Dubbelboende vid beskattningen av fysiska personer

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http://urn.fi/URN:ISBN:978-951-855-329-1
Title: Dubbelboende vid beskattningen av fysiska personer
Author: Frände, Joakim
Contributor: University of Helsinki, Faculty of Law
Publisher: Suomalainen lakimiesyhdistys
Date: 2013-09-27
Belongs to series: Suomalaisen lakimiesyhdistyksen julkaisuja A-sarja N:o 315 - URN:ISSN:0356-7206
URI: http://urn.fi/URN:ISBN:978-951-855-329-1
http://hdl.handle.net/10138/40303
Thesis level: Doctoral dissertation (monograph)
Abstract: Dual residence in the taxation of individuals Each country has the right to determine on which grounds and to what extent it exercises its tax authority. In the case of individuals a country usually bases its right to levy taxes on the connection between the country and the individual, or the country and the income or wealth in question. This thesis deals with the connection that exists between the country and the individual. Under domestic tax law systems a separation is usually made into full and limited tax liability. Full tax liability arises when there are strong ties between the individual and the state. Residence is usually considered a strong tie that results in full tax liability. A person who is resident in a country, and therefore subject to full tax liability, is usually taxed on his world wide income. However, if the person is not resident, the state does not claim the right to tax the individual as such, but taxes income that arises within the territory of the country. When determining residence in one country, no consideration is given to whether the person is also resident in other countries. Consequently, individuals can as a result of cross border movement be considered resident both in the country of arrival and the country of departure. When two countries both consider an individual resident, dual residence arises. The purpose of this thesis is to analyse three aspects of dual residence. First and foremost, national rules on residence will be analysed, as well as how dual residence occurs in practice. Secondly, the rules on how to determine tax residence for tax treaty purposes are discussed. Thirdly, the tax consequences of dual residence will be investigated. The emphasis will be on the first two aspects of dual residence mentioned. The thesis is based on a dogmatic approach to legal research. Some elements of comparative methods of research are also present. A person who is resident in Finland is subject to full tax liability in Finland. Residence for income tax purposes is determined in the income tax act (ITA) § 11. According to ITA § 11 a person is resident in Finland if he has his main abode and home in Finland, stays over six months in Finland or falls under the three-year rule. Finnish nationals who leave Finland are as a result of the three-year rule considered resident the year of departure and the three following years. Limited tax liability can arise before the three- year period ends if the individual can produce evidence that he lacks substantial ties to Finland. The Finnish rules on residence are partly problematic. The rules on when a visit to Finland has fulfilled the six months requirement are unclear. Also, the three-year rule does not specify what a substantial tie is. The three-year rule furthermore distinguishes between Finnish nationals and foreign nationals. Different tax consequences depending on nationality can be problematic from an EU perspective. A short analysis of the current ECJ cases, however, indicates that the three-year rule is probably in conformity with EU law. Residence is also used to determine tax liability for the purpose of other taxes, such as the gift and inheritance tax, car tax, municipal tax and social security contributions. Each above-mentioned tax has its own notion of residence. The different concepts of residence are compared with the residence concept that is used for income tax purposes. The comparison led to the observation that the residence concept for income tax purposes can impact on the other residence concepts. Usually residence for other tax purposes does not impact on the residence status for income tax purposes. However, the tax authorities claim that belonging to the Finnish social security system is a substantial tie according to the three-year rule. The Finnish rules on residence for income tax purposes are in many ways interesting in comparison to other countries rules on residence. A comparison has been made with Sweden, Norway, Denmark, Germany, the United Kingdom and the USA. Most of the above-mentioned countries have fairly recently amended and modernized their rules on residence. The comparison demonstrates that the Finnish rules on residence are outdated and in need of reformation. For instance, nationality does not carry any weight when determining tax liability in most other countries (except for the USA). When a Finnish national moves abroad, he is usually subject to full tax liability in the country of arrival, and at the same time subject to full tax liability in Finland due to the three-year rule. The resulting dual residence is solved by tax treaty, provided that the countries have concluded a treaty. For tax treaty purposes a person can only have one tax treaty residence at a time. Residence for tax treaty purposes is determined through the tie breaker in article 4(2). The state of residence has the primary right to tax the individual. The tie breaker is, however, problematic, since the criteria on which residence is decided are partly ambiguous and can be interpreted in different ways. Therefore the general rules on tax treaty interpretation have to be considered. Rules on tax treaty interpretation can be found in domestic legislation, international law, the Vienna convention, article 3(2) of tax treaties, and in the commentaries to the model tax convention. Some of the rules on interpretation can lead to different outcomes. The parties can also have diverging information about the individual s personal circumstances. Therefore it is possible that two countries cannot reach an agreement on which country should be the individual s state of residence according to article 4. When both countries claim to be the state of residence, the conflict shall be settled by the mutual agreement procedure in article 25 of the tax treaty. The mutual agreement procedure is time consuming and results cannot be guaranteed. In Finland there are no publications by the tax authorities on the mutual agreement procedure, and the procedure is hence not very well known. Therefore, I have tried to describe how the mutual agreement procedure is executed in practice. In 2008 the OECD added an arbitration clause to its model convention as a final means to solve tax treaty disputes that have not been solved by the mutual agreement procedure. Finland has not, however, included the clause in its treaties. Dual residence can result in several different consequences for the taxation of individuals, and the possible consequences are analysed in this thesis. The taxation of dual resident individuals can vary greatly from one situation to another depending on domestic legislation in both countries of residence, the type of income, the source of income, the tax treaties articles and the interpretation of the tax treaty. The taxation of dual resident persons can be divided into situations where no tax treaty has been concluded, a tax treaty exists and Finland is not the state of residence, and situations where both countries claim residence status according to the tax treaty. Some Finnish tax treaties include the three-year rule in article 23. According to the clause the source country is granted a more comprehensive, but secondary, right to tax persons who are resident according to domestic tax law, although the residence state for tax treaty purposes is in the other country. To demonstrate the impact of dual residence on the taxation of individuals, the taxation in Finland of interest, dividend, capital gains, salary and pensions is described through practical examples. Situations of dual residence can also have other tax implications, e.g. is there a progressive impact on other income, and how are deductions and losses taken into account when Finland is not the state of residence according to article 4? Dual residence does not necessarily cause double taxation as a result of national rules on credit and exemption and the elimination of double taxation. The concluding chapter sheds light on some of the most urgent problems in the current legislation on residence and presents some suggestions for improvements. The rules on residence in the domestic income tax act are scrutinized in detail. It is suggested that the nationality criterion in the three-year rule is abolished, and that substantial ties are defined in the income tax act. Furthermore, it is also suggested that the national rules on the elimination of double taxation are elucidated and that the scale of application is extended. On the international level it is recommended that article 3(2) in the OECD model tax convention is amended to primarily recommend an interpretation according to the context. Some minor adjustments are also presented to the articles on residence and mutual agreement.Varje stat får självständigt reglera utsträckningen av och kriterierna för sin beskattningsbehörighet. I fråga om fysiska personer baserar sig statens beskattningsbehörighet vanligen på antingen anknytningar mellan staten och den skattskyldige eller anknytningar mellan staten och skatteobjektet. Denna forskning tar sin utgångspunkt i förhållandet mellan den skattskyldige och en stat. I Finland gör man en uppdelning i allmänt och begränsat skattskyldiga personer. En person som enligt inkomstskattelagen är bosatt i Finland anses vara allmänt skattskyldig, och beskattas således för sina globala inkomster. Alla andra är begränsat skattskyldiga, och beskattas bara för inkomst med sin källa i Finland. Andra länder har vanligen motsvarande regler. Således kan det vid gränsöverskridande rörlighet hända att avfärdslandet anser att den skattskyldige fortsättningsvis är skatterättsligt bosatt där, medan allmän skattskyldighet aktualiseras i det nya vistelselandet. Om två länder samtidigt anser att en och samma person är bosatt och allmänt skattskyldig i landet i fråga uppstår dubbelboende. I denna forskning granskas tre skeden av dubbelboende. Först behandlas hur boende enligt nationell rätt och dubbelboende uppstår. För det andra analyseras hur dubbelboendekonflikter löses genom bestämmandet av hemvist i de fall då skatteavtal ingåtts. För det tredje redogörs för de skattekonsekvenser dubbelboendesituationer får. Boken avslutas med förslag för hur nationell och internationell rätt kunde utvecklas.
Subject: finansrätt, skatterätt
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