Tax Residency in Dominica
1. Criteria for Determining Tax Residency in Dominica
According to Section 2 of the Income Tax Act, an individual is considered a tax resident in Dominica if they meet any of the following criteria:
- Physical presence in Dominica for more than 183 days in a calendar year.
- Domicile in Dominica, which is established by a person's permanent home or principal place of abode.
- Ordinary residence in Dominica, which implies a more continuous and permanent presence beyond mere physical presence.
For entities, tax residency is determined based on their place of incorporation or management and control.
2. Impact of International Tax Treaties on Tax Residency Criteria
Dominica has entered into several tax treaties with other countries to prevent double taxation and promote cross-border trade and investment. These treaties may modify or provide exceptions to the standard criteria for tax residency as defined in domestic law.
For example, under the Dominica-United Kingdom tax treaty, an individual is considered a resident of Dominica if they are liable to tax in Dominica by reason of their domicile, residence, or place of management. The treaty also includes tie-breaker rules for individuals who are considered residents of both Dominica and the United Kingdom under each country's domestic law.
These treaty-specific modifications aim to provide clarity and prevent double taxation by establishing clear rules for determining tax residency in cases involving cross-border activities. They reflect the mutual agreement between Dominica and the treaty partner country to facilitate tax compliance and enhance economic cooperation.
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