A company's tax residence decides which country may tax its worldwide profits and which treaties it can use. Most countries combine a test based on where a company is incorporated with a test based on where it is actually run, so a company formed in one country but managed from another can be resident in both. Treaties resolve that conflict with a tie-breaker, and since 2017 the OECD Model leaves the answer to negotiation between tax authorities rather than an automatic rule.
Two tests: where a company is formed and where it is run
The United Kingdom illustrates the common pattern. A company incorporated in the UK is UK resident by statute, and a foreign-incorporated company is also UK resident if its central management and control, meaning the highest level of control of the business, is exercised in the UK. That control may be exercised by the board or, in fact, by a parent company or founder who has taken over the board's role.
India applies a similar two-limb test: a company is resident if it is an Indian company or if its place of effective management in the year is in India. For a founder-led group this matters directly. A UAE or Singapore holding company whose real decisions are taken by directors sitting in India or London may be resident there as well, with its worldwide profits exposed to that country's tax.123
Dual residence and treaty tie-breakers
Where both countries claim a company as resident, the treaty between them decides. Older treaties, such as the India-UAE treaty, award residence to the state where the place of effective management is situated. The 2017 OECD Model replaced that rule with a negotiated outcome: the competent authorities endeavour to agree, having regard to the place of effective management, place of incorporation and other factors, and without agreement the company receives treaty relief only to the extent they allow.
The practical consequence is uncertainty and delay. HMRC, for example, cannot apply a competent-authority tie-breaker on its own; until the authorities decide, the company remains dual resident and therefore UK resident, and it must keep filing returns on that basis. Where a tie-breaker does award residence to the other country, UK law treats the company as not UK resident without any claim being needed.456789
India's place of effective management test as a worked example
India defines place of effective management as the place where the key management and commercial decisions necessary for the business as a whole are, in substance, made. CBDT guidance looks first at whether the company has an active business outside India, then at where the board, or whoever actually takes decisions, operates. CBDT has also stated that the test does not apply to companies with turnover of INR 50 crore or less.
These rules were framed under the Income-tax Act, 1961. The Income-tax Act, 2025 has applied from 1 April 2026 and renumbered the provisions, so references in board papers, opinions and intra-group agreements should be updated and the current section confirmed.101112
| Rule | Test | What decides residence | Research status |
|---|---|---|---|
| UK domestic law | Incorporation (CTA 2009 s14) and central management and control | Either test makes the company UK resident | Source-checked |
| India domestic law | Indian company or place of effective management in India | Either test makes the company Indian resident | Research draft: confirm 2025 Act provision |
| India-UAE treaty, Article 4(4) | Place of effective management tie-breaker | Automatic: state where effective management is situated | Source-checked |
| OECD Model 2017, Article 4(3) | Competent authority agreement | Negotiated; no treaty relief without agreement | Research draft: OECD text not yet checked |
Decisions to make
- Where does the board actually meet and where are strategic decisions really made?210Both the UK control test and India's effective management test look at substance, not the registered office.
- Which treaty applies, and is its company tie-breaker based on place of effective management or on competent authority agreement?547A negotiated tie-breaker can leave the company dual resident for a long period, with no treaty relief in the meantime.
- Are the founders or senior executives tax resident in a different country from the company?210Decisions taken by individuals sitting in another country can move effective management there.
- Is the company below India's POEM turnover threshold?11CBDT has stated the test does not apply at or below INR 50 crore turnover, subject to confirmation under the 2025 Act.
Documents usually needed
- Board and committee minutes recording where meetings were held and who attended from where
- Delegation of authority matrix showing who approves contracts, budgets and financing
- Directors' residence and travel records for the year
- Tax residency certificate from the country of claimed residence
- Competent authority or mutual agreement procedure request where residence is disputed
Common mistakes
- Assuming that incorporating in a low-tax country settles where the company is resident
- Holding board meetings by video while most directors sit in a higher-tax country
- Treating the board as a formality while a parent or founder elsewhere takes the real decisions
- Assuming a place of effective management tie-breaker applies when the treaty, as modified, requires competent authority agreement
- Delaying tax returns while waiting for a tie-breaker decision
Questions businesses ask
Can a company be tax resident in two countries at once?
Yes. If one country uses incorporation and another uses management and control, a company can meet both tests. The relevant treaty then decides, either automatically by place of effective management or by agreement between the tax authorities.1245
What happens while the tax authorities are still deciding?
Under UK practice the company stays dual resident, and therefore UK resident, until a decision, and must keep filing. Under the 2017 OECD wording, treaty relief is only available as the authorities agree.785
Does India's POEM test apply to small companies?
CBDT has stated that it does not apply to companies with turnover or gross receipts of INR 50 crore or less in the year. Confirm the position under the Income-tax Act, 2025.11
What this guide does not yet confirm
These points need checking with a qualified local professional before you rely on them.
- The OECD Model full text could not yet be checked, so the Article 4(3) wording is recorded as a research draft.
- CBDT Circulars 6 and 8 of 2017 and the Income-tax Act, 2025 residence section could not yet be checked; the POEM points are research drafts and the 2025 Act section number is unconfirmed.
- Which treaties among the eight markets adopted MLI Article 4 (dual-resident entities) was not confirmed.
- Domestic residence tests in the UAE, Saudi Arabia, Singapore, the US, Germany and France were not researched in this part.
Sources and review status
Each statement is numbered to the source it was checked against. We use official sources where we can, and each statement says whether it was checked against an official or a secondary source. Sources last checked on 18 October 2026. None of it has been professionally reviewed yet: it is research checked against official and secondary sources by WONE Global, not legal or tax advice.
Under UK law a company incorporated in the UK is resident in the UK for tax purposes. Corporation Tax; statutory incorporation rule in CTA 2009 s14, subject to the exceptions in CTA 2009 Schedule 2.
Under the UK case-law test, a company is also UK resident if its central management and control is exercised in the UK, meaning the highest level of control of the business. Applies to companies not incorporated in the UK; derived from De Beers Consolidated Mines Ltd v Howe. Control may be exercised by the board or by another person, such as a parent, that has in fact assumed it.
Under Indian income-tax law a company is resident in India for a year if it is an Indian company or its place of effective management in that year is in India. Income-tax Act, 1961 section 6(3); the corresponding Income-tax Act, 2025 provision applies from 1 April 2026.
Point reflects the Income-tax Act, 1961 and its CBDT guidance. The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026 and renumbered provisions; the corresponding 2025 Act section and any CBDT guidance re-issued under it could not yet be checked.
The India-UAE DTAA deems a person other than an individual that is resident in both states to be resident only where its place of effective management is situated. India-UAE DTAA Article 4(4); the department's synthesised text shows no MLI modification of Article 4.
Under Article 4(3) of the 2017 OECD Model, the residence of a dual-resident company is settled by mutual agreement between the competent authorities, having regard to its place of effective management, place of incorporation and other relevant factors; absent agreement, it gets treaty relief only as the authorities agree. OECD Model as updated in 2017; applies to a given treaty only where that treaty, or the MLI (Article 4) as adopted by both parties, contains this wording.
The article wording could not yet be checked. Statement reflects the 2017 OECD Model; confirm against the publication before relying on it.
Where a treaty uses a 'standard' tie-breaker that depends on agreement between the competent authorities, HMRC cannot apply it unilaterally. UK treaties with competent-authority tie-breakers for companies.
Under a competent-authority tie-breaker, HMRC lists place of effective management among the factors considered, and until a decision is made the company remains dual resident and therefore UK resident. UK practice; HMRC states it places greater weight on place of effective management than on legal connection in finely balanced cases.
HMRC expects a dual or potentially dual resident company to meet its self-assessment obligations as normal and not to delay returns while a bilateral residence determination is in progress. UK Corporation Tax self-assessment.
A company that is dual resident and whose treaty tie-breaker awards residence to the other country is treated as not resident in the UK ('treaty non-resident'). Does not apply where the tie-breaker awards residence to the UK or where the treaty has no tie-breaker; no treaty claim is needed. Statutory rule in CTA 2009 s18 (formerly FA 1994 s249).
India defines place of effective management as the place where key management and commercial decisions necessary for the conduct of the entity's business as a whole are, in substance, made; CBDT guidelines distinguish companies engaged in active business outside India. CBDT Circular No. 6 of 2017 (guiding principles for determination of POEM).
Point reflects the Income-tax Act, 1961 and its CBDT guidance. The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026 and renumbered provisions; the corresponding 2025 Act section and any CBDT guidance re-issued under it could not yet be checked. The circular itself could not yet be checked; the circulars index is cited.
CBDT has stated that the POEM provisions do not apply to a company with turnover or gross receipts of INR 50 crore or less in a financial year. CBDT Circular No. 8 of 2017.
Point reflects the Income-tax Act, 1961 and its CBDT guidance. The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026 and renumbered provisions; the corresponding 2025 Act section and any CBDT guidance re-issued under it could not yet be checked. The circular itself could not yet be checked; the circulars index is cited.
The Income-tax Act, 2025 replaces the Income-tax Act, 1961 with effect from 1 April 2026, and 'tax year' replaces 'previous year' for income earned from that date. Income earned in FY 2025-26 remains under the 1961 Act.
Questions on this topic
11 statements on corporate tax residence, 4 not yet checked against a source
