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OECD model tax convention: changing residence mid-month

Law Asked by sygi on October 2, 2020

OECD model tax convention and its commentary serves as a basis for many Double Taxation Agreements between European countries. How, typically, is a person P taxed according to the tax convention in the following case:

  • P is a resident of country A according to the convention from Jan 1 until Aug 15
  • then, from Aug 15 until Dec 31 they are a resident of country B
  • they derive income from employment which is exercised in the corresponding states (A until mid-August, B afterwards)
  • they receive salary at the end of the month (ie. Aug 31)

Should the August salary be taxed only by the country B (which is the country where P is a resident when he receives the salary) or half-half between A & B, as P already earned half of their August income when they became a resident of B?

One Answer

Individuals generally operate on a cash basis for taxation

When you are paid is when the tax liability occurs.

Larger businesses operate on an accruals basis; when they become entitled to the income is when the tax liability occurs irrespective of when (or if) they get paid.

Answered by Dale M on October 2, 2020

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