A question of fact

Needless to say, neither of the authors mentions the Depardieu “case”! However, it is true that the Depardieu case could perfectly illustrate the first chapter of the book which is dedicated to the idea of a basic concept related to international taxation: residency. “This criterion is usually the connecting factor, people are associated with a particular territory and therefore to a taxation system according to tax residency, which is a factual residence that is distinct from civil residence which is made concrete by entry on the population register”. It is therefore necessary to prove actual residency in a given place to the taxation authorities; this can be done by producing water and electricity bills, stubs from restaurants and receipts… “Everything is a question of fact, if we take the example of certain actors or businessmen; the question that needs to be answered is whether France is prepared to accept that they are no longer resident in France. For this, they must prove their tax residency in another country and that there are no remaining factors connecting them to France. That does not mean that they can no longer enter France, but they can no longer have their normal residence there (2). As for considering them to be Belgian residents, they must demonstrate a certain presence in the country. For people who travel a lot, determining the place of tax residency can be tricky”, explains Professor Richelle.

Movements across borders inevitably give rise to instances of double taxation. This occurs when two taxation authorities want to tax the same person or the same object. Double taxation can be of an economic or legal nature. Isabelle Richelle gives two concrete examples. “Let’s imagine the case of a retailer with a sales outlet in Liege. His business is going well and he wants to open a second sales outlet in Maastricht. Because he is a Belgian resident, Belgium can tax his overall revenue, including earnings from the Netherlands. But the Netherlands will also want to tax this revenue that has been generated on their territory. This is an international judicial double taxation because the same taxpayer is subjected to the same tax twice on the same income”.

With regard to double taxation of an economic nature, we naturally think of the company that distributes dividends to shareholders. “This dividend is part of the profit generated by the company; it is therefore subject to company tax. For the shareholder it is an income which is taxable in principle”. This is a case of double economic taxation as it concerns two distinct taxpayers. We can easily imagine what would remain of the dividend in question if it were to be distributed from shareholder to shareholder without any corrective mechanism for double taxation…

“Not bad for a small country”

This type of situation can occur in both a national and international context. If the company and the shareholder are both from the same company, the state can accept to cancel one of the two taxations which would be favorable to its economy. But this economy and this shareholder could also be established in different national territories. This is where the problem arises: which country will accept to abandon its share of the spoils? “We could also imagine sharing the spoils between the two, but this is much more difficult to implement. Therefore, most of the time, either one party or the other must relinquish their claim”.

[1] Although it is doubtful that the Belgian taxation authorities would want to contest the fact of residence of individuals wishing to be taxed in Belgium…