A few days ago I wrote a post on the determination of Tax Residency for NRIs who live or work in multiple countries. The rules are general in nature, as developed by the OECD or UN model. But certain countries also have certain rules of their own to determine residency status for NRIs or citizens of a different country. More than 60% of NRI population loves in USA, Canada, Singapore, UAE & UK. Hence we shall discuss the important Tax Residency Rules in Some Countries in brief.

You may like to check the previous post on the OECD/UN model to determine Tax Residency here.

Tax Residency Rules in Some Countries

US TAX RESIDENCY

An individual is required to file a federal income tax return if he is a citizen or resident of U.S. and the same needs to be ascertained for the respective tax year (1 Jan to 31 Dec).

The definitions of U.S. citizen and resident for the calendar year 2020 are given below:
a) U.S. Citizen

Every person born or naturalized in the United States is a U.S. Citizen.

b) U.S. Resident for tax purpose

A person can qualify as a U.S. resident who meets either of two tests: the lawful permanent resident test or the substantial presence test.

Lawful permanent resident test: An alien individual is regarded as a resident of the U.S. if he is a lawful permanent resident of the U.S. at any time during the year (commonly referred to as a green card holder).

Substantial presence test: To meet this test, the individual must be physically present in the United States for at least:

31 days during the current calendar year, AND
183 days in aggregate during the 3-year period elaborated below :
- The total number of days he was present in the current calendar year, and
- 1/3 of the days he was present during the 1st preceding calendar year, and
- 1/6 of the days he was present during the 2nd preceding calendar year

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This definition applies only for purposes of determining an individual’s U.S. income tax liability. For example, it does not apply for estate and gift tax purposes.

Non-resident alien: An individual will be a non-resident alien if he is neither a citizen nor a resident of the United States.

The indicative residency test flowchart is reproduced as under:

The Internal Revenue Service (IRS) has issued guidance that provides relief to individuals and businesses affected by travel disruptions across the globe arising from the COVID-19 situation. As per the guidance, under certain circumstances, up to 60 consecutive calendar days of U.S. presence that are presumed to arise from travel disruptions caused by the COVID-19 emergency will not be counted for purposes of determining substantial presence test under U.S. tax residency rules.

Canada TAX RESIDENCY

In Canada, an individual’s residency status for income tax purposes is determined on a case-by-case basis. A

n individual who is resident in Canada can be characterized as ordinarily resident (also known as a factual resident) or deemed resident. An individual’s whole situation and all the relevant facts must be considered with reference to Canada’s tax laws and views of the Courts.

An individual who is ordinarily resident in Canada includes an individual who regularly, normally or customarily lives in the usual mode of life in Canada. As a result, residential ties with Canada such as a home in Canada, social and economic interests in Canada, and other connections to Canada are important considerations.

It is also important to consider whether any “deeming provision” in Canada’s tax laws apply to cause an individual to be a resident of Canada for income tax purposes.

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These “deeming provisions” impact certain individuals not otherwise resident in Canada with connections to Canada, such as individuals who spend a total of 183 days or more in a year in Canada or who are employed by the Government of Canada or a Canadian province.

UK TAX RESIDENCY

For individuals, the UK tax year runs from 6 April in one year and ends on 5 April in the following year. The UK operates as a system of independent taxation. In determining an individual’s liability to UK tax it is first necessary to consider their residence and domicile status.

a) Residence: Statutory Residence Test (SRT)

The SRT is a comprehensive test to determine whether an individual is a UK resident. Broadly the SRT looks at a person’s history of residence in the UK and level of connectivity with the UK.

b) Residence: Domicile

Domicile is a general law concept and is distinct from nationality and residence. In very broad terms, an individual is regarded as domiciled in the country they consider their ‘home country’ (often the country where they have their long term permanent home).

SINGAPORE TAX RESIDENCY

In Singapore, tax year runs from 1 January to 31 December. A person shall be regarded as a resident of Singapore if he is a:

A person who normally resides in Singapore except for temporary absences; OR
A person who is physically present or who exercises an employment (other than as a director of a company) for 183 days or more in the previous year

Further, an individual will be treated as a resident in any of the below cases:

He has entered Singapore on or after 1 January 2007 (excludes directors of a company, public entertainers or professionals) and is present for at least 183 days straddling over 2 years. In this case, he will be treated as a resident for both the years.
He stays or works in Singapore for continuously 3 consecutive years (not necessarily complete 3 calendar years). In this case, he will be treated as a resident for all the 3 years.

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