ACC308 Lecture

Residency, source & relief from

double taxation

PART 1
 Residents/Non-residents
 Basic element in design of any tax –
identification of persons subject to the tax.
◦ Section 6 define resident individuals
◦ Section 7 define sources in Fiji

◦ Residents are subject to Fiji tax on their

world-wide income;
◦ Non-residents are subject to Fiji tax on
income derived in Fiji
 1. Resident
 For tax purposes every person is either a
resident or a non resident.
 S.6 (1) Subject to subsections (2) & (3), an

individual is a resident individual if the

individual –
◦ (a) resides in Fiji;
◦ (b) is domiciled in Fiji unless the individual has a
permanent place of abode outside Fiji;
◦ (c) Is present in Fiji for a period of, or periods
amounting in aggregate to, 183 days in any twelve-
month period; or
◦ (d) is an employee of the Government posted
abroad.
 1. Resident
 Section 6(2) an individual who is a resident individual
under subsection (1) in relation to a tax year, in this
section referred to as the “current tax year”, but who
was not a resident individual for the preceding tax
year is treated as a resident individual in the current
tax year only for a period commencing on the day on
which the individual was first present in Fiji.
 Section 6(3) An individual who is a resident individual
under subsection (1) for the current tax year but who
is not a resident individual for the following tax year is
treated as a resident individual in the current tax year
only for the period ending on the last day on which
the individual was present in Fiji.
 A person who resides
 A resident of Fiji is a person who resides in Fiji.
 But whether a person resides in a place, is regarded as a

question of fact. E.g a tourist

 Therefore, some guidelines are necessary.

Tax cases concerning residency establish the following

guidelines:
1. A person may be a resident of two places simultaneously.
◦ Case: Cooper v Cadwalader
 In this case, an American lawyer who worked and lived in America
spent two months in Scotland during the grouse hunting season,
staying at a fully furnished house he had leased for several years.
 Was he resident or non-resident of Scotland?
 Court: a resident of Scotland (he was also of course a resident of
the US.) Clearly had the taxpayer stayed at a hotel during his
grouse hunting holidays he would have been regarded as merely
a tourist).
A person who resides cont…
2. A residence in the sense of a dwelling is not
essential to residing or being a resident.
◦ A person with no fixed address, leading a
nomadic existence, may still be a resident.
However, the maintenance of a resident or
establishment is a major factor, perhaps a
conclusive factor, in favour of a person being
regarded as a resident.
◦ Case: Cooper v Cadwalader
A person who resides cont…
3. To settle in a place involves ties other than those of a
house and household effects.
◦ Other connections or ties to a place such as bank account,
membership of clubs and professional associations, involvement in
a business, friends and family are indicative of residence.
◦ The continued maintenance of ties weighs strongly against a
person who claims to have ceased being a resident of a place.
 In Levene v IR Comrs, the taxpayer and his wife disposed of their
residence in England with the declared intention of living abroad.
Thereafter they stayed at various hotels on the continent, annually
returning to England for a number of months to visit friends and
relatives, attend religious ceremonies and obtain medical advise.
While in England they stayed at hotels and with friends. This lifestyle
was maintained for five years until a residence was leased at Monte
Carlo.
 What was Levene’s residence status?
 Court: remained a resident of England throughout the 5-year period.
A person who resides cont…
4. The longer the person stays in the jurisdiction the
stronger the case for holding him/her to be resident.
◦ However the length of a person’s presence is not of
itself determinative.
 A sailor who maintains a household in the jurisdiction to
which he returns only briefly between voyages is a resident.
 Or even lengthy period in the jurisdiction but still not a
resident. Like a traveller who is injured and hospitalized for
a lengthy period.
5. An individual’s intention may be of greater or lessor
significance.
◦ A person who disposes of all his assets in one country
and moves to a second country intending to establish
his life in the second country will be resident of the
new country from day one of his arrival.
A person who resides cont…
◦ But on the other hand, a person who contrary to his
wishes is obliged to stay in or regularly visit and work
in a country (e.g. for business reason) may be a
resident notwithstanding that he has no personal wish
to stay in that country and no intention of becoming a
resident thereof.

6. The issue for decision is whether a person is a resident

of a tax jurisdiction for a particular year.
◦ Attention therefore must be focused on the person’s
situation in that year. However, evidence may be
admitted regarding earlier and latter tax years. Such
evidence may be of value as corroborating testimony
of the person as to his intention or as disclosing a
pattern of activity.
A person who resides cont…
7. Areas of law other than tax classify persons as
resident and non-resident.
◦ Immigration Act – expatriate obtain a permit to
reside in Fiji – resident of Fiji
◦ Exchange Control Act – expatriate working in Fiji
up to 3 years is classed as non-resident. No
relevance to a determination whether the person
is resident in Fiji in ordinary sense.

8. Whether a person is a resident of a place is a

question of fact
◦ Many of the facts listed above appear in the Court
of Review decision Maneklal Maganlal v CIR.
◦ Let us look at this case.
A person who resides cont…
Case of Maneklal Maganlal v CIR.
 The taxpayer was born in India and came to Fiji with his

wife in 1948. At some time the couple acquired Fiji

citizenship and passports. By 1979, the taxpayer owned
a house in Suva, was a partner in a firm of merchants
and a director of each of the 3 companies associated
with the firm. The taxpayer’s father had been born in
India, lived in Fiji and returned to India in 1974. The
taxpayer testified that in 1979 he decided to return to
India and live there permanently. He disposed of most of
his Fiji assets and obtained Monetary Board certification
as a non-resident. He retained one company
directorship and ownership of the Suva house. The
taxpayer and his wife left Fiji in April 1979 and arrived
India several month later. Cont.... Next slide...
A person who resides cont…
 There the couple lived in the father’s house. The
taxpayer had no source of income in India. All his
1979 income was sourced in Fiji. Around June 1980
a cousin visited the taxpayer in India and requested
that he return to Fiji to train her daughter-in-law in
the running of the partnership business. The
taxpayer did return in Fiji in September 1980 and
on arrival stayed in his Suva house.
 Clearly the taxpayer was a resident of Fiji at least
his departure in April 1979. In issue was the
taxpayer’s status for the remainder of 1979. Was
he resident of Fiji or non-resident?
A person who resides cont…
 The Court held that the taxpayer to be a resident of
Fiji for all of 1979 (will be the same for 1980).
◦ Taxpayer declared intention – not to return to Fiji viewed as
doubtful given the failure to dispose of the Suva house.
◦ Number of features pointed towards continued residence:
 Taxpayer retained the ties of a house in Suva
 A directorship in one of the companies
 And income from Fiji and his Fiji nationality and passport
 In India he had not acquired his own residence but stayed in his
father’s house
 WORDS OF COURT – he was master in his Fiji house whereas he
was a merely a son in his father’s house in India.
 2. Source of Income
 Employment & Services
◦ The essence of income from employment is of a reward for services.
 Employment income is derived from the place where duties are performed.
– employment income normally derives from the place where
duties are performed.
◦ Case of FCT v French. The Australian High court have given primary
emphasis to the place at which services are performed when determining the
source of employment income. In French the taxpayer, a resident of
Australia, was employed as an engineer by CSR. His regular work was in
Sydney and a monthly salary was paid into his Sydney bank account. The
taxpayer spent several weeks in NZ inspecting operations of the company in
that country. What was the source of the salary for his period in NZ. Was it
NZ or Australia?
◦ Salary attributed to this period was held to be sourced in NZ.
 Profit of a business -
◦ Profit is as an outcome of the whole business is located, where the whole of
the business is carried on.
◦ If the whole of the business extend across 2 or more jurisdiction then the
profit will be apportioned in some rough fashion between the 2 jurisdictions.
 2. Source of Income cont..
 Income from property -
◦ Rental income from real estate derives from the place
where the land is located.
 Thus, income is sourced at the location of the property.
 3. Double taxation relief
Re- analyse the 2 proposition:
1. Residents are subject to Fiji tax on their world-wide
income;
 A resident of Fiji deriving income in a foreign jurisdiction
that taxes income source in the jurisdiction will be liable
to Fiji tax by virtue of his residence, and foreign tax by
virtue of the source of income.
 Subjecting the taxpayer to tax from two jurisdiction on
the same income is unfair to the particular taxpayer.
 How this could be avoided or minimized?
2. Non-residents are subject to Fiji tax on income
derived in Fiji
 A non-resident of Fiji, resident in a foreign jurisdiction
that taxes residents on the world-wide income will be in
a similar situation.