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CA Final · Direct Tax Laws & International Taxation · Overview of Model Tax Conventions

Under both the OECD and UN Model Conventions, a resident of both Contracting States (dual resident individual) is resolved by tie-breaker rules in Article 4. Rohan, an individual, has a permanent home available in both India and State X, and his personal and economic relations are closer to India. Which result follows?

Rohan is deemed resident of India. The Article 4 tie-breaker first checks permanent home; as both States provide one, the next test is centre of vital interests, namely closer personal and economic relations, which point to India. Later tests are not applied.

  1. AHe is deemed resident of State X because he has a home there
  2. BHe is deemed resident of India, as the centre of vital interests is in IndiaCorrect
  3. CHe is resident of the State where he spends more days
  4. DResidence is decided by his nationality

Explanation

The Article 4(2) tie-breaker order is: permanent home, then centre of vital interests, then habitual abode, then nationality, then mutual agreement. Since the home is available in both States, the test moves to the centre of vital interests, which is India. Habitual abode and nationality are not reached.

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