Leonova, O. A., Budylin, S. L. Residence of Physical Entity According to Tax Legislation in Germany and Russia

Abstract: The article is devoted to the analysis of the term ‘residence’ according to German law ad compared to a similar concept in the Russian law taking into account provisions of international tax agreements. The article discusses criteria of residence based on Russian and German tax laws and provides their comparative analysis. Based on the study, the author of the article concludes that in Russia the most important criterion for defining a resident’s status is the number of days the resident has spent in the country while in Germany the most important criteria is the domicile and the place of permanent residence. However, these terms still lack a clear and precise definition. The definitions of the aforesaid terms are studied based on the judicial practice. Taxation of a tax resident is quite rough in Germany. Income tax includes one’s profit all over the world and gift tax and estate tax are imposed on gifted and inherited property. Profit gained from a foreign company controlled by a German resident is also subject to taxation. In this regard, a very important target of international tax planning should be a number of measures allowing a physical entity to avoid becoming a German resident and paying all associated taxes. The article describes particular methods of international tax planning allowing to avoid gaining a status of a tax resident in Germany.

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