Term 'Resident' In DTA Agreements

A resident: The definition of the term, resident, is central to the application of a treaty because treaties often assign the taxing authority to the state of residence. Each contracting state defines residence for individuals and companies under its domestic law. However, the definition of residence under a DTAA may be the same as that under the regular tax laws of a contracting state, i.e. based on the number of days stay in that country or other such criterion, or on the basis of whether he has a permanent home in both states, or where his personal and economic relations (center of vital interest are greater.

If the center of the vital interests cannot be determined, then the habitual abode test is applied. In the absence of habitual abode, citizenship may be the determining factor. If the person is a citizen of both/ states or neither, some DTAAs specify that it will be the phase of effective management which is determinative.