Gilberto Vargas is an affluent Brazilian citizen who has lived in Rio Essay

Gilberto Vargas is an affluent Brazilian citizen who has lived in Rio since 1965. He is the controlling shareholder of a multina - Essay Example The test of connection that decides whether the person comes under the jurisdiction of UK taxation is primarily the test of residence (Baistrocchi, 2013, p. 2).The network that exists amongst the scores of double tax treaties (DTTs) forms an important part of the international law. The existing DTTs are all bilateral and based on two existing models; the OECD model and the UN Model. All the DTTs have stark similarities in terms of the topics covered, the order in which the topics are presented and the language in which the articles are described. This makes the DTT network such an important element in the tax regime, that the general rules have become a feature of the international law and might become binding in situations of governing taxation of income in cases of cross border transaction. This paper deals with the case of a Mr. Vargas who is a businessman and considers moving base to London for seven years. The OECD Model of DTT The DTT that follows the OECD Model is particularly applicable for the developed countries. It â€Å"reduces tax on royalties to zero but has a positive rate on interest and dividends† (Avi-Yonah, 2007, p. 3). There is harmful tax competition in which two issues are identifiable. Firstly, tax havens have been identified â€Å"as jurisdictions with no or nominal income taxes and also one or more of lack of effective exchange of information, lack of transparency, and lack of substantial activities by tax payers†. Secondly, preferential tax regimes have been identified as regimes that offer â€Å"no or low effective tax rate and one or more of ring fencing, lack of transparency, and lack of effective exchange of information† (Baistrocchi, n.d.). The prevalence of tax havens and preferential regimes has been condemned by the OECD which has stated it to be a harmful tax competition. The basis of taxation applicable for Mr. Gilberto Vargas: Arising basis or Remittance basis In the given case study, there is OECD Model based tax treaties between the relevant countries. Gilberto Vargas is the controlling shareholder of a multinational enterprise which is based in Brazil and holds investments in the real property market in Brazil, China and India. He is a citizen of Brazil and is considering a migration to the United Kingdom, along with family, for seven years. He is then a foreign national to the UK and his income is liable to taxation for only that amount that arises to him in the UK. The status of becoming a â€Å"resident in the UK† (Judgement, 2010, p.6) creates the platform for UK tax under the provisions of â€Å"Income Tax (Earning and Pensions) Act 2003† (Judgement, 2010, p.6). He is to be considered as a resident of the United Kingdom under the 183-day rule which states that if any person stays in the UK for one hundred and eighty three days, which is approximately half of a tax year (starting form 6th April of any year and continuing till 5th April of the next year) he is c onsidered a â€Å"resident in the United Kingdom† (BN1-British Citizenship, n.d., p. 5) for tax purposes occurring in that tax year. For the citizens of UK, unless a person spends the entire tax year outside the UK with no return visits to the UK, he would be treated as a resident of UK â€Å"for the tax years in which† (You are a UK resident taking a holiday or working holiday abroad, 2010) a citizen of the UK spends any time in the United Kingdom. But when the person is a non-UK domiciled, ie, his