Centre of Vital Interests

[Revoltec]

Hello guys!

If your country had 'centre of vital interests' as on of the requirements for being a tax resident in the country and you wanted to leave this country's tax net, would you be comfortable doing so if there was no clarification on what this exactly means and without it ever been tested in court? Are these ambiguous laws written like that on purpose? It seems like they can use this term in almost any way.

Yes, I have consulted local tax consultants and lawyers and they give me different answers and said it has never been tested in court yet.

 

[belarus]

What country is it ?

 

[Revoltec]

What country is it ?

Serbia

 

[daniels27]

Hello guys!

If your country had 'centre of vital interests' as on of the requirements for being a tax resident in the country and you wanted to leave this country's tax net, would you be comfortable doing so if there was no clarification on what this exactly means and without it ever been tested in court? Are these ambiguous laws written like that on purpose? It seems like they can use this term in almost any way.

Yes, I have consulted local tax consultants and lawyers and they give me different answers and said it has never been tested in court yet.

Yes, I would be comfortable. It mainly depends on where your family resides and then where you are part of any social, cultural, political organisations.

The laws are not ambigious but of course, there are cases where there is not a firm answer. But if you have a family in any country, that is normally where the centre is. Unless of course, you never see them and are very active politically in another country.

I would say that in the most cases or traditional families, the case is more than crystal clear. If you are single, things are different. Then it depends on your parent's family, ties to them etc. But even then, if you are single and have a big family in Serbia but never meet them in Serbia, your centre most likely won't be there.

 

[Revoltec]

Yes, I would be comfortable. It mainly depends on where your family resides and then where you are part of any social, cultural, political organisations.

The laws are not ambigious but of course, there are cases where there is not a firm answer. But if you have a family in any country, that is normally where the centre is. Unless of course, you never see them and are very active politically in another country.

As I have understood, this is the definition that should be used for tax treaties and is provided by the OECD. However, if the law is domestic, it doesn't need to follow the OECD guidelines.

In case of tax evasion in Serbia, a prison sentence up to 10 years is possible.

 

[daniels27]

As I have understood, this is the definition that should be used for tax treaties and is provided by the OECD. However, if the law is domestic, it doesn't need to follow the OECD guidelines.

The definitions come from Article 4 of the United Nations (UN) Model Double Taxation Convention. This is like the template for most recent DTAs. No DTA must follow the UN model, most took over the article directly from the model, while other's made changes. There normally are no domestic laws with that. Some countries have laws containing similar notions, but that's entirely different matter.

In case of tax evasion in Serbia, a prison sentence up to 10 years is possible.

I think in almost all countries.

Could you maybe elaborate what you are trying to do and what the circumstances are? Leaving a country may lead to many other issues as well, like exit tax on personal level, exit tax on a company level if you had one, etc. I would recommend to first plan it.

If you are leaving Serbia, it also depends on where you are going and if you can take advantage of any DTA (which is better for you).

But if you leave Serbia to travel a bit, have been born there, have kids there, I am almost certain that your plan won't work. You would at least need a new girlfriend and a common apartment in another country.

 

[Revoltec]

The definitions come from Article 4 of the United Nations (UN) Model Double Taxation Convention. This is like the template for most recent DTAs. No DTA must follow the UN model, most took over the article directly from the model, while other's made changes. There normally are no domestic laws with that. Some countries have laws containing similar notions, but that's entirely different matter.


I think in almost all countries.

Could you maybe elaborate what you are trying to do and what the circumstances are? Leaving a country may lead to many other issues as well, like exit tax on personal level, exit tax on a company level if you had one, etc. I would recommend to first plan it.

If you are leaving Serbia, it also depends on where you are going and if you can take advantage of any DTA (which is better for you).

But if you leave Serbia to travel a bit, have been born there, have kids there, I am almost certain that your plan won't work. You would at least need a new girlfriend and a common apartment in another country.

Just to clarify, the 'centre of vital interests' is written in the domestic tax law of Serbia, without any guidance or clarification of what it means.

I was born there and lived there for a limited period of time, probably not enough to be considered tax resident. However, I was registered since birth on a permanent address that I didn't know about and removed it this year. No family as wife and kids but I got parents (only formally registered) and grandparents (actually live there) and I guess no other connections than passport and some empty bank accounts. There is no exit tax. Will probably move to Germany where there is a DTA. However, there is not even a definition of what is considered to be a 'permanent home' by Serbia domestic legislation or guidelines, and this would be applied in case of a DTA. It would be a matter of interpretation, as always.

 

[Nomado]

Parents and grand parents don't count.

Defining center of vital interests is important because it might make you tax resident in a country even if you don't spent time there.

Center of vital interests : businesses in that country, a personal address in that country, close family (wife & kids) living there...and to an extend real estate ownership, specially if it generates some income, in that case you might have to prove to the tax man that you have a bigger center of vital interests in another country.

 

[daniels27]

Just to clarify, the 'centre of vital interests' is written in the domestic tax law of Serbia, without any guidance or clarification of what it means.

I was born there and lived there for a limited period of time, probably not enough to be considered tax resident. However, I was registered since birth on a permanent address that I didn't know about and removed it this year. No family as wife and kids but I got parents (only formally registered) and grandparents (actually live there) and I guess no other connections than passport and some empty bank accounts. There is no exit tax. Will probably move to Germany where there is a DTA. However, there is not even a definition of what is considered to be a 'permanent home' by Serbia domestic legislation or guidelines, and this would be applied in case of a DTA. It would be a matter of interpretation, as always.

Yes. it is a matter of interpretation. But in your case, it should not be too much of an issue. The law is mainly aimed at families whose father lives across the river in Romania and is benefitting from very low tax there, while of course inofficially living with the kids and the mother in Serbia all evenings. Are your parents registered in another country?

Parents and grand parents don't count.

Depends on the age. If you are 18, they probably count too. If you are 65 and taking care of your parents, they would also count.

 

[Revoltec]

Are your parents registered in another country?

Yes, both parents, me and my sister have been registered in another country and tax residents of that country. I became a non-resident of that country this year. There will be a hole of one year where I was not registered anywhere but tax resident in a third country.

 

[daniels27]

Yes, both parents, me and my sister have been registered in another country and tax residents of that country. I became a non-resident of that country this year. There will be a hole of one year where I was not registered anywhere but tax resident in a third country.

If you paid tax somewhere, you are usually good (unless it is a low tax country with reputation). But in this case, there is not much that can be seen as centre of vital interests. Not sure if you are member of any association or clubs in Serbia, but I guess not in that case.