in Section 6(1) of the Income Tax Assessment Act 1936, they will still be regarded as a tax resident of Australia: 1. Their domicile/permanent place of residence is in Australia (excluding those whose permanent place of residence is not in Australia). 2. They physically stay in Australia for more than half of the tax year (excluding habitual abodes that are not in Australia). 3. They contribute to a Commonwealth government superannuation fund (including their spouse and children under 16 years of age). | Companies that meet any of the following conditions should be considered tax resident entities of Australia: 1. Registered and established in Australia. 2. Registered outside Australia but operating in Australia, with the main management in Australia or voting power controlled by Australian residents. General trusts that meet any of the following conditions in the tax year should be considered tax resident entities of Australia: 1. At any time during the year of assessment, any trustee of the trust is an Australian resident. 2. At any time during the year of assessment, the main management and control of the trust is in Australia. Unit trusts should be considered tax resident entities of Australia in the tax year if both of the following conditions are met at any time during the tax year: 1. The trust has assets located in Australia, or the trustee of the trust operates a business in Australia. 2. The main management and control of the trust is in Australia, or over 50% of the trust's income or property interests are held by Australian residents.

New Zealand | An individual who meets any of the following conditions is considered a tax resident: 1. Having a permanent residence in New Zealand, even if the individual also has a permanent residence in another country or region. 2. Accumulating a total of more than 183 days of stay within any 12-month period in New Zealand, without losing their New Zealand tax resident status for the following reasons: a. Not having a permanent residence in New Zealand. b. Spending more than 325 days living outside of New Zealand within any 12-month period. c. Residing outside of New Zealand for the purpose of carrying out official duties for the New Zealand government. | A company is considered a New Zealand tax resident if it meets any of the following conditions: 1. The company is registered and incorporated in New Zealand. 2. The company's head office is in New Zealand. 3. The company's principal management is in New Zealand. 4. The place where the company's directors or other controlling individuals exercise their authority is located in New Zealand, even if the decision-making location is sometimes outside of New Zealand. The term "company" refers to legal entities that have separate legal status from their members, including limited partnerships, unit trusts, specified group investment funds, airport operators, statutory producer boards, organizations established under the Incorporated Societies Act 1908 and the Companies Act 1908, mutual associations, and building societies, among others. In certain circumstances, a disregarded company may also be considered a tax resident.

Although partnerships and pass-through entities are not considered tax resident entities for taxation purposes in certain countries, they still have an obligation to report financial information as tax residents according to CRS. For example, according to CRS, a partnership with its place of effective management situated in Canada is a tax resident of Canada. It is to prevent the risk of cross-border tax evasion as well as strengthen tax revenue management and information exchange among countries (regions).

4. Dual Tax Residence and Taxation Rules

4.1 Reasons for Dual Tax Residence

Dual tax residence refers to a situation where an individual meets the criteria for tax residence in two or more countries (regions) and therefore liable to tax in those countries (regions) due to the different criteria used to determine residency for tax purpose in each jurisdiction. For example, some countries determine tax residence based on domicile, while others determine it based on habitual residence, resulting in the same taxpayer being recognized as a resident and having unlimited tax obligations in different countries.

To avoid or mitigate double taxation, countries often enter into Double Taxation Agreements (DTAs), which specify how conflicts in determining tax residence should be resolved and provide corresponding exemptions or offset arrangements.

4.2 Taxation rules under DTA Agreements

Generally, DTAs use rules such as the permanent residence rule, the tie-breaker rule based on habitual residence, and the tie-breaker rule based on nationality to resolve conflicts in tax residence determination. The tie-breaker rules are a series of criteria established in international tax agreements to determine the tax liability of individuals or entities who are residents of both countries. In international tax agreements, the tie-breaker rules are usually applied in the following order:

For individuals:

(1) The individual is deemed to be resident of the country in which they have a permanent home available to them.

(2) If they have a permanent home in both countries, they are deemed to be resident of the country with which their personal and economic relations are closer (center of vital interests).

(3) If it is not possible to determine the center of vital interests or if they do not have a permanent home in either country, they shall be considered a resident of the country in which they have a habitual abode;

(4) If they have habitual abode in both countries or in neither country, they shall be considered a resident of the country of which they have the nationality of the country;

(5) If they have nationality in both countries or in neither country, the competent authorities of both countries shall settle the matter through consultation.

For entities:

(1) The entity is deemed to be resident of the country where its actual management is located;

(2) If it is not possible to determine the country where the actual management is located, the competent authorities of both countries shall settle the matter through consultation.

This section aims to illustrate the application of tie-breaker rules using the “The Agreement Between The Government of The United States of America and The Government of The People’s Republic of China For The Avoidance of Double Taxation and The Prevention of Tax Evasion with respect to Taxes on Income” (referred to as "the Agreement"). Firstly, Article 4(1) of the Agreement states that the term “resident of a Contracting State” means any person who, under the laws of that Contracting State, is liable to tax therein by reason of domicile, residence, place of management, place of incorporation, or any other criterion of a similar nature. Following this, Article 4(2) and (3) of the Agreement respectively mention that if an individual or entity is considered a tax resident of both China and the United States based on domestic laws, both sides “shall endeavor to determine the residence of the individual/entity for the purposes of this Agreement through mutual agreement.”

Moreover, the Protocol of the Agreement stipulates that “in applying paragraph 2 of Article 4 of this Agreement, the competent authorities of the Contracting States shall consult each other in accordance with the provisions of Article 4(2) of the United Nations Model Double Taxation Convention between Developed and Developing Countries.” This Model Convention's Article 4(2) is known as the "tie-breaker rule," which follows the same determination methods as mentioned before. Therefore, a few examples can be provided as follows:

Example 1: Company A is registered in China and operates businesses in both China and the United States, but its actual management is in China. Therefore, Company A should be regarded as a resident of China because its actual management is in China.

Example 2: Company B is registered in the United States and operates businesses in both China and the United States, but the location of its actual management cannot be determined. In this case, Company B should be considered as a resident determined by the competent authorities of both countries through negotiation. If no agreement can be reached through negotiation, Company B will not be entitled to any tax treaty benefits.

Example 3: Mr. C and his wife are both Chinese citizens. They reside in the United States for about 90 days each year, while the rest of the time they live in China, with their permanent residence in Shanghai. They have invested a substantial amount of capital in a company in the United States and are members of the board of directors, but they are not responsible for the company's day-to-day operations. They have also purchased several investment properties in the United States. In this example, Mr. C is considered a tax resident of China according to Chinese domestic law and a tax resident of the United States according to U.S. domestic law (based on the substantial presence test). Therefore, according to the relevant provisions of the tax treaty, the first step is to determine whether Mr. C has a residence in both countries. It is evident that Mr. C has a residence in China but not in the United States, so he is considered a tax resident of China, not the United States.

4.3 Exception to the tie-breaker Rules

As of the end of April 2020, China has officially signed 107 double taxation avoidance agreements (101 of which are effective) and tax arrangements with Hong Kong and Macau Special Administrative Regions (already effective), as well as a tax agreement with Taiwan (not yet effective). In the bilateral tax agreements between China and other countries, the tie-breaker rules are usually based on the United Nations Model Double Taxation Convention for Developed and Developing Countries (hereinafter referred to as the “UN Model”), but some agreements adopt tie-breaker rules different from the "UN Model", such as the OECD Model. Although the tie-breaker rules of the OECD Model and the UN Model are similar, there may be different determination methods in specific agreements. Therefore, Chinese investors should pay attention to the bilateral tax agreements between their host country and China in order to determine the applicable tie-breaker rules.

5. Considerations for Cross-border Cryptocurrency Investments

Investment activities of cross-border cryptocurrency investors usually operate around the world. In such cases, in addition to the taxation by the local authorities in the jurisdiction where the assets are located based on local tax provisions, investors may also be liable to tax in high-tax countries if they are recognized as tax residents of those countries. To reasonably eliminate the corresponding investment costs, this section suggests that investors should consider the following aspects:

First, try to avoid having a permanent residence in high-tax countries. Permanent residence is the primary criterion for determining tax residency. If investors have a permanent residence in a high-tax country, they are likely to be recognized as tax residents of that country. Therefore, investors should try to avoid purchasing or leasing long-term residential properties in high-tax countries.

Second, try to place significant centers of interest in low-tax countries. If investors have permanent residences in multiple countries, they should try to place significant centers of interest in countries with lower tax rates. The significant center of interest refers to the place where individuals have the closest personal and economic ties, including family, society, occupation, and property. Investors can demonstrate the significant centers of interest in the following ways:

Residing with family or frequently visiting in a low-tax country,

Engaging in social activities, joining clubs and organizations, forming friendships, etc., in a low-tax country,

Pursuing primary professional or business activities, establishing companies, branches, offices, etc., in a low-tax country,

Investing or holding a significant portion of assets in a low-tax country,

Opening bank accounts, credit cards, insurance, and other financial products in a low-tax country.

Third, try to avoid having habitual residence in high-tax countries. If investors do not have a permanent residence in any country and it is difficult to determine the center of interest, they should try to avoid having habitual residence in high-tax countries. In particular, investors should try to control the amount of time spent living in high-tax countries or provide evidence that their residence in that country is temporary, such as for tourism, visiting friends, or business inspections.

Lastly, for investors with entities, they should try to establish the actual management of the entity in countries with lower tax rates. The actual management refers to the highest decision-making body of the entity, usually the board of directors or a similar body, which is responsible for making and implementing significant decisions for the entity. If the entity operates in multiple countries, the meeting location of the actual management, the location of document storage, and the residence of senior management should be set in a country with a lower tax rate to demonstrate that this country is a significant center of interest for the entity. If it is not possible to determine the location of the actual management, the competent authorities of both jurisdictions will resolve it through negotiation. Correspondingly, the outcome may be uncertain and time-consuming. Therefore, investors should try to avoid this situation or proactively communicate with the tax authorities of the relevant countries to seek more favorable results.