1 Connection Factors

1.1 To what extent is domicile or habitual residence relevant in determining liability to taxation in your jurisdiction?

U.S. domiciliaries are generally subject to U.S. Federal estate tax, gift tax and generation-skipping transfer tax (the “GST tax”) in the same manner as U.S. citizens, i.e., on transfers of property wherever located. Resident aliens of the U.S. are generally subject to U.S. Federal income taxation in the same manner as U.S. citizens, i.e., on their worldwide income. The tests for determining whether an individual is a resident alien is not based on the concept of domicile or habitual residence. Depending on the jurisdiction, domicile may be relevant for estate, gift and income tax purposes at the state or local level.

1.2 If domicile or habitual residence is relevant, how is it defined for taxation purposes?

For Federal transfer tax purposes, a person is domiciled in the United States by living in the United States, even for a brief period of time, with no definite present intention of later moving away from the United States. (U.S. Treasury Regulation (“Treas. Reg.”) ง 20.0-1(b).) Domicile thus has both an objective (physical presence) and a subjective (intent) component.

1.3 To what extent is residence relevant in determining liability to taxation in your jurisdiction?

For Federal transfer tax purposes, residence is equated with domicile.

Unless a treaty provides otherwise, resident aliens of the United States are generally subject to U.S. Federal income taxation in the same manner as U.S. citizens, that is, on income derived from all sources, including sources outside the United States, at graduated rates, subject to applicable deductions and credits. Currently, these marginal rates range from 10% to 37%.

Depending on the jurisdiction, residence may be relevant for tax purposes at the state or local level.

1.4 If residence is relevant, how is it defined for taxation purposes?

A non-U.S. citizen will be considered a U.S. resident for U.S. Federal income tax purposes for any calendar year in which he or she (i) is a lawful permanent resident of the United States at any time during the calendar year, or (ii) is “substantially present” in the United States. In addition, under certain circumstances, an alien individual may elect to be treated as a resident of the United States. U.S. Internal Revenue Code of 1986, as amended (“IRC”), ง 7701(b)(1)(A)(iii) and (b)(4).

A non-U.S. citizen meets the first test if he or she holds a valid Certificate of Permanent Residence, i.e., a “green card”. The substantial presence test is generally satisfied if a non-U.S. citizen is physically present in the United States in a calendar year for a period of 183 days or more. In addition, the test is also satisfied if (i) an individual is physically present in the United States for at least 31 days during that calendar year, and (ii) the individual’s presence in that year and the two preceding years equals a weighted aggregate of 183 days or more pursuant to the application of a specific formula. (IRC ง 7701(b)(3)(A).) Subject to certain exceptions, the applicable statutory formula for calculating the 183-day period provides that each day of the current calendar year will count as one day, each day of the first preceding calendar year will count as 1/3 of a day, and each day of the second preceding calendar year will count as 1/6 of a day. A useful rule of thumb is that an individual can spend up to 121 days each year in the United States without becoming a resident under the substantial presence test.

The above is subject to applicable U.S. income tax treaties.

1.5 To what extent is nationality relevant in determining liability to taxation in your jurisdiction?

U.S. citizens are subject to U.S. Federal income taxation on their worldwide income and transfer taxation on their transfers of worldwide assets.

1.6 If nationality is relevant, how is it defined for taxation purposes?

The status of an individual as a U.S. citizen is determined under U.S. nationality laws, not U.S. tax laws. A person becomes a citizen of the United States at birth if the individual (i) was born in the United States or certain territories of the United States, (ii) was born outside the United States to two U.S. citizen parents, or (iii) was born outside the U.S. to one parent who was a U.S. citizen and who met certain statutory requirements regarding the parent’s presence in the U.S. In addition, a person may become a citizen of the United States after birth either through his parents or by applying for naturalisation. The right of a person born outside the United States to claim citizenship through a parent who is a U.S. citizen (or under certain circumstances a parent who becomes a naturalised U.S. citizen before the child’s 18th birthday) is based entirely on statute. In general, an individual who is a citizen of both the U.S. and another country is subject to U.S. Federal taxation as a U.S. citizen.

1.7 What other connecting factors (if any) are relevant in determining a person’s liability to tax in your jurisdiction?

A U.S. citizen or resident is subject to U.S. Federal income taxation on his or her worldwide income.

A non-resident alien is only subject to U.S. Federal income tax on certain types of income from U.S. sources. Income that is effectively connected with a U.S. trade or business is generally taxed on a net basis in the same manner as income earned by a U.S. person. In addition, certain U.S. source “fixed and determinable income”, such as dividends, rents and interest, is generally subject to a flat 30% withholding tax. Certain types of U.S. source income, such as interest from U.S. bank accounts and “portfolio interest” on U.S. debt obligations (which includes registered debt issued by the United States and U.S. corporations) is generally exempt from U.S. Federal income tax when held by a non-resident alien.

A non-resident alien who is present in the United States for 183 days or more during the tax year is subject to a flat 30% capital gains tax on gains derived from sources within the United States. In practice, such an individual will generally be a U.S. resident under the substantial presence test. However, this rule may apply to individuals who are not treated as satisfying that test, such as individuals present in the U.S. on a valid student visa.

In addition, states of the United States that have an income tax generally impose that tax on non-residents of such states with respect to income earned in such states.