Question

Discuss with what criteria the government of a country would consider whether an individual is chargeable to income tax of its country.

Answer 1

The critical factor that determines the income tax of an individual taxpayer is his/her residential status during the financial year. The taxpayer's residential status is determined with the number of stay day’s i.e. physical presence of the taxpayer in a country (irrespective of the stay purpose) during the financial year and preceding a specified term of the financial years. In United States, a person would be a resident alien for taxation purposes when meet either the substantial presence test or the green card test for the calendar year (January 1-December 31). A non-resident alien would be a non-citizen of U.S. who has not passed or is exempted from the substantial presence tests or Green Card.