Corporate residence is one of the cornerstones of corporate income tax in both domestic law and tax treaties. Tax authorities tend to challenge corporate residence of foreign entities because corporations are internationally mobile. The notion of corporate residence is blurred because MNEs tend to centralise their activities and thus are managed globally. Such a centralised decision-making process leaves little room to manoeuvre by controlled entities (e.g. subsidiaries or holding entities).
Further, countries are using various criteria in determining corporate residence, and as a result, uniformity cannot be guaranteed, leading to dual resident entities (i.e., increased double taxation). And despite various attempts by both the OECD and EU, harmonise such criteria seems unlikely. Yet, corporate residence remains a cornerstone for both domestic law and international taxation.
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